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

The operating result after tax of the Automotive Division, including the proportionate operating result of the Chinese joint ventures, was €11,756 (7,419) million in fiscal year 2017. The increase was due primarily to the year-on-year decline in special items, as well as to improvements in volumes and in the mix and to optimized product costs. Profit was negatively impacted by higher fixed costs as a result of expansion and by higher depreciation and amortization charges due to the large volume of capital expenditure. Effects on earnings and assets from purchase price allocation are not taken into account as they cannot be influenced operationally by management.

Invested capital rose to €97,021 (91,020) million, primarily due to higher inventories as well as to additions to investments in property, plant and equipment 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. The ROI improved year-on-year on the back of the higher operating profit and, at 12.1 (8.2)%, exceeded our minimum rate of return on invested capital of 9% in spite of the adverse effects of the special items on earnings.

At €5,821 (5,643) 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. Operating result after tax was negatively impacted by special items and led to a positive value contribution of €5,935 (1,775) million after the opportunity cost of invested capital.

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/ir.