Investment and financial planning
To ensure the Volkswagen Group’s future viability, we will continue to mobilize our pronounced strengths in innovation and technology and push the Volkswagen Group’s transformation while leveraging our economies of scale and achieving the greatest possible synergies.
In our current planning for 2020, 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 on hybridization, electrification and digitalization of our vehicles has been stepped up again, particularly through the development of the Modular Electric Drive Toolkit (MEB) and the Premium Platform Electric (PPE), the all-electric platform for our premium and sports brands. 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 6.0–6.5%.
Besides capex, investing activities will also 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 electric 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. For 2020, we expect further cash outflows resulting from the diesel issue and significantly higher outflows from mergers & acquisitions. We estimate that net cash flow in 2020 will subsequently be clearly positive albeit perceptibly below the prior-year figure.
Nevertheless, net liquidity in the Automotive Division will probably be distinctly higher than in the reporting period.
These plans are based on the Volkswagen Group’s current structures. A possible sale of RENK AG and related cash inflows are not taken into account. Our planning also does not include cash outflows for a possible acquisition of all outstanding ordinary shares of Navistar International Corporation.
Our joint ventures in China are accounted for using the equity method and are therefore not included in the figures above. For 2020, the joint ventures plan to invest in e-mobility, further enhancement of the model portfolio, the development of new mobility solutions and smart city concepts. Their capex will exceed the 2019 level and be financed from the companies’ own funds.
In the Financial Services Division, we are planning higher investments in 2020 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 the direct banking business, and through the use of international credit lines.