Return on investment (ROI) and value contribution in the reporting period

At €13,019 (11,438) million, the Automotive Division’s operating result after tax, including the proportionate operating result of the Chinese joint ventures, was up on the prior-year figure. Improvements in the mix and increased vehicle sales, reversals of impairment losses as part of the remeasurement of development costs, product cost optimization as well as the measurement of certain derivatives and a decline in negative special items had a positive impact. In particular, higher depreciation and amortization charges due to the large volume of capital expenditure and a rise in research and development costs had an offsetting effect. Effects on earnings and assets from purchase price allocation are not taken into account as they cannot be influenced operationally by management.

In the reporting year, the invested capital rose to €116,016 (104,424) million. The increase was particularly due to the change in the accounting for leases (IFRS 16) that entered into force on January 1, 2019, as well as additions to capex and capitalized development costs.

The return on investment (ROI) is the return on invested capital for a particular period based on the operating result after tax. In spite of the additional adverse effects of the special items on earnings as well as the increase in the invested capital resulting from the new IFRS 16, the ROI improved as a result of the higher operating profit and amounted to 11.2 (11.0)%, which is above our minimum rate of return on invested capital of 9%.

At €7,328 (6,474) million, the opportunity cost of capital (invested capital multiplied by cost of capital) was up on the prior-year level due to the increase in the invested capital. After deduction of the opportunity cost of invested capital, operating result after tax – which was negatively impacted by special items – led to a positive value contribution of €5,691 (4,964) million.

More information on value-based management is contained in our publication entitled “Financial Control System of the Volkswagen Group”, which can be downloaded from our Investor Relations website: www.volkswagenag.com.