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 €7,419 (−203) million in fiscal year 2016. The increase was primarily due to the year-on-year decline in special items, as well as improvements in the mix and optimized product costs. Profit was negatively impacted by higher depreciation and amortization charges due to the high volume of capital expenditures and exchange rate effects. 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 €91,020 (84,289) million, primarily due to increased investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex), and higher 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. It rose year-on-year to 8.2 (−0.2)% as a result of the improved operating profit. We did not meet the minimum required rate of return on invested capital of 9% due to the adverse effects of the special items on earnings.

At €5,643 (5,732) million, the opportunity cost of capital (invested capital multiplied by cost of capital) was down on the prior-year level due to decreased cost of capital. Operating result after tax was negatively impacted by special items and led to a positive value contribution of €1,775 (−5,935) 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.