Investment and financial planning
To continue to build on our pronounced strengths in innovation and technology, we will vigorously invest in e-mobility, autonomous driving, new mobility services and digitalization in the coming years. The largest share of the investments will be in the development of vehicles with hybrid or all-electric drives.
In our current planning for 2018, 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 Toolkit (MEB). At the same time, primarily the SUV range will be further expanded. We expect the Automotive Division’s ratio of capex to sales revenue to be in the range 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 fulfillment of environmental standards and the electrification and updating of our model range.
The investments in our facilities and models, as well as in the development of alternative drives and modular toolkits, 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 impact on the cash flow again in 2018, but will be substantially lower than in the reporting period. Consequently, we anticipate a positive net cash flow for 2018 that will be up significantly on the prior-year figure.
These plans are based on the Volkswagen Group’s current structures. They do not take into account the possible settlement payable to other shareholders associated with the control and profit and loss transfer agreement with MAN SE. Our joint ventures in China are included using the equity method and are therefore not included in the above figures. In 2018, these joint ventures plan higher investments in capex than in 2017, which will be financed from the companies’ own funds.
In the Financial Services Division, we are planning slightly higher investments in 2018 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 45% 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, asset-backed securities, customer deposits from direct banking business, as well as through the use of international credit lines.