TAKING A LOOK INSIDE VOLKSWAGEN
One way to understand the Volkswagen Group is to look at it in terms of its two major components
- the Automotive business
- the Financial business
A separate thread takes a quick look at the Financial business
Here is the Automotive business
A QUICK OVERVIEW OF VOLKSWAGEN'S AUTOMOTIVE BUSINESS
This business sold 5.58 million vehicles in 2020
It used Property Plant & Equipment of €62.8 billion to do so
- which translates to €11,254 per vehicle or $13,350
The equivalent number for Tesla in 2020 was about $25,500
VW Automotive had Inventories of €39.1 billion, which translates to about €7,000 per vehicle sold or $8,300
The equivalent number for Tesla in 2020 was about $8,200 per vehicle sold
Note that Tesla is more vertically integrated and has a higher cost and price for its vehicles
There are two other notable entries on the VW Automotive Balance Sheet :
The first is €44.2 billion of Unfunded Pension Obligations
- which represents Pension Expenses that have been charged to the Income Statement but not separated into a Cash reserve for future payment
This basically means that VW have reduced their tax payments by recognizing and charging these expenses to their Income Statement, but they have used the Cash for other purposes
This is generally not considered to be a good practice
The second is €67.8 billion of Intangible Assets
VW has a habit of capitalising a variety of Cash costs instead of expensing them
This allows them to show higher profits
They capitalized €7.5 billion in 2020
The total amount capitalized at the end of 2020 was €98.3 billion
€30.3 billion of this €98.3 billion has been amortized or expensed over time
- leaving a net balance of approximately €68 billion
The Automotive business has Shareholders Equity of €96.7 billion
- and 70% of this Equity is represented by these Intangible Assets
VW is very aggressive in capitalizing these costs
For comparison :
- many automakers do not capitalize Development Costs but instead expense them as incurred
- Tesla does not capitalize Development Costs
- Tesla's Intangible Assets including Goodwill are only $0.52 billion
Note that historically VW Investors have discounted the Book Value of VW's Shareholders Equity in the marketplace
According to VW's 2020 report, its Equity Market Capitalization has generally been discounted to about 64%~77% of Book Equity
The difference was €45.4 billion
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