Thread by @jpr007

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

https://twitter.com/jpr007/status/1406581299641520128

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