Q1 2019 e

Transcript

1 2 0 1 9 Interim Report JANUARY – MARCH 2019

2 1 UPDATED INFORMATION 5 INTERIM MANAGEMENT 22 BRANDS AND 25 INTERIM CONSOLIDATED FINANCIAL BUSINESS FIELDS STATEMENTS (CONDENSED) REPORT 5 Volkswagen Shares 25 Income Statement 1 Key Facts 26 Statement of Comprehensive Income 2 Key Events 6 Business Development 14 Results of Operations, Finan- 27 Balance Sheet 28 Statement of Changes in Equity cial Position and Net Assets 21 Outlook 30 Cash Flow Statement 31 Notes to the Interim Consolidated Financial Statements 52 Review Report Key Figures VOLKSWAGEN GROUP Q1 2019 2018 % 1 Vo lu me Data in thousands –2.8 Deliveries to customers (units) 2,606 2,680 2,583 –6.7 Vehicle sales (units) 2,769 Production (units) 2,727 –2.6 2,655 Employees (on March 31, 2019/Dec. 31, 2018) 665.3 664.5 +0.1 Financial Data (IFRSs), € million Sales revenue 58,228 +3.1 60,012 Operating result before special items 4,849 4,211 +15.2 Operating return on sales before special items (%) 8.1 7.2 – x Special items –981 –8.2 3,868 Operating result 4,211 Operating return on sales (%) 7.2 6.4 4,071 4,477 –9.1 Earnings before tax 6.8 7.7 Return on sales before tax (%) 3,053 3,300 Earnings after tax –7.5 2 Automotive Division +3.8 Total research and development costs 3,483 3,356 6.9 6.7 R&D ratio (%) 5,364 5,455 –1.7 Cash flows from operating activities 3 Cash flows from investing activities attributable to operating activities 3,375 3,018 +11.8 +4.7 of which: capex 2,008 1,918 capex/sales revenue (%) 3.9 4.0 Net cash flow 1,990 2,437 –18.4 Net liquidity at March 31 15,991 24,294 –34.2 nsolidated Chinese joint ventures. These compan rior-year deliveries updated to reflect 1 Volume data including the unco ies are accounted for using the equity method. P subsequent statistical trends. een the Automotive and Financial Services divisions. 2 Including allocation of consolidation adjustments betw 3 Excluding acquisition and disposal of equity investments: Q1 €3,100 (3,080) million. he Report are rounded, so minor discrepancies may arise This version of the Interim Report is a translation of the Germ an original. The German takes precedence. All figures shown in t from addition of these amounts. The figures from the previous fiscal year are shown in parentheses directly after the figures f or the current reporting period.

3 በ STYLEREF " Ü berschrift 1" \* MERGEFORMAT Key Facts Updated Information 1 Key Facts Deliveries to Volkswagen Group customers at 2.6 million vehicles (–2.8%); decline in Asia- > Pacific in particular, growth in Western Europe and South America; passenger car market share expanded in declining overall market worldwide > Group sales revenue of €60.0 billion exceeds prior-year figure by 3.1% > Operating profit before special items improved by €0.6 billion to €4.8 billion; herein fair value measurement gains and losses on derivatives €0.4 billion higher than in the previous year Operating profit of €3.9 (4.2) billion; negative special items of €–1.0 billion arising from > legal risks > Profit before tax at €4.1 (4.5) billion Automotive Division’s net cash flow down by €0.4 billion to €2.0 billion; capex ratio of > 4.0 (3.9)% > Net liquidity in the Automotive Division of €16.0 billion; negative effect of €5.1 billion on the disclosure of net liquidity due to the application of the new IFRS 16 > Exciting products: Volkswagen Passenger Cars presents the enhanced Passat; leisure-oriented ID. BUGGY - concept car demonstrates versatility of the Modular Electric Drive Toolkit (MEB); JETTA launches as new brand of Volkswagen Passenger Cars in China - Audi celebrates world premiere of the Q4 e-tron, an all-electric concept vehicle based on the MEB ŠKODA presents the Kamiq city SUV for the European market; the VISION iV concept - gives a glimpse of the brand’s first MEB vehicle - SEAT debuts electric-powered el-Born concept car Porsche celebrates open-top driving with new 911 Convertible - - Bentley marks its 100-year history with the Mulsanne W.O. Edition by Mulliner Lamborghini presented the exclusive and powerful Aventador SVJ Roadster -

4 Key Events 2 Updated Information Key Events GENEVA INTERNATIONAL MOTOR SHOW hybrid versions of the high-volume A6, A7, A8 and Q5 series Volkswagen’s showings at the Geneva International Motor were also presented to the public for the first time at the mobility. The Group announced Show put emphasis on electric motor show. that it would make its Modular Electric Drive Toolkit ( for the European market and the all- ) MEB SUV The Kamiq city VISION iV made their debut at ŠKODA electric concept vehicle available to other manufacturers as well. Aachen-based e.GO ŠKODA brand’s booth. The Kamiq systematically contin- the Mobile AG is expected to become the first external partner . The Group intends to launch almost MEB ues the design language of the Kodiaq and Karoq models and globally to use the 70 new electric models on the market in the next ten years. rounds out the Czech automotive manufacturer’s portfolio in segment. The VISION iV gives customers a detailed SUV The expansion of electric mobility is an important step on the preview of the brand’s first production model based on the the path to becoming carbon neutral. MEB. The study stands out with an athletic, aerodynamic The Volkswagen Passenger Cars brand celebrated no fewer body and the generous interior space that is typical of the than four world premieres at the motor show, shining a light brand. Two electric motors – one on the front axle and one on on two key areas: e-mobility and performance. The brand’s ID. BUGGY KLEMENT , , which demonstrates the the rear – provide emission-free drive. With the first new product was the ŠKODA MEB , even for small series. The ID. BUGGY is also presented an innovative electric two-wheel con- versatility of the cept for sustainable urban mobility. already the fifth concept car based on the MEB , with which SEAT ’s presence at the motor show centered on the world Volkswagen is showing a new, leisure-oriented facet of zero- , this is MEB premiere of its el-Born concept car. Based on the emissions electric mobility. The Volkswagen Passenger Cars The highlight of the vehicle is ’s first all-electric vehicle. SEAT brand wants to bring out 20 electric models by 2025. Another its spacious interior, which guarantees practicality and highlight presented in Geneva was the new Passat. The functionality. The vehicle has a range of up to 420 kilometers enhanced bestseller stands out in particular thanks to its and can accelerate from 0 to 100 km/h in just 7.5 seconds. technological innovations such as Travel Assist, which The battery can be returned to 80% of its maximum capacity permits semi-automated driving (Level 2 according to the in only 47 minutes. German Automotive Industry Association, VDA – Verband brand in Geneva was the The highlight of the Porsche der Automobilindustrie) from 0 to 210 km/h. Volkswagen Convertible, which continues presentation of the new 911 Passenger Cars presented a new sporty top model for its Porsche’s long tradition of open-top driving. The 331 kW successful crossover series, the T-Roc R. This features a four- TSI engine with an output of 221 kW (300 PS) that (450 PS) twin-turbo engine delivers top speeds of over cylinder enables the vehicle to accelerate from 0 to 100 km/h in 300 km/h, and acceleration of 0 to 100 km/h in less than also celebrated its world TDI 4.9 seconds. The Touareg V8 the 911 Convertible, the 718 T 4 seconds. In addition to engine makes it TDI premiere in Geneva. Its 310 kW (421 PS) Boxster and Cayman were shown. The new touring version s. SUV one of the most powerful diesel combines 220 kW (300 PS) output from the four-cylinder Audi continued its electric car offensive in Geneva, th state-of-the-art dynamic turbocharged boxer engine wi ly powered vehicles. The Q4 presenting exclusively electrical components and a sports ch assis with a 20-millimeter- e-tron concept SUV with its all-electric drive is based on the lowered body. The new Macan S was also presented in MEB and is positioned in the to p third of the compact class. Geneva. Porsche has extensively enhanced the Macan in Two electric engines allow the vehicle to accelerate from 0 to terms of design, comfort, connectivity and driving dynamics. 100 km/h in just 6.3 seconds. The battery installed in the The most eye-catching new features in the interior are the vehicle floor can fast-charge to 80% of its total capacity in less 10.9-inch touchscreen of the new Porsche Communication ) and the GT sports steering wheel. The PCM than 30 minutes. Audi's Q4 e-tron concept is setting new Management ( 's SUV new V6 engine has a power output of 260 kW (354 PS). standards in its category with a range of 450 km. The interior also offers spaciousness and comfort. Audi debuted a Bentley celebrated a special anniversary at the motor four-door coupé in Europe in the form of its e-tron GT con- show – its centenary. To mark the occasion, the luxury brand chitecture with a low center of cept show car. The flat-floor ar unveiled the Mulsanne W.O. Edition by Mulliner. With a gravity, dynamic proportions and electric drive with an production run limited to just 100 cars, the model pays output of 434 kW (590 PS) ensure performance fit for a sports tribute to Bentley’s founder Walter Owen Bentley and is pre- car. The torque is transferred to the wheels via the quattro sented in classy black with an anniversary plaque and a range permanent all-wheel drive with torque vectoring. The plug-in of chrome fittings. The new Bentayga Speed also premiered in

5 Key Events 3 Updated Information engine with 467 kW (635 PS), TSI Geneva. Powered by a W12 Multivan. Porsche took top honors in the luxury category the dynamic SUV sprints to 100 km/h in just 3.9 seconds. with the Panamera and in the sports car and convertible Alongside the Bentayga Speed, the new Continental GT categories with the 911. Audi won an award in the compact Convertible also made its debut. The powerful W12 TSI class with the Q3. The “Best Cars” readers’ choice awards SUV engine accelerates the breath-taking grand tourer convertible are one of the most important competitions in Europe’s car industry. from 0 to 100 km/h in just 3.7 seconds. Its maximum speed is 333 km/h. At the beginning of 2019, the Porsche 911 received an TÜV Roadster, SVJ accolade for its product quality in two competitions. In Lamborghini presented the Aventador which is limited to 800 units, for an exclusive, powerful open- Rheinland’s annual used car report, the model took first place in all age brackets due to the lowest number of material air driving experience. The V12 engine with 566 kW (770 PS) defects. In addition, the US consulting firm J.D. Power honored accelerates the vehicle to 100 km/h in just 2.9 seconds or to 200 km/h in 8.8 seconds. The the 911 as the most reliable model in its class. high-powered car has a maxi- mum speed of over 350 km/h. In addition, Lamborghini In February 2019, the Volkswagen Touareg won the top EVO Spyder. After the Coupé, this is showed off the Huracán gold award in the “Passenger Vehicles” category at the “Ger- the second version of the V10 Huracán and impresses EVO man Design Awards”. The Touareg did well in the evaluation with predictive logic which co ntrols the vehicle dynamics, thanks to its timeless and functional design, its technology, and a new design for improved aerodynamics. The 5.2 l natu- high quality and fun factor. The German Design Award is rally-aspirated V10 engine features 470 kW (640 PS) and presented by the Rat für Formgebung (German Design accelerates the convertible from 0 to 100 km/h in 3.1 seconds. Council), which is regarded as the German brand and design Bugatti debuted two models. The automaker celebrated authority. TFSI its 110th anniversary with the Chiron Sport, of which only At the beginning of March 2019, Audi’s A4 Avant 2.0 was put at the top of the leaderboard in “Auto Bild” magazine’s 20 units will be made. The second model, La Voiture Noire, is endurance test. Audi now holds first and second place in the e iconic Bugatti Type 57 SC a modern interpretation of th endurance test ranking: only the A3 Sportback g-tron ranks Atlantic. Above all, the supercar impresses with the use of jet- higher than the A4 Avant with a grade of 1+. The “Auto Bild” black carbon fiber and a 16-cylinder engine that generates endurance test involves a 100,000-kilometer drive and ends 1,103 kW (1,500 PS) of power. with the car being dismantled and examined by an indepen- In Geneva, Group Components presented a flexible fast dent expert. The reliability of the car and the everyday charging station at which up to four vehicles can be charged experiences and impressions of the editors are also part of at the same time using the power bank principle. Charging the assessment. capacity is up to 360 kWh; series production is expected to SEAT Tarraco At the beginning of March 2019, the new start at the Hanover site from 2020. ’s cra sh test, NCAP achieved a five-star safety rating in Euro making it the benchmark for safety in large SEAT s. AWARDS SUV ’s At the end of January 2019, th e Volkswagen Passenger Cars flagship achieved 97% of the maximum score for adult brand’s e-Golf and e-up! models took first and second place in protection – an excellent result and also the best result ever NCAP ADAC EcoTest 2018. The ADAC EcoTest determines, in ’s crash test looks at and evaluates the in this category. Euro emissions along with levels of all safety aspects of the vehicle: occupant protection, the realistic cycles, local CO 2 ), hydrocarbon carbon monoxide (CO), nitrogen oxide (NO safety of vulnerable road users such as cyclists and pedes- x (HC) and fine dust particles present in exhaust gas. trians and provision of the latest safety systems. Also at the end of January 2019, Auto Bild and Computer ’s new Scala won the ŠKODA At the end of March 2019, Bild magazines presented several awards to the Volkswagen “Red Dot Award” in the product design category. With its Group at the Connected Car Award 2018. Audi won over sculptural forms, dynamic lines and precise details, the Scala readers in the entertainment category with its Audi Connect is the first production model to showcase the next step in the design language. The “Red Dot ŠKODA ard in the medium-sized cars system. Porsche secured an aw development of the Award” is considered to be a seal of high-quality product category with its Macan, which is fitted with a Connect Plus design and is one of the world’s most famous design com- the Volkswagen Commercial module. In the van segment, s from around the globe, the petitions. Composed of expert Vehicles brand scored with the on-board entertainment in nt designers, academics and jury brings together independe the Grand California. The Connected Car Award focuses on industry journalists. the best overall package in connected vehicles. Also at the end of March 2019 , Audi was named the over- Also at the end of January 2019, the Volkswagen Group all winner in the quality assessment of Auto Bild’s “best won auto motor und sport magazine’s “Best Cars 2019” award brands in all classes” reader survey. In addition, readers voted in several categories. The Volkswagen Passenger Cars brand Audi the overall brand winner with 55.2% approval – ahead of won with the up!, Polo and Golf in the minicars, small cars ŠKODA . In the “Best Brands in All Classes” survey, Porsche and and compact class categories. The Volkswagen Commercial readers of Auto Bild magazine rated 38 car brands in 14 Vehicles brand received an award in the vans category for its

6 Updated Information Key Events 4 vehicle categories. Quality, design and value for money were prerequisites for achieving the productivity goals in pro- considered key criteria. duction. In the long term, the global supply chain of the Volkswagen Group with more than 30,000 locations of over ANNIVERSARIES 1,500 suppliers and partner companies could also be inte- In mid-January 2019, the Volksw agen Passenger Cars brand grated. The Cloud will be designed as an open industry plat- celebrated the production of five million Tiguans at the form which other partners from industry, logistics and sales Wolfsburg plant. Since its market launch in 2007, the com- may use in the future. Siemens is to be the first major integra- pact Tiguan has enjoyed success worldwide and provides tion partner for this project. SUV valuable stimulus for the brand’s growth strategy and JETTA TO BECOME THE NEW VOLKSWAGEN PASSENGER CARS initiative. BRAND IN CHINA In mid-February 2019, the Salzgitter plant of the Volks- The Jetta is one of the most popular models of Volkswagen wagen Passenger Cars brand manufactured the 60 millionth Passenger Cars. Now, the model will be turned into a separate engine since production began 49 years ago. The anniversary engine. TSI brand for the Chinese market with its own model family and engine was a 1.5 l At the beginning of March 2019, the 10 millionth vehicle a separate dealer network. In setting up the JETTA brand, at the Volkswagen Commercial rolled off the assembly line Volkswagen Passenger Cars is focusing particularly on young Vehicles brand’s factory in Hanover – a red-and-white T6 Chinese customers striving for individual mobility and their SUV s and a saloon Caravelle. Production of the T-series had begun on March 8, first car. The new brand will bring out two in China. Like all other Volkswagen vehicles, the models stand 1956 at the plant built specifically for this purpose. for quality, a clear design language, lasting value and safety. PARTNERSHIPS In January 2019, the Volkswagen Passenger Cars brand signed INTRODUCING ELLI – ELECTRIC LIFE Volkswagen is expanding its e-mobility initiative with Elli a memorandum of understanding with Ethiopia for further (Electric Life). Elli will develop products and services related to expansion of its involvement in the Sub-Saharan Africa energy and charging and will supply green electricity not region. The memorandum of understanding focuses on four households. This will be carbon- only for vehicles, but also for pillars: the establishment of a vehicle assembly facility, local- -certified Volkswagen Naturstrom generated exclu- TÜV free, ization of automotive component manufacturing, introduc- sively from renewable sources. tion of mobility concepts such as app-based carsharing and ride-hailing, and the opening of a training center. -Volkswagen FAW BOARD OF MANAGEMENT AND SUPERVISORY BOARD MATTERS In March 2019, Volkswagen China and Prof. Jochem Heizmann retire d from the Board of Manage- established a joint venture for advancing connectivity and -Volkswagen. The two FAW ment of Volkswagen AG with effect from January 10, 2019 digitalization of models from partners are investing around €121 million in the new under a retirement program. His Board responsibility for the company, Mobile Online Services Intelligent. The objective is China division was transferred to Dr. Herbert Diess with FAW - to develop digital services for all models built by effect from January 11, 2019. Volkswagen after 2019. Effective February 8, 2019, Mr. Uwe Hück stepped down e Volkswagen Group entered At the end of March 2019, th from his position as a member of the Volkswagen AG Super- into a collaboration with Amazon Web Services aimed at the Chairman of the Super- visory Board. Upon request of developing the Volkswagen Industrial Cloud together. In future, visory Board and in accordance with section 104 AktG, the the plan is for data from all the machinery, equipment and Braunschweig Registry Court appointed Mr. Werner Weresch, systems at every Volkswagen Group factory to be combined Chairman of the General Works Council and Group Works in the cloud. This will help to optimize workflows and Council of Dr. Ing. h.c. F. Porsche AG, to succeed him as a processes in production, and enables considerable improve- member of the Volkswagen AG Supervisory Board, effective ments in future productivity at the plants. The Volkswagen February 21, 2019. Industrial Cloud thus creates the essential technological

7 Volkswagen Shares Interim Management Report 5 Volkswagen Shares In the period from January to March 2019, prices on the Information and explanations on earnings per share can be international equity markets rose overall amid volatile found in the notes to the interim consolidated financial state- trading. ments. Additional Volkswagen share data, plus corporate news, The DAX recorded an increase compared with the end of reports and presentations can be downloaded from our web- 2018. The hopes of less restrictive US monetary policy had a site at www.volkswagenag.com/en/InvestorRelations.html. ate data that in some cases positive effect, as did corpor exceeded expectations. Uncertainty regarding the economic VOLKSWAGEN KEY SHARE FIGURES AND MARKET INDICES policy of the US government, the continuing Brexit negoti- FROM JANUARY 1 TO MARCH 31, 2019 ations between the United Kingdom and the European Union (EU) and the growth of the global economy had a negative impact on share prices. The prices of Volkswagen AG’s preferred and ordinary High Closing Low shares exceeded the 2018 year-end level in the first three months of 2019. Healthy business figures for the past fiscal 135.60 Ordinary share Price (€) 157.60 145.10 year were the main drivers of the uptrend. Share listings were Date Mar. 4 Jan. 3 Mar. 29 negatively impacted in particular by uncertainty regarding 140.32 134.76 154.24 Price (€) Preferred share the future regulatory framework for diesel and electric Jan. 3 Mar. 29 Mar. 4 Date vehicles, the US tariff policy, the slowdown of the Chinese 10,417 11,526 DAX Price 11,788 WLTP (Worldwide Harmonized Light-Duty market and the Date Mar. 19 Mar. 29 Jan. 3 Vehicles Test Procedure), which is a test procedure for deter- 412 ESTX Auto & Parts Price 486 466 emissions and fuel consumption mining pollutant and CO 2 Mar. 4 Mar. 29 Jan. 3 Date for passenger cars and li ght commercial vehicles. PRICE DEVELOPMENT FROM DECEMBER 2018 TO MARCH 2019 ndex based on month-end prices: December 31, 2018 = 100 I Volkswagen ordinary shares +4.3% Volkswagen preferred shares +1.0% DAX +9.2% EURO STOXX Automobiles & Parts +10.3% 120 120 110 110 100 100 90 90 D J J M A FM AS OND J

8 Business Development 6 Interim Management Report Business Development GENERAL ECONOMIC DEVELOPMENT In the economies of Central Europe, growth rates remained The global economy continued its robust growth in the first relatively high in the first quarter of 2019, while declining in GDP growth in Eastern Europe rose, three months of 2019 with a decrease in momentum. The most cases. Overall, omic recovery of the Russian buoyed in particular by the econ average expansion rate of gross domestic product ( ) in GDP market compared with the prior-year period. this period was down year-on-year in both the advanced and The economic downturn that began in Turkey already in the emerging market economies. Prices for energy and other 2018 continued in the opening quarter of 2019. Amid per- commodities decreased on average compared with the prior- es, the growth political challeng sistent structural deficits and year period amid a still comparatively low – albeit higher – was lower than in the same period GDP rate of South Africa’s interest rate level. In connection with the upheaval in trade of the previous year. policy at international level, international goods trade The robust growth of the US economy continued in the declined in the first quarter of 2019. reporting period, with considerable stimulus being provided As a whole, the economies of Western Europe recorded by private domestic demand. The US Federal Reserve kept its slight growth from January to March 2019, with a decline in e stable situation in the labor key rate constant based on th momentum. This trend was recorded in nearly all countries market and declining inflation. Momentum decreased in both in Northern and Southern Europe. The unknown outcome of Canada and Mexico compared to the same period of 2018. the Brexit negotiations between the United Kingdom and the Between January and March 2019, Brazil continued the EU remained the primary source of uncertainty. slight economic growth it had seen in preceding quarters, Amid a strong labor market, the growth trend in Germany though the situation in South America’s largest economy continued at a slower pace in the period under review, with remained tense. Argentina’s economic situation deteriorated both business and consumer sentiment deteriorating further. significantly amid persistently high inflation. EXCHANGE RATE MOVEMENTS FROM DECEMBER 2018 TO MARCH 2019 es: as of December 31, 2018= 100 I ndex based on month-end pric EUR to GBP EUR to USD EUR to CNY EUR to JPY 105 105 100 100 95 95 90 90 J J AS OND D J FMAM

9 Interim Management Report 7 Business Development The high growth momentum in the Chinese economy senger car market developed robustly at the beginning of the remained virtually unchanged during the reporting period. year and matched the previous year’s level. Government support provided in response to the trade policy Registration volumes of light commercial vehicles in Cen- dispute between China and the US continued in the first tral and Eastern Europe were on a level with the previous year, quarter of 2019. With its strong economic performance, India although the number of vehicles sold in Russia between set itself apart from the majority of emerging markets and January and March 2019 was much lower than in the prior- continued to record a high pace of growth. Japan registered year period. GDP growth than in the same period of the previous weaker Demand in the Turkish passenger car market fell dramat- year. ically from January to March 2019 compared to the first quarter of 2018 as a result of the deteriorating macroeco- nomic situation. In South Africa, the number of passenger TRENDS IN THE MARKETS FOR PASSENGER CARS AND LIGHT COMMERCIAL VEHICLES cars sold was much lower than the weak level seen in the Global demand for passenger cars between January and previous year. March 2019 was weaker than in the prior-year period (–5.6%). While new registrations in the Central and Eastern Europe In North America, sales of passenger cars and light com- region slightly exceeded the prior-year figure, the overall mercial vehicles (up to 6.35 tonnes) in the reporting period markets in Western Europe, North America, South America were down slightly on the prior-year figure. The market USA remained below the high prior-year level. and Asia-Pacific recorded considerable dips in some cases. volume in the The decline affected the passenger car segment in particular, Global demand for light commercial vehicles between SUV and pick-up while light commercial vehicles such as January and March 2019 was up slightly on the previous year. models continued to record robust demand. In the Canadian ward trend seen since the automotive market, the down In Western Europe, passenger car demand in the reporting second quarter of 2018 was still noticeable at the beginning WLTP, period fell short of the prior-year level due to the of 2019. The number of vehicles sold in Mexico was slightly cle registrations declined by among other factors. New vehi lower than the figure for the same period of the previous year. varying degrees in the largest single markets. Passenger car sales in France fell slightly. In the United Kingdom, the In the markets of the South America region, new registrations passenger car market volume was also down on the prior- for passenger cars and light commercial vehicles decreased year figure. There, the uncertain outcome of the Brexit nego- perceptibly on the whole in the first three months of 2019. In tiations with the EU continued to weigh on demand. The Brazil, the recovery in the demand for automobiles continued passenger car markets in Italy and Spain contracted notice- with a high growth rate, though new registrations still fell ably in the reporting period. The share of new registrations markedly short of the record level achieved in the first for diesel vehicles in the overall passenger car market in quarter of 2013. In the Argentinian market, the deterioration Western Europe slipped to 33.4 (38.4)% in the period from in the macroeconomic situation also had a negative impact January to March 2019. and light commercial vehicles, on demand for passenger cars Despite the uncertain outcome of the Brexit negotiations with sales figures plummeting in the first quarter of 2019. between the EU and UK, new light commercial vehicles regis- trations in Western Europe were slightly higher than the The number of new passenger cars registered in the Asia- prior-year level. Pacific region in the reporting period was below the prior- year level. This is mainly attributable to the trend in the In Germany, the number of passenger cars sold in the first Chinese passenger car market, where the volume of demand three months of 2019 was on the high level seen in the prior- fell considerably short of the previous year’s level and has year period. In addition to the still solid economic situation, shown negative growth rates since mid-2018. The ongoing rticularly in the form of an sales incentives from dealers, pa continued to weigh USA trade dispute between China and the environmental bonus, underpinned this trend. on demand; another factor was the value-added tax cut Demand for light commercial vehicles in Germany in the announced for April. In the Indian passenger car market, reporting period was considerable higher than in the same of 2019 fell mode sales in the opening quarter rately com- period in 2018. pared with a year earlier. In Japan, demand for vehicles was slightly higher in the year to date than in the previous year. In the Central and Eastern Europe region, demand for Demand for light commercial vehicles in the Asia-Pacific passenger cars in the reporting period was slightly higher region was up moderately on the previous year. Registration than in the previous year. Developments in the individual volumes in China, the region’s dominant market and the markets of Central Europe were mixed. In spite of the value- largest market worldwide, increased slightly year-on-year. added tax increase as of Janu ary 1, 2019, the Russian pas-

10 Business Development 8 Interim Management Report The number of new vehicle registrations in India also saw a previous year. Steady demand was registered in all areas of slight increase versus the previous year. Marked growth was application. Here too, there remained a recognizable trend recorded in Thailand and a sharp increase in Indonesia. away from oil-fired power plants toward dual-fuel and gas- fired power plants. Demand for energy solutions remained TRENDS IN THE MARKETS FOR COMMERCIAL VEHICLES high, with a strong trend towards greater flexibility and In the markets that are relevant for the Volkswagen Group, decentralized availability. Continued strong pressure from global demand for mid-sized and heavy trucks with a gross competition and pricing was discernible in all projects, weight of more than six tonnes was moderately higher than having a negative impact on the earnings quality of orders. the prior-year figure between January and March 2019. Furthermore, order placement was often delayed due to per- In the first quarter of 2019, demand in Western Europe sistently difficult financing conditions for customers, partic- climbed noticeably compared with 2018. New registrations in ularly on larger projects. Germany, Western Europe’s largest market, were much higher The market for turbomachinery improved slightly com- in the first three months of 2019 than in the prior-year pared with the previous year. Particularly the key sales mar- period. While demand in Italy and in Spain witnessed a kets for turbo compressors in th e raw materials, oil, gas and decline, it rose in the United Kingdom and in France. processing industry experienced an upturn in demand. By The less positive economic performance in the Central contrast, the steam and gas turbine business remained and Eastern Europe region in the first quarter of 2019 led to difficult due to existing overcapacity in power generation. slightly lower registration volumes than in the previous year. There was only a marginal let-up in existing pressure from Demand in Russia also decreased slightly. competition and pricing. There was a considerable increase in the volume of regis- The marine and power plant after-sales business for diesel trations in South America compared to the first three months engines performed positively overall and benefited from a of 2018. In Brazil, the region’s largest market, demand for continued increase in interest in long-term maintenance trucks grew very sharply as a consequence of the economic contracts and retrofitting solu tions. The after-sales market recovery compared with the low figure for the prior-year for turbomachinery saw a slow recovery. There were also new period. By contrast, a dramatic decline in registration volumes sales opportunities here in digitalization and long-term was seen in Argentina. service agreements. TRENDS IN THE MARKETS FOR FINANCIAL SERVICES Demand for buses in the markets that are relevant for the Demand for automotive financial services was buoyant in the Volkswagen Group was perceptibly higher in the period from first quarter of 2019 due, among other things, to the persis- January to March 2019 than in the prior-year period. The tently low key interest rates in the main currency areas. markets in Brazil, the United Kingdom and France contrib- Overall, a slight decrease in vehicle demand was recorded uted in particular to this growth. in the European market from January to March 2019. As a TRENDS IN THE MARKETS FOR POWER ENGINEERING consequence, the number of new lease and financing con- The markets for power engineering are subject to differing While sales of used vehicles in tracts signed also fell slightly. Consequently, their business regional and economic factors. Europe remained stable at the prior-year level, a slight growth trends are generally independent of each other. increase was recorded in lease and financing contracts for The marine market saw a continuation of the muted ucts such as inspection con- used vehicles. After-sales prod order activity in the first quarter of 2019 and fell short of the tracts, maintenance and spare parts agreements and, in par- previous year’s level overall. In merchant shipping, orders of ticular, automotive-related insurance were in high demand in LNG carriers remained almost stable. container ships and the first three months of 2019. Demand for bulk carriers and oil tankers fell to a lower level. In Germany, the share of loan-financed or leased new Demand for cruise ships, passenger ferries and fishing vessels vehicles remained stable at a high level in the reporting remained steady. In the offshore sector, the existing excess period. There was greater demand for after-sales products, capacity continued to curb investment in offshore oil pro- and the call for integrated mobili ty solutions in the business duction. Planned tighter emission standards resulted in a customer segment also continued to rise. positive trend toward gas-powered or dual-fuel-engined ships. In South Africa, demand for financing and insurance On account of the low market volume, all market segments products fell slightly. USA and Mexico, automotive finan- are continuing to experience marked competitive pressure In the markets of the cial services remained very popular in the period from and low prices as a result. January to March 2019. The market for power generation was unchanged in the first quarter of 2019 compared with the same period of the

11 9 Interim Management Report Business Development In Brazil, the consumer credit business and sales of the GLOBAL DELIVERIES BY THE PASSENGER CARS BUSINESS AREA agen Group’s passenger cars Global demand for the Volksw country-specific financial services product Consorcio, a was down amid challenging and light commercial vehicles lottery-style savings plan, continued the trend seen in 2018 market conditions, falling 3.0% year-on-year in the reporting and sustained their positive development in the reporting period to 2,548,400 units. This was mainly attributable to the period. In the Argentinian market, the sharp rise in interest Chinese market, where demand fell short of the volume seen rates resulting from the recent economic crisis posed a SEAT (+8.9%) and Volkswagen Com- in the previous year. The challenge for sales of financing and leasing products. mercial Vehicles (+9.4%) brands performed especially well, Demand for automotive financial services across the Asia- both recording the best first quarter in their corporate Pacific region was mixed in the first three months of 2019. In history. Bentley, Lamborghini and Bugatti also increased their China, the proportion of loan-f inanced vehicle purchases rose ŠKODA and deliveries. The Volkswagen Passenger Cars, Audi, compared with the prior-year period, but new contract growth Porsche brands fell short of their high prior-year levels. The slowed on account of the decline in passenger car sales. , model WLTP main reasons were the changeover to the Despite increasing restrictions on registrations in metro- changes and declining markets, particularly China. In the politan areas, there is strong potential to acquire new cus- Western Europe and South America regions, demand for the tomers for automotive-related financial services, particularly Volkswagen Group’s passenger cars and light commercial y and for used vehicles. The in the interior of the countr vehicles exceeded the equivalent prior-year figure, while demand for automotive financial services rose in the Indian fewer vehicles were delivered to customers in Central and market, while it tapered off slightly in Japan. Eastern Europe, North America and Asia-Pacific. The demand for financial services in the Commercial The table on the next page provides an overview of Vehicles Business Area also varied from region to region. The passenger car and light commercial vehicles deliveries to positive trend from 2018 continued in China, albeit at a customers by market in the reporting period. Sales trends in slower pace. In Brazil, the truck and bus business and the the individual markets are as follows. related financial services market recorded strong growth. Deliveries in Europe/Other markets VOLKSWAGEN GROUP DELIVERIES The Volkswagen Group delivered 2,605,563 vehicles to In Western Europe, the Volkswagen Group delivered 934,716 vehicles to customers in the first quarter of this year and customers worldwide in the first quarter of 2019. This was thereby 0.5% more than in the same period of the previous 2.8% or 74,258 fewer vehicles than in the prior-year period. of new models, among other year. The successful launch While sales figures for the Commercial Vehicles Business Area exceeded the previous year’s level, there was a decline in the things, compensated for negative effects arising from e public debate on driving customer uncertainty due to th number of models delivered to customers from the Passenger bans for diesel vehicles and, declines in particular, from the Cars Business Area. The Volkswagen Commercial Vehicles . Encouraging increases WLTP impact of the changeover to the brand has been reported as part of the Passenger Cars Busi- were recorded by the Polo, T-Roc and Tiguan Allspace models ness Area since January 1, 2019. The prior-year figures have from Volkswagen Passenger Cars, Audi’s A3 Sportback, the been adjusted accordingly. Th e chart on page 12 shows the ’s Arona and SEAT brand, ŠKODA Karoq and Kodiaq from the trend in deliveries worldwide by month compared with the Ateca, and the Multivan from Volkswagen Commercial previous year. In the following, we report separately on uareg from the Volkswagen Vehicles. Additionally, the To deliveries in the Passenger Cars Business Area and Com- A1 Sportback, Q3, A6 and Passenger Cars brand and Audi’s mercial Vehicles Business Area. Q8, of which new models or successors had been introduced in the previous year, were very popular with customers. The VOLKSWAGEN GROUP DELIVERIES e-tron – the Audi brand’s first all-electric production model – 1 FROM JANUARY 1 TO MARCH 31 SEAT Tarraco were successfully brought onto the and the market. The Volkswagen Group’s share of the passenger car market in Western Europe rose to 22.3 (21.7)%. In Germany, demand for Volkswagen Group vehicles rose % 2018 2019 by 1.5% year-on-year from January to March 2019. The most popular Group models included the Polo and T-Roc from the Passenger Cars 2,548,400 2,626,600 –3.0 Volkswagen Passenger Cars brand, the Audi A3 Sportback, the +7.4 57,163 Commercial Vehicles 53,221 ŠKODA Karoq, SEAT ’s Arona and Ateca, and the Multivan from To t a l 2,605,563 2,679,821 –2.8 Volkswagen Commercial Vehicles. The Touareg from the or amended to reflect subsequent statistical 1 Prior-year deliveries have been updated Volkswagen Passenger Cars brand and the ŠKODA Fabia, trends and the changed reporting structure. The figures incl ude the Chinese joint ventures. which were both introduced in the previous year, were also in high demand from customers. Seven Group models led the KBA – German Federal Motor Trans- Kraftfahrt-Bundesamt (

12 10 Interim Management Report Business Development port Authority) registration statistics in their respective Tiguan models from the Volkswagen Passenger Cars brand, ’s Rapid and Kodiaq models, and for the SEAT ŠKODA segments: the up!, Polo, Golf , T-Roc, Tiguan, Touran and for Arona and Ateca. The Volkswagen Group’s share of the Multivan. In the first three months of 2019, the Golf was passenger car market in the Central and Eastern Europe again the most popular passenger car in Germany in terms of region amounted to 21.0 (21.9)%. registrations. In Turkey, mirroring the downturn in the market, we In the Central and Eastern Europe region, we delivered delivered only half as many vehicles to customers from 1.0% fewer vehicles to customers in the first quarter of this January to March this year as in the same period of 2018. On year than in the same period of 2018. While we recorded an the South African market, the number of vehicles sold by the increase in demand for Group models in Russia and Poland, Volkswagen Group fell by 2.1%. The Polo from Volkswagen the number of deliveries de clined in the Czech Republic. Passenger Cars remained the best-selling Group model there. Demand developed encouragingly for the Polo, T-Roc and 1 PASSENGER CAR DELIVERIES TO CUSTOMERS BY MARKET FROM JANUARY 1 TO MARCH 31 DELIVERIES (UNITS) CHANGE 2019 2018 (%) 1,202,198 1,198,129 –0.3 Europe/Other markets Western Europe 934,716 929,852 +0.5 of which: Germany +1.5 326,993 322,053 158,355 160,998 –1.6 United Kingdom 81,873 81,357 Italy +0.6 Spain 79,279 +0.7 79,810 71,535 +7.5 France 66,567 178,612 180,390 –1.0 Central and Eastern Europe of which: Russia 43,663 +6.6 46,523 Poland 43,503 41,238 +5.5 37,814 –13.2 Czech Republic 32,823 Other markets 84,801 –7.8 91,956 14,640 –50.8 of which: Turkey 29,767 South Africa 22,089 22,571 –2.1 215,905 220,255 North America –2.0 of which: USA 149,985 148,857 +0.8 Mexico 43,919 47,927 –8.4 Canada 22,001 23,471 –6.3 South America 117,695 +1.4 119,309 of which: Brazil 84,032 66,327 +26.7 Argentina 22,054 37,489 –41.2 Asia-Pacific 1,015,057 1,086,452 –6.6 of which: China 945,273 1,009,679 –6.4 Japan 19,709 22,534 –12.5 India 14,255 –8.9 15,647 2,548,400 –3.0 Worldwide 2,626,600 1,456,386 1,525,300 –4.5 Volkswagen Passenger Cars Audi 463,759 –3.6 447,247 ŠKODA 307,617 316,716 –2.9 SEAT 151,612 139,235 +8.9 Bentley 2,198 +3.2 2,268 Lamborghini 1,992 1,124 +77.2 Porsche 55,700 63,478 –12.3 Bugatti 20 17 +17.6 Volkswagen Commercial Vehicles 125,558 114,773 +9.4 subsequent statistical trends and the changed reporting structu re. The figures include the Chinese joint ventures. 1 Prior-year deliveries have been updated or amended to reflect

13 Interim Management Report 11 Business Development VOLKSWAGEN GROUP DELIVERIES BY MONTH Vehicles in thousands 2019 2019 2018 2018 1,100 1,100 1,000 1,000 900 900 800 800 700 700 600 600 AS OND J FMAM J J Deliveries in North America The Volkswagen Group benefited from the sustained recovery In a declining passenger car and light commercial vehicle in the Brazilian market and recorded a year-on-year increase market, demand for Volkswagen Group models in North of 26.7% in its sales to custom ers there during the reporting America between January and March of this year was 2.0% period. This was primarily due to the market success of the lower than a year before. The Group’s share of the market in Polo, Virtus and Tiguan Allspace models from the Volks- this region amounted to 4.5 (4.5)%. The Tiguan Allspace and wagen Passenger Cars brand, which were newly introduced to Jetta from the Volkswagen Passenger Cars brand were the the market in the previous year. Demand for the Volkswagen most in-demand Group models in North America. Passenger Cars brand’s Fox and Saveiro models, and for the In the first three months of 2019, the Volkswagen Group Amarok from Volkswagen Commercial Vehicles, was also very delivered 0.8% more vehicles to customers in the US market encouraging. than in the previous year’s reporting period. The market as a In Argentina, the number of vehicles delivered to Volks- whole contracted in the same period. The biggest increases of wagen Group customers declined by 41.2% in the first three all Group models were recorded by the Tiguan Allspace and months of 2019 amid a dramatic contraction in the overall Jetta from the Volkswagen Passenger Cars brand, the Audi Q5, market. The Suran from Volkswagen Passenger Cars and the Audi A6 and Porsche Cayenne. mmercial Vehicles saw the Amarok from Volkswagen Co In Canada, we delivered 6.3% fewer vehicles to customers highest demand of all Group models. The Virtus and Tiguan in the reporting period than in the previous year. The market Allspace models, newly introduced by the Volkswagen Pas- as a whole also declined during this period. The Tiguan senger Cars brand in the previous year, were also well received Volkswagen Passenger Cars Allspace and Jetta models from by customers. were particularly popular. Deliveries in the Asia-Pacific region In a slightly weaker overall market in Mexico, we delivered The Volkswagen Group recorded weaker demand in the Asia- 8.4% fewer vehicles to customers between January and March Pacific region amid difficult market conditions and handed 2019 than in the prior-year period. The Group models with over 6.6% fewer vehicles to customers than a year earlier. The were the Vento, Jetta and the highest volume of demand Group’s share of the passenger car market in this region was Tiguan Allspace from the Volkswagen Passenger Cars brand. at 11.7 (11.7)%. Deliveries in South America In China, the number of Group models sold declined by In the first quarter of 2019, the number of vehicles delivered 6.4% year-on-year from January to March 2019. The T-Roc, to Volkswagen Group customers in the South American Tayron, Tharu, Bora, Lavida and Touareg models from Volks- passenger car and light commerci al vehicles markets rose by wagen Passenger Cars as well as the Audi Q2L e-tron and the Karoq and Kamiq, of which new models or successors ŠKODA 1.4% year-on-year. The Gol and Polo from the Volkswagen had been introduced in the previous year, were in especially Passenger Cars brand achieved the highest demand volume high demand. of all Group models. The Group’s share of the market in South America was 11.8 (10.7)%.

14 Business Development 12 Interim Management Report Deliveries to Volkswagen Group customers were down 8.9% mercial vehicles. In Russia, the region’s largest market, sales year-on-year in India. The Polo from the Volkswagen Passen- declined year-on-year by 31.7% to 1,688 units. ger Cars brand was the Group’s most in-demand model there. In the Other markets, particularly in Turkey, deliveries of In Japan, we handed over 12.5% fewer vehicles to cus- Volkswagen Group commercial vehicles decreased by 43.2% tomers in the reporting period than in the previous year. The year-on-year to 2,583 units; of this total, 2,205 were trucks Polo and Tiguan models from Volkswagen Passenger Cars and 298 were buses. achieved encouraging growth in demand. Sales in North America declined in the first quarter of 2019 to 757 vehicles (–4.5%), which were handed over exclu- COMMERCIAL VEHICLE DELIVERIES sively to customers in Mexico; this included 396 trucks and In the first three months of 2019, the Volkswagen Group 361 buses. delivered a total of 57,163 comm ercial vehicles to customers Deliveries in South America rose to a total of 12,151 vehi- unted for 49,831 units (+6.5%) worldwide (+7.4%). Trucks acco cles (+10.8%); of this total, 10,398 were trucks and 1,753 were and buses for 4,210 units (–17.6%). Deliveries of light com- provement in the economic buses. Following continued im mercial vehicles of the MAN brand amounted to 3,122 units. climate in Brazil, we were able to increase our sales here by In Western Europe, sales increased by 22.4% compared 33.0%. Of the units delivered, 9,226 were trucks and 1,178 with the corresponding prior-year period to a total of 30,140 were buses. units, of which 26,280 were trucks and 1,133 were buses. Here, In the Asia-Pacific region, the Volkswagen Group sold the MAN brand delivered 2,727 light commercial vehicles. 3,035 vehicles in the reporting period; 2,661 trucks and 374 In the period from January to March 2019, deliveries in buses. This was 19.8% less than in the previous year. In China, the markets of the Central and Eastern Europe region were on sales increased by 50.9% to 1,286 vehicles, of which 1,213 a level with the previous year at 8,497 vehicles; of this figure, were trucks and 73 were buses. 7,891 were trucks, 291 were buses and 315 were light com- 1 COMMERCIAL VEHICLE DELIVERIES TO CUSTOMERS BY MARKET FROM JANUARY 1 TO MARCH 31 DELIVERIES (UNITS) CHANGE 2019 (%) 2018 Europe/Other markets 41,220 37,675 +9.4 Western Europe 30,140 24,625 +22.4 Central and Eastern Europe 8,501 –0.0 8,497 Other markets 2,583 4,549 –43.2 North America 757 793 –4.5 South America 12,151 +10.8 10,968 of which: Brazil 10,404 +33.0 7,821 3,035 3,785 Asia-Pacific –19.8 of which: China 1,286 852 +50.9 Worldwide 57,163 53,221 +7.4 Scania 22,640 +4.1 23,576 MAN 33,587 30,581 +9.8 1 Prior-year deliveries have been updated or amended to reflect subsequent statistical trends and the changed reporting structu re.

15 Interim Management Report 13 Business Development DELIVERIES IN THE POWER ENGINEERING SEGMENT The total number of contracts at the end of March stood at Orders in the Power Engineering segment are usually part of 587 (589) thousand and was thus virtually unchanged com- major investment projects. Lead times range from just under pared to the figure as of December 31, 2018. The contracts one year to several years, and partial deliveries as construc- Financing/Leasing area. mainly related to the Customer tion progresses are common. Accordingly, there is a time lag The number of new contracts signed in the Asia-Pacific between incoming orders and sales revenue from the new region fell 5.6% year-on-year in the first quarter of 2019 to construction business. 231 thousand. As of March 31, 2019, the total number of con- In the period from January to March 2019, sales revenue tracts stood at 2.4 million, exceeding the figure for year-end in the Power Engineering segment was largely driven by 2018 by 0.7%. The Customer Financing/Leasing area accounted Engines & Marine Systems and Turbomachinery, which for 1.8 million contracts (+0.7%). together generated more than two-thirds of overall sales SALES TO THE DEALER ORGANIZATION revenue. 2019, the Volkswagen Group’s In the first three months of GROUP FINANCIAL SERVICES unit sales to the dealer organization (including the Chinese joint ventures) fell by 6.7% on the prior-year period to The Financial Services Division includes the Volkswagen 2,583,207 vehicles. This was due to lower demand, especially Group’s dealer and customer financing, leasing, banking and in China, Turkey and Argentina. Unit sales outside Germany insurance activities, fleet management and mobility offer- declined by 7.8% compared to the period from January to ings. The division comprises Volkswagen Financial Services March 2018. In Germany, unit sales rose by 1.6% year-on-year. and the financial services activities of Scania and Porsche Vehicles sold in Germany as a proportion of overall sales 1, 2019, contracts signed by Holding Salzburg. Since January increased to 13.2 (12.1)%. our international joint ventures are also included; the comparison figures have been adjusted. PRODUCTION The Financial Services Division’s products and services Between January and March 2019, the Volkswagen Group’s were very popular in the period from January to March 2019. production decreased by 2.6% year-on-year to a total of The number of new financing, leasing, service and insurance 2,655,044 vehicles. Production in Germany fell by 14.2% to contracts was 2.1 (2.1) million worldwide. The ratio of leased 554,432 units. The proportion of production in Germany and financed vehicles to Group deliveries (penetration rate) declined to 20.9 (23.7)%. in the Financial Services Division’s markets amounted to 33.8 (33.1)% in the reporting period. As of March 31, 2019, the INVENTORIES total number of contracts was 22.7 million, up 2.6% on the Global inventories at Group companies and in the dealer figure as of December 31, 2018. organization were higher on March 31, 2019 than at year-end In the Europe/Other markets region, the number of new 2018, and also exceeded the corresponding prior-year figure. contracts signed in the first three months of 2019 rose by 3.2% to 1.6 million. At 16.6 million as of March 31, 2019, the EMPLOYEES total number of contracts rose by 3.5% compared with the The Volkswagen Group had 638,845 active employees on end of 2018; the Customer Financing/Leasing area accounted March 31, 2019. A further 9,167 employees were in the for 7.3 million of these contracts (+2.4%). passive phase of their partial retirement. In addition, there In North America, the number of new contracts signed were 17,248 young people in vocational traineeships. At the fell by 4.7% year-on-year to 221 thousand in the first quarter , the Volkswagen Group had a end of the first quarter of 2019 of 2019. At 3.0 (3.0) million, the number of contracts at the total of 665,260 employees worldwide. This was on a level end of March was on a level with the figure at year-end 2018. with the figure at year-end 2018. At 292,437, the number of The Customer Financing/Leasing area recorded 1.9 (1.9) mil- employees in Germany was also on a level with the end of lion contracts. 2018. In South America, 62 (66) thousand new contracts were concluded in the period from January to March of this year.

16 Results of Operations, Financial Position and Net Assets 14 Interim Management Report Results of Operations, Financial Position and Net Assets APPLICATION OF NEW INTERNATIONAL FINANCIAL REPORTING the financial reporting. The Commercial Vehicles segment STANDARDS will continue to correspond to the Commercial Vehicles 16, which came into effect The new accounting standard IFRS Business Area, but now excluding the Volkswagen Commer- on January 1, 2019, amends the previous lease accounting cial Vehicles brand. The prior-ye ar figures have been adjusted. rules with the central aim of recognizing all leases in the The Automotive Division will remain unchanged. balance sheet. Accordingly, it es tablishes that lessees are no SPECIAL ITEMS longer required to classify their leases as either finance leases Special items consist of certain items in the financial state- or operating leases. They will instead generally be required to ments whose separate disclosure the Board of Management recognize a right-of-use asset and a lease liability for every believes can enable a better assessment of our economic lease in the balance sheet. The right-of-use assets are recog- performance. nized in the balance sheet un der those items in which the In the period from January to March 2019, negative assets underlying the lease would have been reported if they special items in connection with the diesel issue affected the were owned by the Volkswagen Group. Using the modified operating profit in an amount Passenger Cars Business Area’s retrospective method (adjustments to the opening balance lt of additional expenses 1.0 billion. They were the resu of €– sheet), right-of-use assets were recognized under noncurrent for legal risks. assets and lease liabilities as financial liabilities for the first time as of January 1, 2019. This led to an increase in total COMPENSATION PAID TO THE NONCONTROLLING INTEREST assets but did not affect equity. SHAREHOLDERS OF MAN SE The new approach results in a slight increase in operating In August 2018, the control and profit and loss transfer agree- profit in 2019, because the only items allocated to operating was terminated by extraordinary notice as MAN SE ment with profit as from January 1, 2019 are depreciation charges on the announcement that the of January 1, 2019. Following right-of-use assets. Interest ex pense on lease liabilities in the termination of the control and profit and loss transfer agree- Automotive Division is recognized in the financial result and ment had been recorded in the commercial register, the non- has a corresponding negative impact here. MAN SE were entitled under the controlling shareholders of In the cash flow statement, the modified presentation of provisions of the control and profit and loss transfer agree- leases in the statement of income as a result of the new 16 is expected to have a positive effect on full-year gross IFRS ment to tender their shares to Volkswagen within a two- cash flow, and therefore subsequently also on net cash flow month period. This resulted in cash outflows of €1.1 billion (depreciation is a non-cash expense) in an amount in the mid in the first quarter of this year for the acquisition of tendered Repayments of the principal three-digit million euro range. shares and for compensation payments. The “Put options portion of the lease liability have a corresponding negative and compensation rights granted to noncontrolling interest impact on cash flows from financing activities. shareholders” item reported in the balance sheet was reduced The initial recognition of lease liabilities as financial accordingly. The put options granted to noncontrolling expired on March 4, 2019. MAN SE liabilities in the balance sheet led to a significant increase in interest shareholders of The remaining amount of €0.7 billion was reclassified third-party borrowings in the cash flow statement, which in directly to equity; €0.3 billion of this amount is attributable turn resulted in a negative one-off effect of €–4.8 billion on to noncontrolling interests. the disclosure of the Automotive Division’s net liquidity as of January 1, 2019. RESULTS OF OPERATIONS OF THE GROUP The prior-year figures have not been adjusted. The Volkswagen Group’s sales revenue in the first quarter of NEW REPORTING STRUCTURE 2019 amounted to €60.0 billion, 3.1% more than in the Since January 1, 2019, we have allocated the Volkswagen previous year. The rise, which occurred despite declines in Commercial Vehicles brand to the Passenger Cars segment volumes, is mainly the result of mix and price improvements and renamed the segment Passenger Cars and Light Com- and the healthy business performance in the Financial Ser- mercial Vehicles. Consequently, the Passenger Cars Business vices Division. The Volkswagen Group generated 79.7 (80.1)% Area includes the Volkswagen Commercial Vehicles brand in of its sales revenue outside Germany.

17 Interim Management Report 15 Results of Operations, Financial Position and Net Assets At €11.7 (11.6) billion, gross profit was in line with the pre- unchanged. Administrative expenses and their ratio to sales vious year. The gross margin amounted to 19.5 (19.9)%. revenue were both higher. The other operating result was The Volkswagen Group’s operating profit before special 0.4 billion. Positive effects above all down by €0.2 billion to €– items improved by €0.6 billion in the first three months of arising from the fair value measurement of derivatives to 2019 to €4.8 billion, while the operating return on sales before which hedge accounting is not applied, which are reported special items increased to 8.1 (7.2)%. Positive effects arising here, and the favorable exchange rate trend were unable to from the fair value measurement of certain derivatives, offset the negative special items in connection with the diesel improvements in the mix and price positioning, and the issue. favorable exchange rate trend more than offset the rise in The Automotive Division’s operating result stood at fixed costs and lower vehicle sales. Special items in connec- €3.2 billion in the first quarter of 2019, down €0.4 billion on 1.0 billion weighed tion with the diesel issue amounting to €– the prior-year figure. Positive effects arising from the fair , the Volkswagen Group’s oper- on operating profit. As a result value measurement of certain derivatives and the mix, price billion recorded in the period from ating profit of €3.9 and exchange rate trends were unable to offset the decline in January to March 2019 was €0.3 billion lower than in the new vehicle sales, increased depreciation and amortization previous year. The operating return on sales declined to and research and development costs and specifically the 6.4 (7.2)%. negative special items recognized in the first quarter of The financial result was virtually unchanged at €0.2 (0.3) bil- 2019. The operating return on sales amounted to 6.2 (7.2)%. lion. Higher interest expenses arising from the interest cost Excluding the special items, the Automotive Division’s oper- on provisions and from the application of the new IFRS 16 ating profit rose to €4.1 (3.6) billion. The operating return on was offset by higher income from financial investments. The sales before special items increased to 8.2 (7.2)%. Our oper- share of the result of equity-accounted investments and the ating profit benefits from the business performance of our result of the Chinese joint ventures included in that amount Chinese joint ventures only by deliveries of vehicles and were on a level with the previous year. vehicle parts and of license revenue, as the profit recorded by The Volkswagen Group’s profit before taxes was down on the joint venture companies is accounted for in the financial the prior-year period, at €4.1 (4.5) billion. Profit after tax result using the equity method. decreased by €0.2 billion to €3.1 billion. RESULTS OF OPERATIONS IN THE PASSENGER CARS, COMMERCIAL Results of operations in the Automotive Division VEHICLES AND POWER ENGINEERING BUSINESS AREAS FROM In the first three months of 2019, the Automotive division JANUARY 1 TO MARCH 31 generated sales revenue of €50.8 billion, a year-on-year increase of €2.1%. Mix and price positioning improvements had a positive effect, while declines in volumes impacted negatively. In the Passenger Cars Business Area, sales revenue 2018 2019 € million in the period from January to March 2019 was in line with the 1 previous year. In the Commercial Vehicles and Power Engi- Passenger Cars neering Business Areas, sales revenue was up significantly on Sales revenue 43,243 43,581 the previous year. As our Chinese joint ventures are Operating result 2,803 3,301 accounted for using the equity method, the Group’s business 7.6 Operating return on sales (%) 6.4 performance in the Chinese passe nger car market is reflected 1 in consolidated sales revenue primarily by deliveries of Commercial Vehicles vehicles and vehicle parts. 6,305 5,734 Sales revenue Cost of sales rose faster than sales revenue, mainly due to Operating result 420 312 higher depreciation and amortization charges resulting from Operating return on sales (%) 5.4 6.7 nditure, higher research and the large volume of capital expe development costs recognized in profit or loss and increases Power Engineering in fixed costs. The ratio of cost of sales to sales revenue was Sales revenue 766 891 up on the prior-year period. At 6.9 (6.7)%, total research and – 42 – 56 Operating result development costs as a percentage of the Automotive Divi- – 6.3 5.4 Operating return on sales (%) – sion’s sales revenue (research and development ratio or R&D 1 The Volkswagen Commercial Vehicles brand has been reported as part of the Passenger ratio) was higher than in th e first quarter of 2018. Cars Business Area since January 1, 2019. The prior-year figures have been adjusted. Distribution expenses rose in the period from January to March 2019. Their ratio to sale s revenue remained virtually

18 Results of Operations, Financial Position and Net Assets 16 Interim Management Report OPERATING PROFIT BEFORE SPECIAL ITEMS BY QUARTER Volkswagen Group in € million 2019 2019 2018 2018 6,000 6,000 4,500 4,500 3,000 3,000 1,500 1,500 0 0 Q1 Q4 Q3 Q2 Results of operations in the Financial Services Division At the end of the first three months of 2019, the Volkswagen In the period from January to March 2019, the Financial Group’s cash and cash equivalents reported in the cash flow s revenue of €9.2 billion; the Services Division generated sale statement were €19.7 (21.5) billion. year-on-year increase of 8.9% was mainly attributable to the On March 31, 2019, the Group’s net liquidity amounted to higher business volume. 144.1 billion, compared with €– 134.7 billion at the end of €– Cost of sales expanded by €0.6 billion to €7.5 billion, 2018. growing slightly faster than sales revenue. Distribution Financial position of the Automotive Division expenses and their ratio to sales revenue were both higher The gross cash flow recorded in the Automotive Division was due to volume-related factors. Administrative expenses were €8.1 (6.5) billion in the first quarter of 2019. Compared with up slightly, but their ratio to sales revenue decreased. the previous year, a dividend receivable from the Chinese The operating profit of the Financial Services Division , which was already recog- SAIC VOLKSWAGEN joint venture improved by 9.7% to €0.7 billion in the reporting period. The nized in the first quarter of 2019, had a positive effect on operating return on sales stood at 7.6 (7.5)%. funds tied up in working gross cash flow, but pushed up tanding. In addition, the new capital for the amount still outs FINANCIAL POSITION OF THE GROUP IFRS 16 had a positive effect on gross cash flow in the The Volkswagen Group’s gross cash flow of €10.4 billion recorded in the period from January to March 2019 was reporting period. Special items in connection with the diesel €1.8 billion higher than in the previous year. Due to an issue, which led to a rise in other provisions and thus affected the change in working capital, ha d a negative impact here. In increase in funds tied up in working capital, the change in 3.0 billion to €– 7.6 billion, resulting addition, the change in working capital, which amounted to working capital rose by €– in a decline in cash flows from operating activities to 2.7 billion, was €1.7 billion higher in total than in the €– €2.8 (4.0) billion. prior-year period because of an increase in inventories. The In the period from January to March 2019, the Volks- cash outflows attributable to the diesel issue were signifi- wagen Group’s investing activities attributable to operating cantly lower than in the prior-year period. Cash flows from activities were at the prior-year level, amounting to operating activities were down by €0.1 billion to €5.4 billion. €3.4 (3.2) billion. Investing activities attributable to operating activities Cash outflows from financin g activities amounted to resulted in a total cash outflow of €3.4 (3.0) billion in the 7.4 (2.4) billion. This figure primarily includes the issuance €– period from January to March 2019. Investments in property, and redemption of bonds and other financial liabilities and nt property and intangible plant and equipment, investme shares tendered as a result of the MAN the acquisition of assets, excluding capitalize d development costs (capex) termination of the control and profit and loss transfer agree- increased by €0.1 billion to €2.0 billion. The ratio of capex to 16, payments IFRS ment. Following the application of the new sales revenue was 4.0 (3.9)%. Capex was invested primarily in for the principal portion of the lease liability have had to be our production facilities and in models to be launched in recognized under financing activities since January 1, 2019. 2019 and 2020, as well as in the ecological focus of our model range, the electrification and digitalization of our products and in our modular toolkits.

19 Interim Management Report 17 Results of Operations, Financial Position and Net Assets FINANCIAL POSITION OF THE PASSENGER CARS, COMMERCIAL Division’s net liquidity of €16.0 billion reported at the end of VEHICLES AND POWER ENGINEERING BUSINESS AREAS FROM March 2019 was down significantly on the figure of €19.4 bil- JANUARY 1 TO MARCH 31 lion as of December 31, 2018. Financial position of the Financial Services Division In the first quarter of 2019, the Financial Services Division 2019 2018 € million generated gross cash flow of €2.3 (2.0) billion. Due to an 1 increase in funds tied up in working capital, which was Passenger Cars primarily attributable to the growth in business volumes, the Gross cash flow 5,710 7,297 4.8 bil- change in working capital rose by €–1.3 billion to €– Change in working capital 1,801 541 – – lion. As a result, cash flows fr om operating activities went Cash flows from operating activities 5,169 5,496 2.5 billion. down by €1.1 billion to €– Cash flows from investing activities At €0.0 (0.1) billion, investing activities attributable to attributable to operating activities – 5,057 – 2,739 operating activities fell short of the previous year’s level. Net cash flow 2,430 439 The financing activities in the Financial Services Division resulted in a cash outflow of €1.3 billion in the reporting 1 Commercial Vehicles period, compared with a cash inflow of €5.5 billion in the Gross cash flow 740 776 prior-year quarter. This figure primarily includes the issuance Change in working capital – 894 457 – and redemption of bonds and other financial liabilities. Cash flows from operating activities – 118 283 The Financial Services Division’s negative net liquidity, Cash flows from investing activities 160.0 billion on which is common in the industry, stood at €– attributable to operating activities – 254 1,721 March 31, 2019; the figure as of December 31, 2018 was Net cash flow 1,602 29 154.1 billion. €– CONSOLIDATED BALANCE SHEET STRUCTURE Power Engineering On March 31, 2019, the Volkswag en Group had total assets of Gross cash flow 37 87 €471.2 billion, an increase of 2.9% compared with the figure Change in working capital – 83 – 50 at the end of 2018. The rise is mainly attributable to the Cash flows from operating activities – 3 13 exchange rate trend and the application of the new 16. IFRS Cash flows from investing activities The Group’s equity amounted to €117.5 billion, €0.2 billion attributable to operating activities – 38 25 – more than at the end of 2018. The equity ratio was Net cash flow – 51 – 22 24.9 (25.6)%. 1 The Volkswagen Commercial Vehicles brand has been reported as part of the Passenger prior-year figures have been adjusted. Cars Business Area since January 1, 2019. The Automotive Division balance sheet structure At the end of March 2019, the Automotive Division’s intan- Additions to capitalized deve lopment costs amounting to gible assets were on a level with those on December 31, 2018. €1.1 (1.2) billion were below the level recorded as of March 31, 16 resulted in a rise in property, plant and IFRS The new 2018. SAIC equipment. The dividend of the Chinese joint venture 2019, net cash flow in the In the first three months of already resolved for fiscal year 2018 led to a VOLKSWAGEN Automotive Division declined by €0.4 billion year-on-year to decrease in the shares accounted for using the equity €2.0 billion. method. The business results of the Chinese joint ventures in The Automotive Division’s financing activities resulted in the first three months of 2019 had an offsetting effect. In 6.1 (– 3.1) billion in the period from Janu- a cash outflow of €– total, shares accounted for using the equity method at the ary to March 2019. Financing activities include the issuance end of the first quarter of 2019 were below the level for and redemption of bonds and other financial liabilities and December 31, 2018. Overall, noncurrent assets were 3.5% shares tendered as a result of the MAN the acquisition of higher than at the end of 2018. termination of the control and profit and loss transfer Current assets rose by 5.3%; the inventories included in agreement with . Since January 1, 2019, payments for MAN SE this figure increased, mainly for production-related reasons the principal portion of the lease liability have also been and due to exchange rate effects. The rise in current other reported in this item, as required following the application of is primarily attributable to receivables and financial assets 16. IFRS the new SAIC VOLKSWAGEN and higher dividend receivables from The recognition of lease liabilities as financial liabilities trade receivables. For reasons that include the redemption of required by 16 led to a €5.1 billion increase in third- IFRS current financial liabilities, cash and cash equivalents in the party borrowings in the Automotive Division as of March 31, Automotive Division declined by €7.4 billion to €16.8 billion. 2019. As a result of this non-cash effect, the Automotive

20 18 Interim Management Report Results of Operations, Financial Position and Net Assets At the end of the first quarter of 2019, the Automotive BALANCE SHEET STRUCTURE OF THE PASSENGER CARS, COMMERCIAL VEHICLES AND POWER ENGINEERING Division’s equity was €89.2 (88. 9) billion, and therefore on a level with the figure on December 31, 2018. Healthy earnings BUSINESS AREAS growth and a positive impact from currency translation increased equity; this was offset by a rise in actuarial losses from the measurement of pension provisions and negative Dec. 31, 2018 Mar. 31, 2019 € million effects from the measurement of derivatives recognized directly in equity. The amount of €0.7 billion remaining from 1 Passenger Cars MAN SE granted the put options and compensation rights in Noncurrent assets 116,537 120,742 to noncontrolling interest shareholders was reclassified Current assets 79,727 70,408 directly to equity as a result of the termination of the control Total assets 200,470 186,945 and profit and loss transfer agreement; €0.3 billion of this Equity 72,860 72,110 amount is attributable to noncontrolling interests. These are Noncurrent liabilities 76,550 66,406 AUDI AG . As the and RENK AG , MAN SE now mainly held by Current liabilities 48,429 51,060 total noncontrolling interests were lower than the noncon- trolling interests attributable to the Financial Services Divi- 1 Commercial Vehicles sion, the figure for the Automotive Division, where the Noncurrent assets 24,854 24,117 deduction was recognized, was negative. Current assets 12,864 17,366 Noncurrent liabilities increased by 13.3% to €88.0 billion. 41,483 37,718 Total assets The noncurrent financial liabilities included in this item were 13,788 13,456 Equity significantly higher as a result of the application of the new 10,637 10,532 Noncurrent liabilities IFRS 16. Pension provisions ro se, mainly because of the actu- Current liabilities 13,625 17,162 arial remeasurement following a change in the discount rate. At €67.2 (68.0) billion, current liabilities declined slightly Power Engineering as of March 31, 2019. Because of the extraordinary termina- 2,499 Noncurrent assets 2,632 tion of the control and profit and loss transfer agreement 3,612 3,597 Current assets , the “put options and compensation rights MAN SE with Total assets 6,244 6,097 granted to noncontrolling interest shareholders” account was Equity 2,920 2,953 shares were acquired, the cash MAN settled: the tendered 851 754 Noncurrent liabilities compensation was paid and the remaining amount was Current liabilities 2,391 2,472 reclassified directly to equity. Current financial liabilities 1.5) billion. The figures for the Automotive 6.9 (– stood at €– has been reported as part of the Passenger 1 The Volkswagen Commercial Vehicles brand Division also contain the elimination of intragroup trans- prior-year figures have been adjusted. Cars Business Area since January 1, 2019. The actions between the Automotive and Financial Services divisions. As the current financial liabilities for the primary Financial Services Division balance sheet structure Automotive Division were lower than the loans granted to the The Financial Services Division’s total assets amounted to Financial Services Division in both periods, a negative €226.8 (223.6) billion on March 31, 2019. In total, noncurrent amount was disclosed in each case. Due, among other things, assets were 4.0% above the level recorded at the end of 2018. to the negative effects of the measurement of derivatives, The property, plant and equipment included in this item current other liabilities increased significantly compared decreased. Investment property and lease assets increased ial items recognized in the with December 31, 2018; the spec a result of the application because of business growth and as first quarter of 2019 led to an increase in current other les and financial assets IFRS 16, while other receivab of the new provisions. declined by a corresponding amount. Noncurrent financial At the end of the first quarter of 2019, the Automotive services receivables were higher, driven by higher volumes. Division had total assets of €244.4 billion, 4.2% more than at Current assets were down 2.2%. Current other receivables the end of 2018. and financial assets decreased considerably, while current

21 Interim Management Report 19 Results of Operations, Financial Position and Net Assets financial services receivables were up. As of the balance sheet nagement of Volkswagen AG. chairman of the Board of Ma date, cash and cash equivalents in the Financial Services Based on the information available at the present time, no Division were up €0.7 billion to €5.5 billion. At the end of the change in the risk situation of the Volkswagen Group results first quarter of 2019, the Financial Services Division accounted from the indictment of the former chairman of the Board of for approximately 48.1 (48.8)% of the Volkswagen Group’s Management. assets. USA / At €28.3 (28.5) billion, the Financial Services Division’s 3. Lawsuits filed by investors worldwide (excluding the Canada) equity at the end of the reporting period was almost on a Holding that the factual situation at issue is by and large level with the figure on December 31, 2018. The equity ratio already covered by the model case proceedings being heard was 12.5 (12.7)%. gional Court and that these by the Braunschweig Higher Re Noncurrent liabilities were 3.2% higher, mainly due to a proceedings, being paramount in this regard, preclude rise in noncurrent financial liabilities to refinance the busi- further such actions, the Stuttgart Higher Regional Court in ness volume. March 2019 refused to proceed with the capital investor Under current liabilities, current financial liabilities model case that had been referred to it by the Stuttgart declined, while trade payables increased. Overall, current Regional Court. The pertinent rulings by the Stuttgart Higher liabilities of €100.3 (100.0) billion were nearly at the same Regional Court are not yet legally final. level with the amount recorded at the end of 2018. Deposits from the direct banking business amounted to USA /Canada 4. Proceedings in the 2018, they had also stood at €29.9 billion; at the end of With respect to the consumer protection claims asserted by €29.9 billion. the New Mexico Attorney General, in March 2019 a New Mexico state court denied Volkswagen’s motion to dismiss REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES those claims against Volkswagen AG and certain affiliates, Special items resulting from the diesel issue had a negative and in April 2019 the court declined to grant Volkswagen impact on operating profit in the reporting period. Our fore- permission to appeal that decision. re special items for the Group cast for operating profit befo Volkswagen AG, Volkswagen Group of America, Inc. and ss Area remains unchanged. and the Passenger Cars Busine certain affiliated companies continue to litigate claims We have reduced the forecast for operating profit including asserted by the attorneys general of certain U.S. states and special items. municipalities based on alleged violations of local environ- The Outlook for fiscal year 2019 can be found on page 21. mental laws. In March 2019, the Tennessee Court of Appeals rney General of the State of dismissed the claims of the Atto Diesel issue Tennessee as preempted by federal law. The State of 1. Product-related lawsuits worldwide (excluding the USA / Tennessee may file an application for permission to appeal. Canada) Also in March 2019, the New Mexico Attorney General issing the class action filed by In Italy, the court decision dism voluntarily dismissed its environmental claims, and the the consumer association Codacons as inadmissible has Alabama Attorney General declined to appeal the dismissal of become legally final. its claims against Volkswagen AG by the Alabama Supreme In Germany more than 60,000 individual lawsuits are Court. now pending against Volkswagen AG or other Group com- In March 2019 the U.S. Securities and Exchange Com- panies, with the plaintiffs suin g for damages or rescission of mission filed a lawsuit against Volkswagen AG, Volkswagen , VW Credit, Inc. and a former LLC the contract in most cases. Group of America Finance, chairman of the Board of Management of Volkswagen AG, asserting claims under U.S. federal securities law and alleging 2. Criminal and administrative proceedings worldwide /Canada) USA misstatements and omissions in connection with the offer (excluding the The Braunschweig Office of the Public Prosecutor has now and sale of certain bonds and asset-backed securities. issued indictments against, among other persons, a former

22 20 Interim Management Report Results of Operations, Financial Position and Net Assets Additional important legal cases In the proceedings against a number of captive automobile In April 2019 the European Commission issued a statement finance companies regarding potential competition law of objections to Volkswagen AG, and Dr. Ing. h.c. F. AUDI AG infringements, Volkswagen AG and Volkswagen Bank GmbH Porsche AG in connection with the Commission's antitrust filed an appeal in March 2019 against the administrative fine investigation of the automobile industry. These objections order issued by the Italian Competition Authority. state the European Commission's preliminary evaluation of the matter and afford the opportunity to comment. Beyond this, there were no significant changes in the Volkswagen will examine the statement of objections. The reporting period compared with the disclosures on the subject matter of the proceedings is limited to the cooper- Volkswagen Group’s expected development in fiscal year ation of German automobile manufacturers on technical 2019 in the “Report on Expected Developments” and “Report questions in connection with the development and intro- on Risks and Opportunities” chapters – including the “Risks systems and gasoline particulate filters for SCR duction of from the diesel issue” and “Litigation/Diesel issue” sections passenger cars that were sold in the European Economic Area. and the underlying description of the issues in the chapter The manufacturers are not charged with any other mis- entitled “Diesel Issue” – of the combined management report conduct such as price fixing or allocating markets and in the 2018 Annual Report. In particular, there continue to be customers. Volkswagen has not yet been given access to the no conclusive findings or assessments available to the Board investigation files. In the same matter, the Chinese Com- of Management of Volkswagen AG regarding the described an information request to petition Authority also issued facts, that would suggest that a different assessment of the AUDI AG and Dr. Ing. h.c. F. Porsche AG in Vo l ks w a g e n A G , associated risks should have been made. March 2019. This report contains forward-looking statements on the business development of the markets, or any significant shifts in exchange rates or raw materials relevant to the Volkswagen Group. These statements are based on assumptions relating to the Volkswagen Group, will have a corresponding effect on the development of our business. In addition, expected business development may vary if the assessments of the factors development of the economic and legal environment in individual countries and economic f regions, and in particular for the automotive industry, which we have made on the basis o influencing sustainable value enhancement, as well as risks and opportunities presented the information available to us and which we consider to be realistic at the time of going y other than we are currently expecting, or in the 2018 Annual Report develop in a wa f of risk, and actual developments may differ to press. The estimates given entail a degree additional risks and opportunities or other factors emerge that affect the development o our business. from those forecast. Any changes in significant parameters relating to our key sales

23 Interim Management Report 21 Outlook Outlook The Volkswagen Group is well prepared overall for the future The Volkswagen Group’s Board of Management expects the growth of the global economy to slow somewhat in 2019. We automobility business and the challenges pertaining to the mixed developments in regional vehicle markets. Our brand still believe that risks will continue to arise from protectionist diversity, our presence in all major world markets, our broad, tendencies, turbulence in th e financial markets and struc- selectively expanded product range and pioneering tech- tural deficits in individual coun tries. In addition, growth nologies and services put us in a good competitive position pacted by continuing geopoli- prospects will be negatively im sformation of our core busi- tical tensions and conflicts. We therefore expect both the worldwide. As part of the tran advanced economies and the emerging markets to show ness, we are positioning our Group brands with a stronger acteristics and optimizing the weaker momentum than in 2018. We anticipate the strongest focus on their individual char vehicle and drive portfolio. The focus hereby is primarily on rates of expansion in Asia’s emerging economies. our vehicle fleet’s carbon footpr int and on the most attractive We expect trends in the passenger car markets in the and fastest-growing market segments. In addition, we are individual regions to be mixed in 2019. Overall, global working to make even more focused use of the advantages of demand for new vehicles will probably be at the prior-year our multibrand group by continuously developing new tech- volume of new registrations for level. We anticipate that the nologies and our toolkits. passenger cars in Western Europe will be in line with the We expect that deliveries to customers of the Volkswagen figure seen in the reporting period. After a positive perfor- Group in 2019 will slightly exceed the prior-year figure amid mance overall in recent years, we estimate that demand in continuously challenging market conditions. the German passenger car mark et will fall slightly year-on- Challenges will arise particularly from the economic situ- 2019 are expected to slightly year. Sales of passenger cars in ation, the increasing intensity of competition, exchange rate exceed the prior-year figures in markets in Central and WLTP (Worldwide Harmonized Eastern Europe. The volume of demand in the markets volatility and more stringent Light-Duty Vehicles Test Procedure) requirements. for passenger cars and light commercial vehicles (up to We expect the sales revenues of the Volkswagen Group 6.35 tonnes) in North America is likely to be slightly lower and its Passenger Cars and Commercial Vehicles business than in the prior year. We expect new registrations in the areas to grow by as much as 5% year-on-year. In terms of the South American markets for passenger cars and light com- operating profit before special items for the Group and the mercial vehicles to grow moderately overall compared with Passenger Cars Business Area, we forecast an operating return the previous year. The passenger car markets in the Asia- on sales in the range of 6.5–7.5% in 2019. For the Commercial Pacific region are expected at the prior-year level. Vehicles Business Area, we anticipate an operating return on Trends in the markets for light commercial vehicles in the 0%. In the Power Engineering sales of between 6.0% and 7. individual regions will be mixed again in 2019; on the whole, Business Area, we expect a loss around the previous year’s we anticipate a slight dip in demand. level amid a slight rise in sales revenue. For the Financial In the markets for mid-sized and heavy trucks that are Services Division, we are forecasting a moderate increase in relevant for the Volkswagen Group and in the relevant mar- sales revenues and an operating profit at the prior-year level. kets for buses, new registrations in 2019 are expected to After special items, we anticipate that the operating slightly exceed the prior-year level. return on sales will be at the lower end of the expected range We believe that automotive financial services will continue for both the Group and the Passenger Cars Business Area. to be very important for vehicle sales worldwide in 2019.

24 22 Brands and Business Fields Brands and Business Fields adverse impacts of model start-ups and phase-outs as part of SALES REVENUE AND OPERATING PROFIT BY BRAND AND BUSINESS FIELD WLTP -related fluctuations in the the product initiative and In the first three months of 2019, the Volkswagen Group portfolio as well as higher upfront expenditure for new generated sales revenue of € 60.0 (58.2) billion. Operating products and technologies. The financial key performance profit before special items amounted to €4.8 (4.2) billion. The indicators for the Audi brand include the Lamborghini and ial items of €–1.0 billion in the diesel issue gave rise to spec Ducati brands. Ducati sold 13 ,806 (13,850) motorcycles in the reporting period. reporting period. ŠKODA brand increased its sales by 7.2% to 275 thou- The Volkswagen Passenger Cars brand sold 910 (912) thou- The sand vehicles in the period from January to March 2019. The sand vehicles in the reporting period. Above all, demand was Karoq and Kodiaq models, in particular, were in high demand. strong for the T-Roc, Tiguan, Touareg and Atlas models. Sales Sales revenue increased by 8.2% to €4.9 billion. Operating revenue increased by 7.1% year-on-year to €21.5 billion. profit decreased by 6.2% to €410 million. The decline resulted Operating profit before special items rose to €921 (879) mil- from negative exchange rate effects and cost increases. How- lion. Improvements in the mix and price positioning as well ever, volume increases and pricing measures had a positive as positive cost development compensated for lower volumes impact. and negative exchange rate effects. The diesel issue gave rise brand rose by 5.5% in the reporting SEAT Sales by the to special items of €–0.4 billion in the reporting period. . This figure includes the A1 period to 176 thousand vehicles Effective 2019, the multibrand sales companies will be manufactured for Audi. The Arona and Ateca models were in separated from the Audi brand and reported in the Others high demand, and the Tarraco enjoyed a successful market category to increase transparency and comparability. In the launch. At €3.1 billion, sales revenue exceeded the prior-year first quarter of 2019, the Audi brand recorded global sales of - FAW period’s good figure by 9.7%. Operating profit increased by 305 (394) thousand vehicles. The Chinese joint venture Volkswagen sold a further 130 (159) thousand Audi vehicles. 5.5% to €89 million due to volume and mix effects. This more The A1, Q2 and Q8 models saw growth. March marked the than offset the negative impact of cost increases. gradual market launch of the Audi e-tron, the all-electric, The Bentley brand lifted its unit sales in the first three . Sales revenue fell to €13.8 (15.3) billion SUV mass-produced months of 2019 to 2,584 (2,086) vehicles. As a result, sales ings, the new allocation of companies. due to, among other th revenue climbed to €456 (351) million. Operating profit 44) million, which was mainly the result of At €1.1 (1.3) billion, operating profit was down on the prior- improved to €49 (– the availability of the new Continental GT, favorable mix year figure. Improvements in the mix and margins as well as effects and exchange rate trends. positive exchange rate effects could not compensate for the VOLKSWAGEN GROUP REPORTING STRUCTURE FINANCIAL SERVICES AUTOMOTIVE DIVISION DIVISION Passenger Cars Business Area Dealer and customer financing Power Engineering Business Area Commercial Vehicles Business Area Leasing Volkswagen Passenger Cars Scania Vehicles and Services Power Engineering Direct bank Audi es MAN Commercial Vehicl Insurance KODA Š Fleet management SEAT Mobility offerings Bentley Porsche Automotive Volkswagen Commercial Vehicles Others

25 23 Brands and Business Fields Porsche Automotive sold 57 (61) thousand vehicles world- Services increased sales to 24 (23) thousand vehicles in the wide in the period from January to March 2019. Sales revenue first three months of 2019. Sales revenue amounted to was down on the figure for the same period in 2018 at €3.4 (3.0) billion. Scania Vehicles and Services improved its €5.2 (5.4) billion. Operating profit fell by 11.6% to €829 mil- million. Increased vehicle sales, operating profit to €370 (301) lion, due to market and production-related declining volumes. an improved genuine parts and service business as well as the Sales at Volkswagen Commercial Vehicles in the reporting favorable exchange rate trend more than offset the negative period were up on the previous year at 129 (117) thousand impact of cost increases. MAN Commercial Vehicles sold 34 thousand vehicles in units globally. The Multivan/Transporter and Crafter models the first quarter of this year, representing a 9.8% increase on recorded encouraging growth rates. At €3.3 billion, sales the prior-year figure. Sales revenue amounted to €3.0 (2.8) bil- revenue was 11.8% higher than in the first quarter of 2018. In lion. Operating profit increased, mainly due to volume effects, well improvements in the mix particular, higher volumes as to €115 (83) million. and a favorable exchange rate trend led to a 29.9% rise in the Power Engineering generated sales revenue of €891 operating profit to €291 million. (766) million in the first three months of 2019. Operating Scania’s financial services business has been reported in profit declined to €9 (21) million. the Others category since Januar y 1, 2019. Scania Vehicles and KEY FIGURES BY BRAND AND BUSINESS FIELD FROM JANUARY 1 TO MARCH 31 SALES REVENUE OPERATING RESULT VEHICLE SALES 2019 2018 2019 2018 2019 2018 Thousand vehicles/€ million 912 21,538 20,115 921 879 910 Volkswagen Passenger Cars 1 305 394 13,812 15,320 1,100 1,300 Audi 275 256 4,920 4,547 410 437 ŠKODA 3,053 167 2,782 89 85 176 SEAT 3 456 351 49 –44 2 Bentley 2 939 57 61 5,224 5,438 829 Porsche Automotive 129 117 3,294 2,945 291 224 Volkswagen Commercial Vehicles 3 370 24 3,029 301 23 3,350 Scania Vehicles and Services 34 2,771 115 83 31 2,988 MAN Commercial Vehicles – 766 9 21 – 891 Power Engineering 4 901 1,040 – – – – VW China 5 28 –229 –233 –8,220 –7,834 –622 Other – – 7,999 638 608 8,706 Volkswagen Financial Services – – – 4,849 4,211 – Volkswagen Group before special items – – – – –981 – Special items 2,583 2,769 60,012 58,228 3,868 4,211 Vo lkswagen Gro u p 6 3,166 2,583 49,743 3,572 2,769 50,777 Automotive Division 7 2,526 2,716 43,581 43,243 2,803 3,301 of which: Passenger Cars Business Area 7 420 312 57 6,305 5,734 53 Commercial Vehicles Business Area – – 891 766 –56 –42 Power Engineering Business Area 8,485 701 – – 9,236 639 Financial Services Division 1 2019 in accordance with the new a llocation of companies; the prior- year figures have not been adjusted. 2 Porsche (including financial services ): sales revenue €5,799 (5,936) million, operating profit €868 (976) million. 3 Scania (including financial services): sales revenue €3 ,458 (3,118) million, operating profit €402 (331) million. 4 The sales revenue and operating profits of the joint venture companies in China are not included in the figures for the Group . These Chinese companies are accounted for using the equity method 3) million. and recorded a proportionate op erating profit of €1,074 (1,16 5 In operating profit, mainly intragroup items recognized in pro profits; the figure includes depreciation and amortization of fit or loss, in particular from the elimination of intercompany identifiable assets as part of purchase price allo cations and the companies not allocated to a brand. 6 Including allocation of consolidation adjustments betw een the Automotive and Financial Services divisions. 7 The Volkswagen Commercial Vehicles brand has been reported as part of the Passenger Cars Business Area since January 1, 2019. The prior-year figures have been adjusted.

26 Brands and Business Fields 24 of 2019 to 1.2 million vehicles. Sales revenue amounted to Since January 1, 2019, Volkswagen Financial Services has also €38.1 (36.5) billion. Mix effects had a positive impact. included the contracts concluded by the international joint At 226 thousand vehicles, the Volkswagen Group’s unit ventures in its figures. The prior-year figures have been sales in the North American markets were up by 4.2% year- adjusted. The number of new financing, leasing, service and on-year in the reporting period. Alongside volume increases, insurance contracts signed in the reporting period was the exchange rate trend contributed to a 16.1% increase in 1.9 (1.9) million. Based on unchanged credit eligibility crite- sales revenue to €10.1 billion. ria, the penetration rate, expressed as the ratio of leased or In South America, we sold 125 (143) thousand vehicles in financed vehicles to relevant Group delivery volumes, the first quarter of this year. Sales revenue fell to €2.3 (2.6) bil- amounted to 33.5 (32.8)%. On March 31, 2019, there was a lion due to volume and exchange rate effects. up 1.2% on the end of Decem- total of 20.5 million contracts, In the Asia-Pacific region, sales by the Volkswagen Group ber 2018. The number of contracts in the Customer Finan- – including the Chinese joint ventures – fell to a total of cing/Leasing area increased by 1.5% to 10.9 million as against 1.0 (1.2) million vehicles in the reporting period. As a result, year-end 2018. At 9.6 (9.6) million, the number of contracts in sales revenue also declined and was 6.2% lower than in the the Service/Insurance area was in line with the 2018 year-end previous year, at €9.3 billion. This figure does not include the level. On March 31, 2019, Volkswagen Bank managed sales revenue of our Chinese joint ventures, as this is accounted approximately 1.4 (1.5) million deposit accounts. Operating for using the equity method. profit in the reporting period increased by 5.0% to €638 mil- In the period from January to March 2019, hedging trans- lion, which was mainly due to the growth in business. actions relating to the Volkswagen Group’s sales revenue in UNIT SALES AND SALES REVENUE BY MARKET foreign currency increased by €206 million. In the Europe/Other markets region, the Volkswagen Group’s unit sales fell by 1.9% year-on-year in the first three months KEY FIGURES BY MARKET FROM JANUARY 1 TO MARCH 31 VEHICLE SALES SALES REVENUE 2019 2018 2019 Thousand vehicles/€ million 2018 1,223 1,247 38,063 36,519 Europe/Other markets North America 226 216 10,140 8,735 South America 125 2,572 143 2,348 1 Asia-Pacific 1,010 1,163 9,255 9,868 Hedges on sales revenue – – 206 534 1 Vo lkswagen Gro u p 2,583 2,769 60,012 58,228 arket. 1 The sales revenue of the joint venture companies in China is not included in the figures for the Group and the Asia-Pacific m

27 Interim Consolidated Financial Statements (Condensed) 25 Income Statement Interim Consolidated Financial Statements (Condensed) Income Statement for the Period January 1 to March 31 DIVISIONS VOLKSWAGEN GROUP FINANCIAL SERVICES AUTOMOTIVE¹ 2019 2018 2018 2018 2019 € million 2019 50,777 49,743 9,236 8,485 58,228 60,012 Sales revenue –40,805 –39,783 –7,519 –6,874 Cost of sales –48,324 –46,657 11,570 9,971 1,717 1,610 Gross result 11,688 9,960 –4,559 –4,941 –314 Distribution expenses –4,445 –4,759 –383 –1,809 –463 –448 –2,125 –2,271 Administrative expenses –1,677 –437 –267 –171 –209 Other operating result –608 –475 3,166 Operating result 701 639 3,868 4,211 3,572 Share of the result of equity-accounted 808 799 812 9 17 investments 829 –562 –629 –540 24 –22 Interest result and other financial result –605 266 Financial result 272 34 –6 203 169 4,477 Earnings before tax 735 633 3,336 4,071 3,844 –833 –1,018 –169 Income tax expense –1,009 –1,178 –185 2,503 550 465 3,300 3,053 Earnings after tax 2,835 of which attributable to 1 –12 15 13 Noncontrolling interests 7 –8 134 77 – – 134 Volkswagen AG hybrid capital investors 77 3,221 2,377 Volkswagen AG shareholders 535 452 2,912 2,769 6.40 Basic earnings per ordinary share (€)² 5.78 6.40 5.78 Diluted earnings per ordinary share (€)² 6.46 Basic earnings per preferred share (€)² 5.84 5.84 6.46 Diluted earnings per preferred share (€)² een the Automotive and Financial Services divisions. 1 Including allocation of consolidation adjustments betw 2 Explanatory information on earnings per share is presented in the “Earnings per share” section.

28 26 Interim Consolidated Financial Statements (Condensed) Statement of Comprehensive Income Statement of Comprehensive Income for the Period January 1 to March 31 € million 2018 2019 Earnings after tax 3,300 3,053 Pension plan remeasurements recognized in other comprehensive income Pension plan remeasurements recognized in other comprehensive income, before tax –845 –4,086 Deferred taxes relating to pension plan remeasur ements recognized in other comprehensive income 1,200 255 Pension plan remeasurements recognized in other comprehensive income, net of tax –2,886 –590 Fair value valuation of other participations and securities (equity instruments) that will not be reclassified to profit or loss, net of tax –21 23 Share of other comprehensive income of equity-accounted investments that will not be reclassified to profit or loss, net of tax 12 12 –2,851 –599 Items that will not be reclassified to profit or loss Exchange differences on translating foreign operations Unrealized currency translation gains/losses 860 –596 Transferred to profit or loss – – Exchange differences on translating foreign operations, before tax –596 860 Deferred taxes relating to exchange differences on translating foreign operations 12 4 Exchange differences on translating foreign operations, net of tax 872 –592 Hedging Fair value changes recognized in other comprehensive income (OCI I) –1,820 806 –209 –597 Transferred to profit or loss (OCI I) Cash flow hedges (OCI I), before tax –2,029 209 593 Deferred taxes relating to cash flow hedges (OCI I) –73 Cash flow hedges (OCI I), net of tax –1,436 136 –518 Fair value changes recognized in other comprehensive income (OCI II) –136 Transferred to profit or loss (OCI II) 235 –2 Cash flow hedges (OCI II), before tax –283 –137 Deferred taxes relating to cash flow hedges (OCI II) 85 42 Cash flow hedges (OCI II), net of tax –96 –198 Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss Fair value changes recognized in other comprehensive income 24 20 Transferred to profit or loss 0 0 Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss, before tax 24 20 Deferred taxes relating to fair value valuation of securities and receivables (debt instruments) recognized in other comprehensive income –7 –4 17 16 Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss, net of tax Share of other comprehensive income of equity-accounted investments that may be reclassified to profit or loss, net of tax 198 0 –547 –537 Items that may be reclassified to profit or loss –5,281 –1,358 Other comprehensive income, before tax 1,883 223 Deferred taxes relating to other comprehensive income Other comprehensive income, net of tax –1,135 –3,398 Total comprehensive income –345 2,165 of which attributable to Noncontrolling interests 6 1 Volkswagen AG hybrid capital investors 134 77 2,086 Volkswagen AG shareholders –485

29 Interim Consolidated Financial Statements (Condensed) 27 Balance Sheet Balance Sheet as of March 31 , 2019 and December 31, 2018 VOLKSWAGEN GROUP DIVISIONS AUTOMOTIVE¹ FINANCIAL SERVICES 2019 2018 2019 2018 2019 € million 2018 Assets 284,896 274,620 148,229 Noncurrent assets 136,667 131,467 143,153 Intangible assets 64,785 64,613 64,578 64,404 207 209 Property, plant and equipment 62,239 57,630 60,905 54,619 1,334 3,010 Lease assets 45,354 2,566 5,297 42,787 38,249 43,545 81,602 81,826 –224 9 Financial services receivables 78,684 78,692 Investments, equity-accounted investments and other equity investments, other receivables and 30,917 30,140 20,404 18,824 10,513 11,315 financial assets Current assets 186,326 183,536 96,203 91,371 90,123 92,165 Inventories 49,477 45,054 41,302 4,423 4,443 45,745 Financial services receivables 54,216 –522 –510 56,772 54,726 56,250 Other receivables and financial assets 41,321 37,557 21,513 13,033 19,808 24,524 Marketable securities 17,022 17,080 13,377 13,376 3,646 3,703 4,769 Cash, cash equivalents and time deposits 22,256 28,938 16,781 24,169 5,474 Total assets 471,222 244,432 234,524 226,790 223,632 458,156 Equity and Liabilities 117,507 89,237 88,850 28,271 28,492 Equity 117,342 Equity attributable to Volkswagen AG 104,493 104,522 76,839 76,624 27,654 27,898 shareholders Equity attributable to Volkswagen AG hybrid capital investors 12,596 12,525 12,596 – – 12,525 Equity attributable to Volkswagen AG shareholders and hybr 117,019 117,117 89,364 89,219 27,654 27,898 id capital investors 489 –128 Noncontrolling interests –369 616 594 225 Noncurrent liabilities 172,846 88,038 77,692 98,191 95,154 186,229 Financial liabilities 108,811 101,126 19,150 14,187 89,661 86,939 Provisions for pensions 37,145 36,497 32,535 647 563 33,097 40,273 32,390 30,970 7,882 7,652 Other liabilities 38,623 167,486 167,968 67,157 67,982 Current liabilities 99,986 100,329 Put options and compensation rights granted to noncontrolling interest shareholders – 1,853 – 1,853 – – Financial liabilities 83,920 89,757 –6,895 –1,504 90,814 91,261 Trade payables 23,607 20,899 20,962 3,506 2,645 24,405 Other liabilities 59,162 52,750 53,153 46,671 6,009 6,079 223,632 Total equity and liabilities 458,156 244,432 234,524 226,790 471,222 1 Including allocation of consolidation adj ustments between the Automoti ve and Financial Services divisions, primarily intragro up loans.

30 Interim Consolidated Financial Statements (Condensed) Statement of Changes in Equity 28 Statement of Changes in Equity OTHER RESERVES Currenc y Subscribed capital Retained earnings translation reserve € million Capital reserve Unadjusted balance at Jan. 1, 2018 14,551 81,367 –3,223 1,283 – –282 – Changes in accounting policy to reflect IFRS 9 and 15 – Balance at Jan. 1, 2018 1,283 14,551 81,085 –3,223 – – 3,221 – Earnings after tax Other comprehensive income, net of tax – –589 –592 – – – Total comprehensive income –592 2,632 Disposal of equity instruments – – – – – – Capital increases/Capital decreases – – Dividends payment – – – – – – – Capital transactions involving a change in ownership interest – Other changes – – 1 – 1,283 14,551 83,718 –3,815 Balance at Mar. 31, 2018 1,283 14,551 Balance at Jan. 1, 2019 –3,576 91,105 Earnings after tax – – 2,912 – Other comprehensive income, net of tax – – –2,885 872 Total comprehensive income – 27 872 – – – Disposal of equity instruments – – Capital increases/Capital decreases – – – – Dividends payment – – – – Capital transactions involving a change in ownership interest¹ – 401 29 – Other changes – – 28 – Balance at Mar. 31, 2019 1,283 14,551 91,561 –2,675 1 For the change in capital transactions involving a change in ownership interest see the section entitled “Key events”.

31 29 Statement of Changes in Equity Interim Consolidated Financial Statements (Condensed) HEDGING Equity Equit y attributable to attributable to Volkswagen AG Cash flow Equity- Volkswagen AG shareholders and Deferred costs Noncontrolling Equity and debt of hedging hedges accounted hybrid capital hybrid capital (OCI I) (OCI II) investments investors investors interests instruments Total equit y 91 229 11,088 108,849 – 109,077 3,525 166 63 – – –388 1 –387 56 –225 63 –133 166 11,088 3,581 229 108,690 108,461 – – – 77 3,299 1 3,300 – –96 – 12 136 –1,135 0 –1,135 –5 136 –5 12 77 2,164 1 2,165 –96 – – – – – – – – – – – – – – – – – – –204 –204 – –204 – – – – – – – – – – – – – 51 52 0 52 – 3,717 –33 178 11,012 110,472 230 110,702 –138 –629 117,117 228 12,596 1,790 225 117,342 –230 – – – 134 3,046 7 3,053 – –1,436 –198 40 210 – –3,397 –1 –3,398 –1,436 –198 210 134 –351 6 –345 40 – – – – – – – – – – – – – – – – – – – – –204 –204 – –204 0 0 –3 – 429 255 684 0 – – – – – 28 2 30 354 –827 –190 435 12,525 117,019 489 117,507

32 30 Interim Consolidated Financial Statements (Condensed) Cash flow statement Cash flow statement for the Period January 1 to March 31 DIVISIONS VOLKSWAGEN GROUP FINANCIAL SERVICES AUTOMOTIVE¹ 2019 € million 2019 2018 2019 2018 2018 Cash and cash equivalents at beginning of period 28,113 18,038 13,428 4,759 4,609 23,354 4,071 4,477 3,336 3,844 735 633 Earnings before tax – 796 – 743 – 460 – 455 – 337 – 288 Income taxes paid 5,925 3,935 3,687 1,990 1,675 Depreciation and amortization expense² 5,362 – 6 44 – 10 41 4 3 Change in pension provisions 1,159 828 Share of the result of equity-accounted investments 1,168 – 811 – 9 – 17 – and reclassifications³ 66 271 140 231 – 75 40 Other noncash income/expense Gross cash flow 10,418 8,584 8,110 6,537 2,308 2,047 Change in working capital – – 4,585 – 2,745 – 1,082 – 4,824 – 3,503 7,569 – 337 – 1,995 – 3,349 – 2,332 48 Change in inventories 3,301 – – – 5,676 Change in receivables 3,605 – 2,814 – 413 4,017 2,862 – Change in liabilities 4,123 4,897 2,994 3,666 1,129 1,232 Change in other provisions 1,463 959 1,476 917 – 13 42 Change in lease assets (excluding depreciation) –2,950 –269 –317 –2,500 –2,633 –2,769 – Change in financial services receivables 179 7 – 201 – 3,075 380 3,067 Cash flows from operating activities 2,849 3,999 5,364 5,455 – 2,515 – 1,457 Cash flows from investing activities attributable to operating –3,414 –3,157 –3,375 –3,018 –39 –139 activities of which: Investments in intangible assets (excluding capitalized development costs), property, –2,059 –1,978 –2,008 –1,918 –51 –60 plant and equipment, and investment property – – capitalized development costs – 1,147 – 1,203 – 1,147 – 1,203 acquisition and disposal of equity investments 276 – 48 – 274 62 – 1 – 110 – 5 4 – 56 5 84 1 1,99 Net cash flow 2,43 7 – 2,55 – 1,59 6 0 Change in investments in securities, loans and time deposits 782 308 – – 1,920 4,526 – 1,612 5,308 Cash flows from investing activities – 4,196 – 2,849 – 8,682 – 1,098 4,487 – 1,751 Cash flows from financing activities – 2,401 – 6,085 – 3,058 – 1,314 5,458 7,399 – 19 – – 19 – – – of which: capital transactions with noncontrolling interests capital contributions/ capital redemptions – – 2 – 24 – 2 24 MAN noncontrolling interest shareholders: compensation payments and acquisition of shares – – 1,063 – – 1,063 – – tendered 324 Effect of exchange rate chan ges on cash and cash equivalents 372 – 77 – 61 48 – 16 Change of loss allowance within cash & cash equivalents 1 1 0 0 0 0 – 8,373 – 9,079 1,238 706 2,235 Net change in cash and cash equivalents 3,473 5 19,740 21,511 Cash and cash equivalents at Mar. 31 14,666 5,465 6,844 14,275 Securities, loans an 28,999 25,798 14,030 13,146 14,970 12,652 d time deposits 48,739 47,309 28,305 27,812 20,435 19,496 Gross liquidity Total third-party borrowings – 192,793 – 164,976 – 12,314 – 3,518 – 180,479 – 161,458 15,991 Net liquidity at Mar. 31 – 144,054 – 117,668 24,294 – 160,044 – 141,962 6 For information purposes: at Jan. 1 – 134,735 – 119,143 19,368 22,378 – 154,103 – 141,522 1 Including allocation of consolidation adjustments betw een the Automotive and Financial Services divisions. 2 Net of impairment reversals. 3 These relate mainly to the fair value measurement of financial instruments an d the reclassification of gains/losses on dispos al of noncurrent assets and equity investments to investing activities. 4 Net cash flow: cash flows from operating activities, net of cash flows from investing activities attributable to operating ac tivities (investing activities excluding change in investments in securities, loans and time deposits). 5 Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits. 6 The total of cash, cash equivalents, secu rities, loans to affiliates an d joint ventures as well as time deposits net of third -party borrowings (noncurrent an d current financial liabilities). d in the section relating to the cash flow statement. Explanatory notes on the cash flow statement are presente

33 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements 31 Notes to the Consolidated Financial Statements Accounting in accordance with International Financial Reporting Standards (IFRSs) pean Parliament and of the Council, Volkswagen AG In accordance with Regulation No. 1606/2002 of the Euro prepared its consolidated financial statements for 2018 in compliance with the International Financial IFRS s), as adopted by the European Union. These interim consolidated financial state- Reporting Standards ( 34 (Interim IAS ments for the period ended March 31, 2019 were therefore also prepared in accordance with Financial Reporting) and are condensed in scope compared with the consolidated financial statements. All figures shown are rounded, so minor discrepancies may arise from addition of these amounts. ve and Financial Services divisions are presented in In addition to the reportable segments, the Automoti the condensed interim group financial report for expl anatory purposes alongside the income statement, balance sheet and cash flow statement for the Volksw agen Group. This supplemen tal presentation is not between the Automotive and Financial Services IFRS s. Eliminations of intragroup transactions required by divisions are allocated to the Automotive Division. ents were reviewed by auditors in accordance with The accompanying interim consolidated financial statem section 115 of the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act). Accounting policies Volkswagen AG has applied all accounting pronouncem ents adopted by the EU and effective for periods beginning on or after January 1, 2019. IFRS 16 – LEASES 17 standard and related IAS IFRS 16 amends the rules for lease accounting and replaces the previous interpretations. 16 is to recognize all leases. It establishes that lessees are no longer required to IFRS The main objective of e leases or operating leases. In general, they will instead be required to classify their leases as either financ the leases in the balance sheet. In the Volkswagen Group recognize a right-of-use asset and a lease liability for the lease liability is measured on the basis of th e outstanding lease payments, discounted using the incremental borrowing rate, while the right-of-use asset is always measured at the amount of the lease liability plus any initial direct costs. During the lease term, th e right-of-use asset must be depreciated and the lease IFRS 16 offers payments into account. liability adjusted using the effective interest meth od and taking the lease practical expedients for short-term and low-value leases ; the Volkswagen Group make s use of this option and ies for these types of leases. In this respect, the lease therefore does not recognize right-of-use assets or liabilit payments will continue to be recognized in the income statement in the same way as before. At the initial ary 1, 2020 were reclassified as short-term leases, application date, leases whose term ends before Janu irrespective of the start date of the lease. In addition, existing leases were not assessed at the initial application date to determine whether or not they are leases under th e criteria of IFRS 16. Instead, contracts classified as leases under IAS 17 or IFRIC 4 will continue to be accounted for as leases. 17. Lessors will be required to continue IAS ows the previous guidance of Lessor accounting essentially foll leases on the basis of the risks and rewards incidental to to classify their leases as finance leases or operating ownership of the leased asset. IFRS 16, using the modified retrospective r leases in accordance with The Volkswagen Group accounts fo method, for the first time as of January 1, 2019. Prior- year periods have not been restated. According to this tion date is the present value of the outstanding lease method, the lease liability to be recognized at the transi payments, which is determined using the incremental bo rrowing rates as of January 1, 2019. The weighted average interest rate applied in the Volkswagen Group was 3.7%.

34 32 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements e amount of the corresponding lease liability, adjusted To simplify, the right-of-use assets are recognized in th IAS 17 or IFRIC 4 will continue for any prepaid or accrued lease payments. Contracts not classified as leases under not to be accounted for as leases. Applying the permitte d exemption, the right-of-use asset is adjusted for the amounts that were recognized in the balance sheet as prov isions for onerous operating leases as of December 31, 2018. The right-of-use assets were not tested for impairment in this context at the initial application date. The right-of-use assets are recognized in the balance sheet under those items in which the assets underlying the lease would have been reported if they were owned by the Volkswagen Group. For this reason, the right-of-use assets are presented under noncurrent assets, mostly in property, plant and equipment, as of the balance sheet date. abilities had the following effects as of January 1, 2019: The initial recognition of right-of-use assets and lease li > Right-of-use assets of €5.5 billion were recognized in the opening balance sheet (including €5.4 billion under property, plant and equipment and €0.1 billion under investment property). Prepayments capitalized, accrued liabilities and provisions for onerous operating leases were offset with the right-of-use assets. The right-of-use assets recognized included an amount of €0.4 billion that had already been recognized under finance leases as of December 31, 2 018. In connection with the initial application of IFRS 16 there was an adjustment to the classification of noncurrent assets, resulting in the reclassifica tion of property, plant and equipment of €0.4 billion to lease assets and investment property. .6 billion; they are reported under e opening balance in an amount of €5 > Lease liabilities are recognized in th noncurrent and current financial liabilities. The lease liabilities recognized included an amount of €0.4 bil- lion that had already been recognized unde r finance leases as of December 31, 2018. > Initial application did not have any effect on equity. The difference between the expected payments for operat ing leases in an amount of €4.9 billion, discounted using the incremental borrowing rate as of December 31, 2018, and the lease liabilities in an amount of balance sheet is mainly the result of €5.6 billion recognized in the opening taking account of existing finance leases and a new estimate of expected lease payments, attributable to the capitalization of certain variable lease payments, for example. The lease terms taken into account when recognizing lease liabilities were also IFRS 16. In this process, reasonably certain extension or termination reassessed in accordance with the rules of options were taken into account in determining the lease payments to be capitalized. Moreover, the opening balance sheet does not include lease paymen ts for low-value or short-term leases. Unlike the previous procedure, under which all operating lease expenses were reported under operating 16 are depreciation IFRS profit, the only items allocated to operating profit in the Automotive Division under charges on right-of-use assets. Interest expense from adding interest on lease liabilities in the Automotive Division is reported in the financial result. This had a po sitive impact of €0.1 billion on the operating result in the first quarter of 2019. The change in the way expenses from operating leases are presented in the statement of cash flows resulted in an improvement of €0.2 billion in ca sh flows from operating ac tivities and net cash flow in the first quarter of 2019, of which €0.2 billion is attributable to to the au tomotive division. Cash flows from financing activities declined accordingly. The increase in financial liabilitie s attributable to the change in accounting rules had a negative impact of €5.4 billion on the Volkswagen Grou p’s net liquidity as of March 31, 2019, of which €5.1 bil- lion is attributable to the automotive division. This standard also results in far more extensive disclosures in the notes.

35 Notes to the Consolidated Financial Statements 33 Interim Consolidated Financial Statements (Condensed) OTHER ACCOUNTING POLICIES A discount rate of 1.5 % (December 31, 2018: 2.0%) wa s applied to German pension provisions in the accom- panying interim consolidated financial statements. nancial statements was calculated on the basis of The income tax expense for the interim consolidated fi IAS 34 (Interim the average annual tax rate that is expected for the entire fiscal year, in accordance with Financial Reporting). In other respects, the same accounting policies an d consolidation methods that were used for the 2018 consolidated financial statements are generally applied to the preparation of the interim consolidated financial aratives. A detailed description of the policies and statements and the measurement of the prior-year comp methods applied is published in the “Accounting policies” section of the notes to the 2018 consolidated financial statements. In addition, details of the effects of new standards can be found in the “New and amended IFRS s not applied” can also be accessed on the Internet at www.volks- section. The 2018 consolidated financial statements wagenag.com/en/InvestorRelations.html. Key events ronmental Protection Agency ( ) publicly announced in a “Notice of On September 18, 2015, the US Envi EPA ) emissions had been discovered in emissions Violation” that irregularities in relation to nitrogen oxide (NO X oup with type 2.0 l diesel engines in the tests on certain vehicles of Volkswagen Gr . This was followed by USA further reports on the scope of the diesel issue. Detailed info rmation can be found in the “Key events” section of the 2018 consolidated financial statements. In the first quarter of fiscal year 2019, additional expens es of €1.0 billion had to be recognized for legal risks in this connection. te, as well as the investigations and interviews in Moreover, the publications released by the reporting da connection with the diesel issue, did not provide the Group Board of Management with any new reliable findings or judgments regarding the underlying facts and the assessment of the associated risks (e.g. investor quarterly financial statements in the reporting period. lawsuits) and did not reveal any material effects on the Further information on the litigation in connection with the diesel issue can be found in the “Litigation” section. MAN SE was terminated by it and loss transfer agreement with In August 2018, the control and prof 1, 2019. Following the announcement of the termination of the control and extraordinary notice as of January profit and loss transfer agreement and the recording thereof in the commercial register, the noncontrolling MAN SE had the right to tender their shares to Vo lkswagen, pursuant to the provisions of the shareholders of control and profit and loss transfer agreement, within a two-month period. This resulted in cash outflows of €1.1 billion in the first quarter of this year for the acquis ition of shares tendered and dividend distribution. There was a corresponding decline in the amount of “put opti ons and compensation rights granted to noncontrolling interest shareholders” reported in the balance sheet. The put options granted to noncontrolling interest MAN SE expired on March 4, 2019. The remaining liability of €0.7 billion was reclassified directly to shareholders of equity; €0.3 billion of this amount is a ttributable to noncontrolling interests. Basis of consolidation In addition to Volkswagen AG, which is domiciled in Wolfsburg and entered in the commercial register at the 100484, the consolidated financial statements comprise all signifi- HRB Braunschweig Local Court under No. cant German and non-German subsidiaries, including stru ctured entities, that are controlled directly or indirectly by Volkswagen AG. This is the case if Volksw agen AG obtains power over the potential subsidiaries directly or indirectly from voting rights or similar rights, is exposed or has righ ts to, positive or negative variable returns from its involvement with the subsidiaries, and is able to influence those returns.

36 Notes to the Consolidated Financial Statements Interim Consolidated Financial Statements (Condensed) 34 Disclosures on the interim consolidated financial statements Sales revenue 1. 1 STRUCTURE OF GROUP SALES REVENUE Q1 2018 Passenger Cars and Light Commercial Commercial Power Financial Volkswagen € million Vehicles Services Total Segments Reconciliation Vehicles Group Engineering 35,364 – – Vehicles 38,934 –2,719 36,215 3,570 Genuine parts 837 – – 3,985 –24 3,962 3,149 Used vehicles and third-party products 3,067 – – 3,423 –117 3,306 356 Engines, powertrains and parts deliveries 152 – – 3,126 –4 3,122 2,974 – – 766 Power Engineering 766 –1 766 – Motorcycles 150 – – – 150 – 150 Leasing business 178 391 – 6,517 7,087 –970 6,117 Interest and similar 62 1 – 1,773 1,837 –42 1,795 income Hedges sales revenue 585 9 – – 594 –60 534 Other sales revenue 1,937 417 – 194 2,548 –286 2,262 58,228 –4,223 47,466 5,734 766 8,485 62,451 1 Since January 1, 2019, sales revenue from th e sale of light commercial vehicles of th as not been reported in the e Volkswagen Commercial Vehicles brand h Commercial Vehicles segment. The prior-year figures have been adjusted accordingly. STRUCTURE OF GROUP SALES REVENUE Q1 2019 Passenger Cars and Light Commercial Commercial Power Financial Volkswagen Engineering Vehicles Group Vehicles Services Total Segments Reconciliation € million 36,275 4,057 – – 40,332 Vehicles 37,419 –2,913 Genuine parts 873 – – 3,292 –32 4,133 4,164 Used vehicles and third-party products 3,306 356 – – 3,662 –117 3,545 Engines, powertrains and parts deliveries 155 – – 2,635 –2 2,633 2,481 – 891 – 891 –1 890 Power Engineering – 158 – – – Motorcycles – 158 158 Leasing business 219 421 – 7,069 7,709 –992 6,717 Interest and similar income 57 – 1,947 2,005 –56 1,949 1 Hedges sales revenue –6 – – 158 47 206 165 Other sales revenue 1,710 448 – 220 2,378 –14 2,364 47,662 6,305 891 9,236 64,093 –4,081 60,012 Other sales revenue comprises revenue from workshop services and license revenue, among other things.

37 Notes to the Consolidated Financial Statements 35 Interim Consolidated Financial Statements (Condensed) Cost of sales 2. (previous year: €518 million) attributable to the financial Cost of sales includes interest expenses of €674 million services business. ortization expenses, cost of sales also includes impairment losses on In addition to depreciation and am and lease assets. The impairment losses identified on intangible assets, items of property, plant and equipment, million (previous year: €164 million). The value the basis of updated impairment tests amount to a total of €223 in use is used as the basis for calculating impairment losses. Research and development costs 3. Q1 2019 2018 % € million 3,483 3,356 3.8 Total research and development costs 1,147 1,203 of which: capitalized development costs –4.7 35.9 32.9 Capitalization ratio in % 934 –4.6 Amortization of capitalized development costs 891 3,087 4.5 3,227 Research and development costs recognized in profit or loss 4. Earnings per share Basic earnings per share are calculated by dividing earnin gs attributable to Volkswagen AG shareholders by the shares outstanding during the reporting period. weighted average number of ordinary and preferred shares is identical, basi c earnings per share also correspond to diluted Since the basic and diluted number of th Article 27 of the Articles of Asso earnings per share. In accordance wi ciation of Volkswagen AG, preferred shares are entitled to a €0.06 higher dividend than ordinary shares. Q1 2019 2018 Weighted average number of shares outstanding million 295.1 295.1 Ordinary shares: basic diluted 295.1 295.1 million million 206.2 Preferred shares: basic 206.2 million 206.2 diluted 206.2 Earnings after tax € million 3,053 3,300 Noncontrolling interests € million 1 7 € million 77 Earnings attributable to Volkswagen AG hybrid capital investors 134 € million 2,912 Earnings attributable to Volkswagen AG shareholders 3,221 Earnings per share Ordinary shares: basic 5.78 6.40 € diluted € 5.78 6.40 Preferred shares: basic € 5.84 6.46 diluted € 5.84 6.46

38 Notes to the Consolidated Financial Statements 36 Interim Consolidated Financial Statements (Condensed) 5. Noncurrent assets CHANGES IN SELECTED NONCURRENT ASSETS BETWEEN JANUARY 1 AND MARCH 31, 2019 Additions/ Changes in consolidated Disposals/ Depreciation Carrying amount Carrying amount at Mar. 31, 2019 Other changes and amortization at Jan. 1, 2019¹ Group € million 64,613 1,228 –22 1,078 64,785 Intangible assets Property, plant and equipment 62,345 2,418 –246 2,770 62,239 Lease assets 43,922 5,486 2,011 2,044 45,354 1 Value in the opening balance adjusted (see disclosures on IFRS 16). 6. Inventories Mar. 31, 2019 € million Dec. 31, 2018 Raw materials, consumables and supplies 5,543 6,139 Work in progress 4,521 4,382 Finished goods and purchased merchandise 32,867 30,553 Current lease assets 5,107 5,762 Prepayments 189 168 Hedges on inventories –2 –8 49,477 45,745 There was no requirement to recognize or reverse signif icant impairment losses on inventories in the reporting period. 7. Current other receivables and financial assets € million Mar. 31, 2019 Dec. 31, 2018 Trade receivables 17,888 20,320 Miscellaneous other receivables and financial assets 21,001 19,669 41,321 37,557 In the period January 1 to March 31, 2019, impairment lo sses and reversals of impairment losses on noncurrent and current financial assets reduced operating profit by €195 million (previous year: €148 million). long-term construction contracts (contract assets). The trade receivables also include receivables from

39 Notes to the Consolidated Financial Statements 37 Interim Consolidated Financial Statements (Condensed) Equity 8. The subscribed capital is composed of 295,089,818 no-par value ordinary shares and 206,205,445 no-par-value preferred shares, and amounts to €1,283 million (December 2018: €1,283 million). , RENK AG and MAN SE The noncontrolling interests in equity are attributable primarily to shareholders of AUDI AG. 9. Noncurrent financial liabilities Mar. 31, 2019 € million Dec. 31, 2018 84,131 Bonds, commercial paper and notes 81,391 Liabilities to banks 16,241 15,447 Deposit business 1,825 1,455 399 Lease liabilities 4,961 Other financial liabilities 1,653 2,433 108,811 101,126 10. Current financial liabilities € million Mar. 31, 2019 Dec. 31, 2018 Bonds, commercial paper and notes 41,513 37,112 Liabilities to banks 16,407 18,455 Deposit business 28,090 28,555 Lease liabilities 940 51 Other financial liabilities 1,371 1,183 83,920 89,757

40 38 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements Fair value disclosures 11. value measurement remained unchanged year-on-year. Generally, the principles and techniques used for fair Detailed explanations of the measurement principles and techniques can be found in the “Accounting policies” section of the 2018 consolidated financial statements. Fair value generally corresponds to the market or quoted market price. If no active market exists, fair value is determined using valuation techniques, such as by disc ounting the future cash flow s at the market interest rate, or by using recognized option pricing models. profit or loss consist of derivatives to which hedge Assets and liabilities measured at fair value through accounting is not applied. They include primarily commodi ty futures, currency forwards relating to commodity futures as well as, in certain cases, interest rate swaps, currency swaps and cross-currency interest rate swaps. Moreover, other equity investments (shares representing an ownership interest of less than 20% as a rule) in partnerships (debt instruments), customer financing rece ivables whose returns contain more than just interest and principal repayments, and financial assets held in special funds controlled by the Volkswagen Group are measured at fair value through profit or loss. Derivative financial instruments within hedge accounting are likewise measured at fair value through profit or loss. Financial assets measured at fair value through other comprehensive income include equity investments (shares representing an ownership interest of less than 20% as a rule) in corporations (equity instruments) and s the option of fair valu e measurement through other shares for which the Volkswagen Group normally exercise comprehensive income, as well as securities (debt instrum ents) whose cash flows comprise solely payments of interest and principal and that are held under a business model aimed at both collecting contractual cash flows truments measured through other comprehensive income, changes in fair and selling financial assets. For ins taxes into account. Impair ment losses on securities value are recognized directly in equity, taking deferred (debt instruments) are recognized through profit or loss. Uniform valuation techniques and inputs are used to measure fair value. The fair value of Level 2 and 3 financial instruments is measured in the individual di visions on the basis of Group-wide specifications. Reconciliation of balance sheet items to classes of financial instruments The following table shows the reconcil iation of the balance sheet items to the relevant classes of financial instruments, broken down by the carrying amount and fair value of the financial instruments. The fair value of financial instruments measured at am ortized cost, such as receivables and liabilities, is calculated by discounting the carrying amount using a market rate of interest for a similar risk and matching e fair value of current balance sheet items is generally deemed to be their maturity. For reasons of materiality, th carrying amount. The risk variables governing the fair value of the receivables are risk-adjusted interest rates.

41 Notes to the Consolidated Financial Statements 39 Interim Consolidated Financial Statements (Condensed) RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF DECEMBER 31, 2018 NOT DERIVATIVE BALANCE FINANCIAL ALLOCATED TO MEASURED A INSTRUMENTS SHEET ITEM AT MEASURED AT AMORTIZED MEASUREMENT AT FAIR WITHIN HEDGE COST VALUE DEC. 31, 2018 ACCOUNTING CATEGORY Carrying amount Carrying amount Carrying amount Carrying amount € million Fair value Noncurrent assets Equity-accounted investments – – 8,434 8,434 – – – – – 1,340 1,474 Other equity investments 134 286 46,905 47,789 – 31,501 78,692 Financial services receivables 772 Other financial assets 4,252 1,510 – 6,521 4,240 Current assets 17,537 Trade receivables – 17,537 17,888 – 352 Financial services receivables 22 36,529 – 17,665 54,216 36,529 1,094 9,179 1,341 1 11,615 Other financial assets 9,179 140 16,940 – – 17,080 Marketable securities 140 Cash, cash equivalents and time deposits 28,938 28,938 – – 28,938 – Noncurrent liabilities Noncurrent financial liabilities 100,727 100,964 – 399 101,126 – Other noncurrent financial liabilities 767 2,085 368 – 3,219 2,087 Current liabilities Put options and compensation rights granted to noncontrolling interest shareholders – 1,853 1,853 – – 1,853 Current financial liabilities 89,707 89,707 – 51 89,757 – Trade payables – 23,607 23,607 – – 23,607 Other current financial liabilities 718 8,010 8,010 721 – 9,449

42 Notes to the Consolidated Financial Statements Interim Consolidated Financial Statements (Condensed) 40 RECONCILIATION OF BALANCE SHEET ITEMS TO CLASSES OF FINANCIAL INSTRUMENTS AS OF MARCH 31, 2019 DERIVATIVE NOT BALANCE FINANCIAL ALLOCATED TO SHEET ITEM MEASURED INSTRUMENTS A AT WITHIN HEDGE MEASURED AT AMORTIZED MEASUREMENT AT FAIR VALUE CATEGORY COST MAR. 31, 2019 ACCOUNTING Carrying amount € million Fair value Carrying amount Carrying amount Carrying amount Noncurrent assets Equity-accounted – – – – 7,677 7,677 investments Other equity investments 162 – – – 1,436 1,598 Financial services receivables 48,314 49,430 – 32,994 81,602 294 Other financial assets 786 3,617 3,639 1,076 – 5,478 Current assets Trade receivables 3 19,973 – 345 20,320 19,973 23 38,192 – 18,036 56,250 Financial services receivables 38,192 1,176 10,643 826 2 12,647 Other financial assets 10,643 16,881 141 141 – – 17,022 Marketable securities Cash, cash equivalents and time deposits 22,256 22,256 – – 22,256 – Noncurrent liabilities Noncurrent financial liabilities – 103,850 104,587 – 4,961 108,811 Other noncurrent financial liabilities 2,187 953 – 3,931 791 2,189 Current liabilities Current financial liabilities – 82,980 82,980 – 940 83,920 Trade payables 24,405 24,405 – – 24,405 – Other current financial liabilities 881 8,176 8,176 1,497 – 10,554

43 Notes to the Consolidated Financial Statements 41 Interim Consolidated Financial Statements (Condensed) The following tables contain an overview of the financial assets and liabilities measured at fair value: FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE BY LEVEL € million Dec. 31, 2018 Level 1 Level 2 Level 3 Noncurrent assets 56 25 134 Other equity investments 53 Financial services receivables 286 – – 286 772 – 357 415 Other financial assets Current assets 22 – 22 Financial services receivables – – 880 1,094 Other financial assets 214 Marketable securities 16,940 16,940 – – Noncurrent liabilities Other noncurrent financial liabilities – 250 516 767 Current liabilities Other current financial liabilities – 419 299 718 Level 1 Level 3 Mar. 31, 2019 Level 2 € million Noncurrent assets 162 73 0 89 Other equity investments 294 – 294 – Financial services receivables 786 – 386 400 Other financial assets Current assets – 3 – Trade receivables 3 Financial services receivables 23 – 23 – 1,176 969 207 Other financial assets – 16,881 16,881 Marketable securities – – Noncurrent liabilities Other noncurrent financial liabilities 791 – 305 486 Current liabilities Other current financial liabilities 881 – 577 304

44 Notes to the Consolidated Financial Statements Interim Consolidated Financial Statements (Condensed) 42 DERIVATIVE FINANCIAL INSTRUMENTS WITHIN HEDGE ACCOUNTING BY LEVEL Dec. 31, 2018 Level 1 Level 2 Level 3 € million Noncurrent assets Other financial assets 1,510 – 1,510 – Current assets Other financial assets 1,341 1,341 – – Noncurrent liabilities Other noncurrent financial liabilities 368 – 368 0 Current liabilities Other current financial liabilities – 721 – 721 € million Mar. 31, 2019 Level 2 Level 3 Level 1 Noncurrent assets Other financial assets 1,076 – 1,076 – Current assets Other financial assets 826 – 826 – Noncurrent liabilities 953 Other noncurrent financial liabilities – – 953 Current liabilities 1,497 – 1,497 Other current financial liabilities – The allocation of fair values to the three levels in the fair value hierarchy is based on the availability of observable market prices. Level 1 is used to report the fair value of financial instruments for which a price is directly available in an active market. Examples include marketable securities and other equity investments measured at fair value. Fair values in Level 2, for example of derivatives, are measured on the basis of market inputs using market-based valuation techniques. In part icular, the inputs used include exchange rates, yield curves and commodity prices that are observable in the relevant markets and obtained through pricing services. Fair Values in Level 3 are calculated using valuation techniques that incorporate inputs that are not directly observable in active markets. In the Volkswag en Group, long-term commodity futures are allocated to Level 3 because the prices available on the market must be extrapolated for measurement purposes. This is done on the basis of observable inputs obtained f or the different commodities through pricing services. Options on equity instruments, residual value prot ection models, customer financing receivables and receivables from vehicle financing programs are also reported in Level 3. Equity instruments are measured primarily using the relevant business plans and entity-specific discount rates. The significant inputs used to measure fair value for the residual value protection models include forecasts and estimates of used vehicle residual values for the appropriate models. The measurement of vehicle financing programs requires in particular the use of the corresponding vehicle price.

45 Notes to the Consolidated Financial Statements 43 Interim Consolidated Financial Statements (Condensed) The table below provides a summary of changes in level 3 balance sheet items measured at fair value: CHANGES IN BALANCE SHEET ITEMS MEASURED AT FAIR VALUE BASED ON LEVEL 3 Financial liabilities Financial assets measured at fair value measured at fair value € million Balance at Jan. 1, 2018 823 765 –8 2 Foreign exchange differences Total comprehensive income –23 111 recognized in profit or loss –23 111 – – recognized in other comprehensive income 2 Additions (purchases) 11 0 Sales and settlements –22 Transfers into Level 2 –21 0 Balance at Mar. 31, 2018 772 867 Total gains or losses recognized in profit or loss –23 –111 –16 –111 Other operating result of which attributable to assets/liabilities held at the reporting date –122 –33 Financial result –8 0 of which attributable to assets/liabilities held at the reporting date – 0 Financial liabilities Financial assets € million measured at fair value measured at fair value 990 Balance at Jan. 1, 2019 816 24 8 Foreign exchange differences Total comprehensive income 2 44 recognized in profit or loss 36 2 recognized in other comprehensive income 8 – Additions (purchases) 35 1 –69 –32 Sales and settlements Transfers into Level 2 –4 –5 Balance at Mar. 31, 2019 1,016 790 Total gains or losses recognized in profit or loss 36 –2 Other operating result –2 40 of which attributable to assets/liabilities held at the reporting date 42 5 Financial result –4 0 of which attributable to assets/liabilities held at the reporting date 4 –

46 Notes to the Consolidated Financial Statements Interim Consolidated Financial Statements (Condensed) 44 The transfers between the levels of the fair value hierar chy are reported at the respective reporting dates. The transfers out of Level 3 into Level 2 comprise commodity futures for which observable quoted prices are now available for measurement purposes due to the decline in their remaining maturities; consequently, no further extrapolation is required. There were no transfers between other levels of the fair value hierarchy. value of commodity futures. Sensitivity analyses are Commodity prices are the key risk variable for the fair used to present the effect of changes in commodity prices on earnings after tax and equity. If commodity prices for commodity futures classified as Level 3 had been 10% higher (lower) as of March 31, 2019, earnings after tax would have been €60 million (previous year: €39 million) higher (lower). The equity is not affected. The key risk variable for measuring options on equity instruments held by the Company is the relevant enter- prise value. Sensitivity analyses are us ed to present the effect of changes in risk variables on earnings after tax. If the assumed enterprise values at March 31, 2019 had been 10% high er, earnings after tax would have been €2 million (previous year: €3 million) higher. If the assumed enterprise values at March 31, 2019 had been 10% lower, earnings after tax would have been €2 million (previous year: €3 million) lower. Residual value risks result from hedging agreements with dealers under which earnings effects caused by e from buy-back obligations under leases are borne in market-related fluctuations in residual values that aris part by the Volkswagen Group. The key risk variable influencing the fair value of the opti ons relating to residual value risks is used car prices. Sensitivity analyses are used to quantify the effects of changes in used car pric es on earnings after tax. If the prices of the used cars covered by the residu al value protection model had been 10% higher as of March 31, 2019, earnings after tax would have been €328 million (previous year: €325 million) higher. If the prices of the used cars covered by the residual value pr otection model had been 10% lower as of March 31, 2019, earnings after tax would have been €354 million (previous year: €339 million) lower. les measured at fair value had been 100 basis points If the risk-adjusted interest rates applied to receivab higher as of March 31, 2019, earnings after tax would have been €2 million lower. If the risk-adjusted interest earnings after tax would have been €2 million higher. rates as of March 31, 2019 had been 100 basis points lower, If the corresponding vehicle price used in the vehicle financing programs had been 10% higher as of March 31, 2019, earnings after tax would have been €7 mi llion higher. If the corresponding vehicle prices used of March 31, 2019, earnings after tax would have been in the vehicle financing programs had been 10% lower as €7 million lower. If the result of operations of equity investments measured at fair value had been 10% better as of March 31, 2019, the equity would have been €3 million hi gher. If the result of operations had been 10% worse, the equity would have been €3 million lower. 12. Cash flow statement The cash flow statement presents the cash inflows and outflows in the Volk swagen Group and in the Automotive and Financial Services divisions. Cash and ca sh equivalents comprise cash at banks, checks, cash- in-hand and call deposits. € million Mar. 31, 2019 Mar. 31, 2018 Cash, cash equivalents and time deposits as reported in the balance sheet 22,256 21,950 Time deposits –2,516 –439 Cash and cash equivalents as reported in the cash flow statement 19,740 21,511

47 Notes to the Consolidated Financial Statements 45 Interim Consolidated Financial Statements (Condensed) Cash inflows and outflows from financing activities are presented in the following table: Q1 2018 € million 2019 Capital contributions/capital redemptions – – Dividends paid –204 –204 –19 – Capital transactions with noncontrolling interest shareholders 6,808 Proceeds from issuance of bonds 4,665 –6,405 Repayments of bonds –2,213 Changes in other financial liabilities –7,381 159 Repayments of lease liabilities –197 –6 –7,399 2,401 13. Segment reporting Segments are identified on the basis of the Volkswagen Group’s internal management and reporting. In line with the Group’s multibrand strategy, each of its brands (operating segments) is managed by its own board of management. The Group targets and requirements laid do wn by the Board of Management of Volkswagen AG must be complied with. Segment re segments: Passenger Cars and Light porting comprises four reportable Commercial Vehicles, Commercial Vehicles , Power Engineering and Financial Services. As a result of an internal es of the Volkswagen Commercial y 1, 2019, light commercial vehicl management change as from Januar Vehicles brand are no longer allocated to the Commercia l Vehicles segment, but reported under the Passenger Cars and Light Commercial Vehicles segment. The prior-year figures have been adjusted accordingly. mmercial Vehicles segment cover the development of The activities of the Passenger Cars and Light Co vehicles and engines, the production and sale of passe nger cars and light commercial vehicles, and the corre- and Light Commercial Vehicl es reporting segment, the sponding genuine parts business. In the Passenger Cars le segment, in particular as a response to the high individual brands are being combined into a single reportab e production network. Furthermore, there is collabo- degree of technological and economic interlinking in th ration within key areas such as procuremen t, research and development or treasury. e development, production and sale of trucks and The Commercial Vehicles segment primarily comprises th services. Just as in the case of the car brands, there buses, the corresponding genuine parts business and related is collaboration within the areas procurement, developm ent and sale. The aim is to achieve further forms of interlinking. The activities of the Power Engineering segment consis t of the development and production of large-bore ustrial turbines and chemical reactor systems, as well as the production diesel engines, turbo compressors, ind of gear units, propulsion co mponents and testing systems. The activities of the Financial Services segment comp rise dealer and customer financing, leasing, banking and insurance activities, fleet management and mobili ty services. In this segment, combinations occur especially while taking into account the comparability of th e type of services as well as the regulatory situation. Purchase price allocation for companies acquired is allocated directly to the corresponding segments. At Volkswagen, segment profit or loss is measured on the basis of the operating result. The reconciliation contains activities and other operatio ns that by definition do not constitute segments. It also includes the unallocated Group financing activities. Consolidation adjustments between the segments are also contained in the reconciliation. As a matter of principle, business relationships between the companies within the segments of the Volks- wagen Group are transacted at arm’s length prices.

48 46 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements 1 REPORTING SEGMENTS Q1 2018 Passenger Cars and Light Volkswagen Commercial Power Commercial Financial Total Services Vehicles Engineering Reconciliation Vehicles Group € million segments Sales revenue from external customers 5,479 766 7,758 58,243 –15 58,228 44,239 3,226 255 726 4,208 –4,208 – Intersegment sales revenue 1 47,466 766 8,485 62,451 –4,223 58,228 Total sales revenue 5,734 Segment result 4,209 639 –42 (operating result) 5,119 –908 4,211 312 in the allocation of Light Commercial Vehicles of the Volkswage n Commercial Vehicles brand. 1 The prior-year figures have been adjusted to reflect a change REPORTING SEGMENTS Q1 2019 Passenger Cars and Light Commercial Volkswagen Commercial Power Total Financial Services Engineering segments Vehicles Reconciliation Vehicles Group € million Sales revenue from external customers 44,546 6,047 890 8,447 59,930 83 60,012 Intersegment sales revenue 3,116 258 1 788 4,163 –4,163 – 9,236 Total sales revenue 47,662 6,305 891 64,093 –4,081 60,012 Segment result (operating result) 420 –56 701 4,151 –283 3,868 3,086 RECONCILIATION Q1 € million 2019 2018 4,151 5,119 Segment result (operating result) Unallocated activities 14 –20 Group financing –16 –7 Consolidation –248 –914 Operating result 3,868 4,211 Financial result 203 266 Consolidated earnings before tax 4,071 4,477

49 Notes to the Consolidated Financial Statements 47 Interim Consolidated Financial Statements (Condensed) Related party disclosures 14. At 53.1%, Porsche SE held the majority of the voting rights in Volkswagen AG as of March 31, 2019. ent for the State of Lower Saxony was resolved at the Extraordinary The creation of rights of appointm a result, Porsche SE cannot appoint the majority of General Meeting of Volkswagen AG on December 3, 2009. As the members of Volkswagen AG’s Supervisory Board for as long as the State of Lower Saxony holds at least 15% of Volkswagen AG’s ordinary shares. However, Porsche SE has the power to participate in the operating policy IAS 24. decisions of the Volkswagen Grou p and is therefore classified as a related party as defined by SUPPLIES AND SERVICES SUPPLIES AND SERVICES RENDERED RECEIVED Q1 Q1 2019 2018 2019 2018 € million Porsche SE and its majority interests 0 1 0 0 0 0 0 Supervisory Board members 1 Unconsolidated subsidiaries 325 303 384 391 3,505 3,959 122 Joint ventures and their majority interests 117 Associates and their majority interests 33 147 131 38 State of Lower Saxony, its majority interests and joint ventures 1 1 1 1 LIABILITIES (INCLUDING OBLIGATIONS) RECEIVABLES FROM TO € million Mar. 31, 2019 Dec. 31, 2018 Mar. 31, 2019 Dec. 31, 2018 Porsche SE and its majority interests 4 0 1 4 0 0 Supervisory Board members 205 178 Unconsolidated subsidiaries 1,274 1,319 1,814 1,869 Joint ventures and their majority interests 13,370 11,989 2,477 2,671 Associates and their majority interests 118 441 487 112 1 2 0 State of Lower Saxony, its majority interests and joint ventures 1 The tables above do not contain the dividend payments of €572 million (previous year: €27 million) received from joint ventures and associates. Receivables from joint ventures are primarily attributable to loans granted in an amount of €7,269 million (December 31, 2018: €7,606 million) as well as trade receivables in an amount of €4,389 million (December 31, 2018: €4,045 million). Receivables from non-consolidated subsidiaries also result from loans granted in an amount of €672 million (December 31, 2018: €741 million) as well as trade receivables in an amount of €241 million (December 31, 2018: €214 million). arm’s length basis. Some of these transactions also Transactions with related parties are conducted on an include reservation of title clauses. Obligations to members of the Supervisory Board relate primarily to interest-bearing bank balances of Supervisory Board members that were invested at standa rd market terms and conditions at Volkswagen Group companies. In addition, the Volkswagen Group has furnished guarantees to external banks on behalf of related parties in the amount of €245 million (D ecember 31, 2018: €239 million). Impairment losses of €53 million (previous year: €20 million) were recognized on the outstanding related party receivables. In the first quarter of 2019, expenses of €0 million (previous year: €3 million) were incurred in this context. In the first three months, the Volkswagen Group made capital contributions of €115 million (previous year: €86 million) at related parties.

50 48 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements Litigation 15. Diesel issue 1. Product-related lawsuits worldwide (excluding the USA/Canada) In Italy, the court decision dismiss ing the class action filed by the cons umer association Codacons as inadmis- sible has become legally final. In Germany more than 60,000 individual lawsuits are now pending against Volkswagen AG or other Group companies, with the plaintiffs suing for damages or rescission of the contract in most cases. USA /Canada) 2. Criminal and administrative proceedings worldwide (excluding the The Braunschweig Office of the Public Prosecutor has now issued indictments against, among other persons, a former chairman of the Board of Ma nagement of Volkswagen AG. Based on the information available at the the risk situation of the Volkswagen Gr present time, no change in oup results from the indictment of the former chairman of the Board of Management. 3. Lawsuits filed by investors worldwide (excluding the USA/Canada) Holding that the factual situation at issue is by and large already covered by the model case proceedings being heard by the Braunschweig Higher Regional Court and th at these proceedings, being paramount in this regard, preclude further such actions, the Stuttgart Higher Re gional Court in March 2019 refused to proceed with the capital investor model case that had been referred to it by the Stuttgart Regional Cour t. The pertinent rulings by the Stuttgart Higher Regional Court are not yet legally final. 4. Proceedings in the USA/Canada With respect to the consumer protection claims assert ed by the New Mexico Attorney General, in March 2019 a New Mexico state court denied Volkswagen’s motion to dismiss those claims against Volkswagen AG and certain affiliates, and in April 2019 the court declined to gr ant Volkswagen permission to appeal that decision. Volkswagen AG, Volkswagen Group of America, Inc. an d certain affiliated companies continue to litigate claims asserted by the attorneys general of certain U.S. states and municipalities based on alleged violations of t of Appeals dismissed the claims of the Attorney local environmental laws. In March 2019, the Tennessee Cour General of the State of Tennessee as preempted by federal law. The State of Tennessee may file an application for permission to appeal. Also in March 2019, the New Mexico Attorney General voluntarily dismissed its environmental claims, and the Alabama Attorney General declined to appeal the dismissal of its claims against Volkswagen AG by the Alabama Supreme Court. In March 2019 the U.S. Securities and Exchange Commi ssion filed a lawsuit against Volkswagen AG, Volks- wagen Group of America Finance, LLC, VW Credit, Inc. and a former chairman of the Board of Management of Volkswagen AG, asserting claims under U.S. federal secu rities law and alleging misstatements and omissions in rtain bonds and asset-backed securities. connection with the offer and sale of ce

51 Notes to the Consolidated Financial Statements 49 Interim Consolidated Financial Statements (Condensed) Additional important legal cases In April 2019 the European Commission issued a AUDI AG and statement of objections to Volkswagen AG, Dr. Ing. h.c. F. Porsche AG in connection with the Commission's antitrust investigation of the automobile 's preliminary evaluation of the matter and afford industry. These objections state the European Commission e statement of objections. The subject matter of the the opportunity to comment. Volkswagen will examine th automobile manufacturers on technical questions in proceedings is limited to the cooperation of German connection with the development and introduction of SCR systems and gasoline particulate filters for passenger cars that were sold in the European Economic Area. The manufacturers are not charged with any other misconduct such as price fixing or allocating markets and customers. Volkswagen has not yet been given access to the investigation files. In the same matter, the Chinese Competition Authority also issued an AUDI AG and Dr. Ing. h.c. F. Porsche AG in March 2019. information request to Volkswagen AG, tomobile finance companies regarding potential In the proceedings against a number of captive au competition law infringements, Volkswagen AG and Vo lkswagen Bank GmbH filed an appeal in March 2019 against the administrative fine order issued by the Italian Competition Authority. Beyond this, there were no significant changes in the re porting period compared with the disclosures on the Volkswagen Group’s expected development in fiscal ye ar 2019 in the “Report on Expected Developments” and “Report on Risks and Opportunities” chapters – including the “Risks from the diesel issue” and “Litigation/ Diesel issue” sections and the underlying description of ed “Diesel Issue” – of the the issues in the chapter entitl Annual Report. In particular, ther e continue to be no conclusive combined management report in the 2018 ment of Volkswagen AG regarding the described facts, findings or assessments available to the Board of Manage that would suggest that a differ ent assessment of the associated risks should have been made.

52 50 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements 16. Contingent liabilities Compared with the 2018 consolidated financial statements, contingent liabilities increased by €0.8 billion to €10.7 billion, mainly due to the recognition of additional tax positions. 17. Other financial obligations Other financial liabilities declined by €4.3 billion comp ared with the 2018 consolidated financial statements 16). IFRS 16 (see disclosures on IFRS to reach €22.3 billion. The decline is mainly due to the initial application of Higher obligations from credit commitments and a ri mmitments for intangible se in the purchase order co etting effect. assets and property, plant and equi pment had an offs

53 Interim Consolidated Financial Statements (Condensed) Notes to the Consolidated Financial Statements 51 German Corporate Governance Code The current declarations in accordance with section 161 of the Aktiengesetz (AktG – German Stock Corporation Act) on the German Corporate Governance Code by th e Board of Management and Supervisory Board of Volks- AUDI AG , MAN SE and RENK AG are permanently available on the Internet at www.volks- wagen AG, wagenag.com/en/InvestorRelations/corporate-governance/declaration-of-conformity.html, www.audi.com/ cgk-declaration, www.corporate.man. eu/en/investor-relations/corporate-governance/corporate-governance-at- man/Corporate-Governance-at-MAN.html and www.renk-ag.com/en/investor-relations/financial-reports/ respectively. Significant events after the balance sheet date There were no events with a significant effect on net asse ts, financial position and results of operations after the end of the first three months of 2019. Wolfsburg, April 30, 2019 Volkswagen Aktiengesellschaft The Board of Management

54 Review Report 52 Interim Consolidated Financial Statements (Condensed) Review Report On completion of our review, we issued the following un qualified review report dated May 2, 2019. This report was originally prepared in German. In case of ambiguities the German version takes precedence: To VOLKSWAGEN AKTIENGESELLSCHAFT , Wolfsburg We have reviewed the condensed consolidated interim financial statements – comprising the condensed income statement and condensed statem ent of comprehensive income, cond ensed balance sheet, statement of changes in equity, condensed statement of cash flows an d selected explanatory notes – and the interim group VOLKSWAGEN AKTIENGESELLSCHAFT , Wolfsburg, for the period from January 1 to management report of March 31, 2019, which are part of the quarterly financial report pursuant to § (Article) 115 WpHG ("Wertpapierhandelsgesetz": German Se curities Trading Act). The preparation of the condensed consolidated interim financial statements in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and of the interim group management report in accordance with the provisions of the German onsibility of the parent Securities Trading Act applicable to interim group mana gement reports is the resp Company's Board of Management. Our responsibility is to issue a review report on the condensed consolidated interim financial statements and on the interim group management report based on our review. ated interim financial statements and the interim We conducted our review of the condensed consolid group management report in accordance with German generally accepted standards for the review of financial ). IDW rüfer (Institute of Public Auditors in Germany) ( statements promulgated by the Institut der Wirtschaftsp Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with moderate assurance, that the condense d consolidated interim financial statements have not IFRS applicable to interim financial reporting as been prepared, in all material respects, in accordance with the adopted by the EU and that the interim group management report has not been prepared, in all material respects, in accordance with the provisions of the Germ an Securities Trading Act applicable to interim group management reports. A review is limited primarily to inquiries of company personnel and analytical procedures and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performe d a financial statement audit, we cannot express an audit opinion.

55 Review Report 53 Interim Consolidated Financial Statements (Condensed) tention that cause us to presume that the condensed Based on our review, no matters have come to our at consolidated interim financial statements have not been prepared, in all material respects, in accordance with IFRS applicable to interim financial reporting as adopted by the EU nor that the interim group management the report has not been prepared, in all material respects , in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports. We draw attention to the updated information provided in section “Key events” of the notes to the condensed consolidated interim financial statements an d in chapter “Report on Expected Developments, Risks and Opportunities” of the interim group management report with regard to the Diesel Issue, which in addition to the explanations of allegations made and claims fi led essentially refer to the information provided and statements made in the 2018 consolidated financial stat ements and in the group management report as at December 31, 2018. Based on the results of the various measures taken to investigate the issue presented so far, which underlie these condensed consolidated interim financial statem ents and interim group management report, there is still no evidence that members of the Company’s Bo ard of Management were aware of the deliberate summer 2015. Nevertheless, should as a result of the manipulation of engine management software before ongoing investigation new knowledge be obtained showin g that members of the Board of Management were entually have an impact on the condensed interim informed earlier about the Diesel Issue, this could ev as well as on the annual and consolidated financial financial statements and interim group management report statements and on the group management report for the financial year 2018 and prior years. The provisions for warranties and legal risks recorded so far are based on the presented state of knowledge. Due to the inevitable uncertainties associated with the current and expected litigation it cannot be excluded that a future assessment of the risks may be different. Our opinions on the condensed consolidated interim financial statements and on the interim group management report are not modified in respect of this matter. Hanover, May 2, 2019 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Harald Kayser Frank Hübner Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)

56 54 Glossary Operating return on sales Gross margin Selected terms at a glance The operating return on sales is the ratio of the Gross margin is the percentage of sales revenue operating result to sales revenue. attributable to gross profit in a period. Gross Capitalization ratio margin provides information on profitability The capitalization ratio is defined as the ratio of Ratio of capex to sales revenue net of cost of sales. capitalized development costs to total research The ratio of capex (investments in property, and development costs in the Automotive plant and equipment, investment property and Hybrid notes Division. It shows the proportion of primary intangible assets, excluding capitalized develop- Hybrid notes issued by Volkswagen are research and development costs subject to ment costs) to sales revenue in the Automotive classified in their entirety as equity. The issuer capitalization. Division reflects both our innovative power and has call options at defined dates during their our future competitiveness. It shows our capital perpetual maturities. They pay a fixed coupon Driving Cycles expenditure – largely for modernizing and until the first possible call date, followed by a Levels of fuel consumption and exhaust gas expanding our product range and for environ- variable rate depending on their terms and emissions for vehicles registered in Europe mentally friendly drivetrains, as well as for conditions. were previously measured on a chassis dyna- adjusting the production capacity and improving mometer with the help of the “New European production processes – in relation to the Auto- Net cash flow Driving Cycle (NEDC)”. Since fall 2017, the motive Division’s sales revenue. Net cash flow in the Automotive Division existing test procedure for emissions and fuel represents the excess funds from operating consumption used in the EU is being gradually Research and development ratio activities available for dividend payments, for replaced by the Worldwide Harmonized Light- The research and development ratio (R&D ratio) example. It is calculated as cash flows from Duty Vehicles Test Procedure (WLTP). This in the Automotive Division shows total research operating activities less cash flows from applies for new vehicle types and all new and development costs in relation to sales investing activities attributable to operating vehicles. The aim of this new test cycle is to revenue. Research and development costs activities. state CO emissions and fuel consumption in a 2 comprise a range of expenses, from futurology more practice-oriented manner. A further through to the development of marketable Net liquidity important European regulation is the Real products. Particular emphasis is placed on the Net liquidity in the Automotive Division is the Driving Emissions (RDE) for passenger cars and environmentally friendly orientation of our total of cash, cash equivalents, securities, loans light commercial vehicles, which also monitors product portfolio. The R&D ratio underscores and time deposits not financed by third-party emissions using portable emission measuring the efforts made to ensure the Company’s borrowings. To safeguard our business activ- technology in real road traffic. future viability: the goal of competitive profit- ities, we have formulated the strategic target ability geared to sustainable growth. that net liquidity in the Automotive Division Equity ratio should amount to approximately 10% of the The equity ratio measures the percentage of Return on sales before tax consolidated sales revenue. total assets attributable to shareholders’ equity The return on sales is the ratio of profit before as of a reporting date. This ratio indicates the tax to sales revenue in a period, expressed as a Operating result stability and financial strength of the company percentage. It shows the level of profit gener- Sales revenue, which does not include the and shows the degree of financial indepen- ated for each unit of sales revenue. The return figures for our equity-accounted Chinese joint dence. on sales provides information on the profit- ventures, reflects our market success in finan- ability of all business activities before cial terms. Following adjustment for our use of deducting income tax expense. resources, the operating result reflects the Company’s actual business activity and docu- ments the economic success of our core busi- ness.

57 Contact Information PUBLISHED BY Volkswagen AG Financial Publications Letterbox 1848-2 38436 Wolfsburg Germany +49 (0) 5361 9-0 Phone +49 (0) 5361 9-28282 Fax INVESTOR RELATIONS Volkswagen AG Investor Relations Letterbox 1849 38436 Wolfsburg Germany Phone +49 (0) 5361 9-0 +49 (0) 5361 9-30411 Fax E-Mail [email protected] Internet www.volkswagenag.com/en/InvestorRelations.html FINANCIAL CALENDAR May 14, 2019 Volkswagen AG Annual General Meeting J uly 25, 2019 Half-Yearly Financial Report 2019 October 30, 2019 Interim Report January – September 2019 This Interim Report is also available on the Internet, in German and English, at: www.volkswagenag.com/en/InvestorRelations.html Printed in Germany 958.809.589.20

58 2 0 1 9 www.volkswagenag.com

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