Investment and financial planning
To ensure the Volkswagen Group’s future viability, we will continue to mobilize our pronounced strengths in innovation and technology further and vigorously invest in e-mobility, digitalization, new mobility services and autonomous driving in the coming years.
In our current planning for 2019, the majority of capex (investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs) will be spent on new products and the continued rollout and further development of the modular toolkit. The focus is on the electrification and digitalization of our vehicles, in particular through the development of the Modular Electric Drive Toolkit (MEB). At the same time, we will primarily expand our SUV range further. We are also investing in the modification of selected locations for the production of electric vehicles. The Automotive Division’s ratio of capex to sales revenue will fluctuate around a level of 6.5–7.0%.
Besides capex, investing activities will include additions to capitalized development costs. Among other things, these reflect upfront expenditures in connection with the electrification and updating of our model range.
With the investments in our facilities and models, as well as in the development of alternative drives and modular toolkits, we are laying the foundations for profitable, sustainable growth at Volkswagen. These investments also include commitments arising from decisions taken in previous fiscal years.
We aim to finance the investments in our Automotive Division from our own capital resources and expect cash flows from operating activities to exceed the Automotive Division’s investment requirements. Cash outflows resulting from the diesel issue will negatively impact the cash flow again in 2019, but will probably be significantly lower than in the reporting period. Consequently, we anticipate a positive net cash flow for 2019 that will be up significantly on the prior-year figure.
The tendering of shares held by MAN’s noncontrolling interest shareholders as a consequence of the judgment issued on the award proceedings and the resulting termination of the control and profit and loss transfer agreement with MAN SE is reflected in the amount of €1.7 billion, reducing net liquidity.
Current estimates indicate that the change in the accounting for leases (IFRS 16), which entered into force in January 2019, will give rise to a negative one-off effect on the net liquidity reported by the Automotive Division, amounting to approximately 1% of the Volkswagen Group’s total assets.
We therefore expect net liquidity in the Automotive Division in 2019 to be down significantly on the level seen in the reporting period.
These plans are based on the Volkswagen Group’s current structures. A possible IPO of TRATON SE and related cash inflows are not taken into account.
Our joint ventures in China are included using the equity method and are therefore not included in the figures above. For 2019, the joint ventures plan to invest in e-mobility and the digitalization of their model range, in new technologies and mobility services, in strengthening their development and manufacturing capacity, and in new products. Their capex will exceed the 2018 level and be financed from the companies’ own funds.
In the Financial Services Division, we are planning slightly higher investments in 2019 than in the previous year. We expect the growth in lease assets and in receivables from leasing, customer and dealer financing to lead to funds tied up in working capital, of which around half will be financed from the gross cash flow. As is common in the sector, the remaining funds needed will be met primarily through unsecured bonds on the money and capital markets, the issuing of asset-backed securities, customer deposits from direct banking business, as well as through the use of international credit lines.