Audi Financial-Part-2018 en

2018
Annual Report
e-valuation
Production of
China
electric vehicles
EUR 25 trillion
6,843,000 and plug-in hybrids
through 2021
Worldwide investments
(overall market
in sustainable assets
forecast) 2016
USA
3,058,000
Germany 2014
2,247,000
2012
Audi Group
Key Figures
2018 2017¹ ) Change
in %
Production
Automotive segment Cars ² ) 1,871,386 1,879,840 –0.4
Engines 1,955,532 1,966,434 –0.6
Motorcycles segment Motorcycles 53,320 56,743 –6.0
Deliveries to customers
Automotive segment Cars 2,081,418 2,105,084 –1.1
Audi brand
³) Cars 1,812,485 1,878,105 –3.5
Lamborghini brand Cars 5,750 3,815 50.7
Other Volkswagen Group brands Cars 263,183 223,164 17.9
Motorcycles segment Motorcycles 53,004 55,871 –5.1
Ducati brand Motorcycles 53,004 55,871 –5.1
Workforce Average 91,477 90,402 1.2
Revenue EUR million 59,248 59,789 –0.9

Operating profit before special items EUR million 4,705 5,058 –7.0
Operating profit EUR million 3,529 4,671 –24.4
Profit before tax EUR million 4,361 4,717 –7.5
Profit after tax EUR million 3,463 3,432 0.9
Operating return on sales before special items Percent 7.9 8.5

Operating return on sales Percent 6.0 7.8
Return on sales before tax Percent 7.4 7.9
Return on investment (ROI) Percent 10.0 14.4
Ratio of capex ⁴ ) Percent 5.9 6.5

Research and development ratio Percent 7.1 6.4
Cash flow from operating activities EUR million 7,013 6,173 13.6
Net cash flow ⁵ )
EUR million 2,141 4,312 –50.4
Balance sheet total (Dec. 31) EUR million 65,598 63,680 3.0
Equity ratio (Dec. 31) Percent 45.3 44.2
1) Some of the prior-year financial key figures have been adjusted to reflect the first-time adoption of IFRS 9 and IFRS 15 (see also the comments regarding
IFRS 9 and IFRS 15 in the Notes to the Consolidated Financial Statements).
2) Including vehicles built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China)
3) Including delivered vehicles built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China)
4) Investments in property, plant and equipment, investment property and other intangible assets (without capitalized development costs) according to the
Cash Flow Statement in relation to revenue
5) Taking into account the transfer of the minority interest in Volkswagen International Belgium S.A., Brussels (Belgium), to Volkswagen AG, Wolfsburg, in 2017
82 83
084 Report of the
Supervisory Board
089 Finances
089 Combined Management Report

of the Audi Group and
AUDI AG for the fiscal year
from January 1
to December 31, 2018
173 Consolidated Financial Statements

of the Audi Group
for the fiscal year
from January 1
to December 31, 2018
INF O R M AT IO N
All figures are rounded of f, which may lead to minor deviations when added up. The figures in brackets refer to
the figures for the previous year. Internet sources refer to the status as of Februar y 20, 2019. The Management
Report contains for ward-looking statements relating to anticipated developments. These statements are based
upon current assessments and are by their ver y nature subject to risks and uncertainties. Actual outcomes may
dif fer from those predicted in these statements.
Dr.-Ing. Herbert Diess
Chairman of the Supervisory Board
084
2018 was a year of major challenges and new departures for
the Audi Group. In the second half of the year in particular, the
switch to the new WLTP test cycle resulted in a restricted sales
range. On top of this was the political debate about banning
the use of diesel vehicles, along with a downturn in important
passenger car markets. Financial burdens arose from a fine
imposed under the administrative order by the Munich II pub-
lic prosecutors in connection with the diesel crisis. When
Chairman of the Board of Management Rupert Stadler was
accused and taken into custody on June 18, 2018, this came as
a shock to the entire Audi and Volkswagen family.
The active commitment of everyone at Audi was especially im-

portant in 2018. The Supervisory Board would particularly like
to thank all employees of the Audi Group for this. I am con-
vinced of the potential of the brand with the Four Rings. With
its capabilities and spirit, the Audi team will rise to the forth-
coming challenges. Every effort must be made to achieve this.
The Supervisory Board is supporting the Board of Management

with the repositioning of Audi. It is careful to ensure that the
lessons learned in the past are firmly anchored in the corpo-
rate culture and strategy. The new Chairman and his manage-
ment team will define and substantiate the action areas, goals
and approach in the corporate strategy in time for the Audi
2019 Annual General Meeting.
The Supervisory Board was newly elected in 2018.
The Supervisory Board was newly constituted last year. With

effect from the close of the Annual General Meeting on May 9,
2018, Senator h. c. Helmut Aurenz, Berthold Huber and Max
Wäcker left the Supervisory Board. The Supervisory Board and
Board of Management have always appreciated their construc-
tive advice and critical questions. The Supervisory Board would
like to express its deep gratitude to these former members in
acknowledgment of the work they performed.
At its constituent meeting on May 9, 2018, the Supervisory

Board elected me as its Chairman and Peter Mosch as Vice
Chairman. The Negotiating Committee, the Presiding Commit-
tee, the Audit Committee and the “Diesel” Committee were
also elected. The Presiding Committee as well as all other
committees were also constituted and commenced work.
The Board of Management gave regular, up-to-date, compre-

hensive accounts of its actions to the Supervisory Board. The
Supervisory Board considered the economic framework and
the Company’s business development and policy as well as its
085
risk management and risk situation at ordinary meetings of
the Supervisory Board convened each quarter, as well as on the
basis of regular oral and written reports from the Board of
Management, and consulted with the Board of Management
closely on these matters.
At its four ordinary meetings in 2018, the Supervisory Board

also considered at length the opportunities and risks for Audi
in key markets, in particular China, the United States and
European markets. In that connection it explored subject ar-
eas such as how to assure a sustainable return and the WLTP
test cycle. The Supervisory Board also held discussions with
the Board of Management on progress with the digitalization
and electrification of vehicles. It approved a new remuneration
system for the members of the Board of Management and,
together with the Board of Management, routinely determined
the content of the Declaration of Conformity pursuant to
S ection 161 of the German Stock Corporation Act (AktG).
In agreeing to the plans for human resources, financial and

investment planning, the Supervisory Board once again con-
firmed the Board of Management’s strategic decisions.
The diesel issue, in particular concerning the V6 3.0 TDI en-

gine, as well as human resources decisions in addition account-
ed for a significant portion of the Supervisory Board’s work in
the year under review. The Supervisory Board was kept con-
stantly informed of the diesel issue by the Board of Manage-
ment in the past fiscal year, both in writing and orally. In this
connection the Supervisory Board held six extraordinary meet-
ings in the past fiscal year. In addition to its four ordinary
meetings, the Presiding Committee of the Supervisory Board
held five extraordinary meetings in 2018.
All Supervisory Board members were present at more than

half of the meetings. The average attendance rate in the past
fiscal year was 94.1 percent. The Negotiating Committee did
not need to be convened in 2018.
The “Diesel” Committee oversees and supports the Board of

Management in its investigation and reappraisal of events
related to diesel issues. It also prepares the Super visor y
Board’s consultations and resolutions on diesel issues.
The “Diesel” Committee came together for four meetings in

the 2018 fiscal year.
086
The Audit Committee met once per quarter in the past fiscal
year and devoted its attention mainly to risk management as
well as compliance and auditing work. In addition, the Audit
Committee concerned itself with the 2018 Interim Financial
Report prior to its publication and the preparatory work for
the 2018 Annual Financial Statements. It also advised on the
independence of the auditor, the findings of additional audits
commissioned and the situation of the Company at the end
of 2018. It passed the necessary resolutions for putting the
auditing of the Annual Financial Statements out to tender.
“I am convinced of the potential of the brand

with the Four Rings. With its
capabilities and spirit, the Audi team will rise
to the forthcoming challenges.”
Upon the proposal of the Supervisory Board, the Annual General

Meeting of AUDI AG appointed PricewaterhouseCoopers
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft as audi-
tor of the accounts for the 2018 fiscal year. The auditor of the
accounts confirmed the Annual Financial Statements of
AUDI AG, the Consolidated Financial Statements of the
Audi Group as well as the Combined Management Report of the
Audi Group and AUDI AG for the 2018 fiscal year, and in each
case issued its unqualified certification with an additional note.
The auditing firm’s representatives explained the key findings

of their audit in detail at the meetings of the Audit Committee
and Supervisory Board. According to information supplied by
the auditing firm, there were no circumstances that might give
cause for concern about the auditor’s partiality.
Following examination of the audit documents received and

based on its own conclusions, the Audit Committee recommend-
ed to the Supervisory Board at the meeting on February 21,
2019, that the Annual and Consolidated Financial Statements
each be signed off. The Supervisory Board accepted this rec-
ommendation and signed off the Annual and Consolidated
Financial Statements prepared by the Board of Management.
The Annual Financial Statements are thus established.
0 87
There have been no changes in the composition of the Super-
visory Board since the close of the last Annual General Meeting
on May 9, 2018.
There have been the following changes in the composition of

the Company’s Board of Management since the close of the
last Annual General Meeting on May 9, 2018:
With effect from June 19, 2018, Abraham Schot assumed

responsibility for the function of Chairman of the Board of
Management of AUDI AG for an interim period, alongside his
responsibility for the “Marketing and Sales” division. Previous-
ly the Super visor y Board had temporarily released Rupert
Stadler from his office as “Chairman of the Board of Manage-
ment” and member of the Board of Management of AUDI AG.
Rupert Stadler left the Board of Management of AUDI AG from

the close of October 2, 2018.
Hans-Joachim Rothenpieler assumed responsibility for the

“Technical Development” division with effect from November 1,
2018, succeeding Dr. Peter Mertens, who had left the Company’s
Board of Management at the close of October 31, 2018.
With effect from Januar y 1, 2019, the Super visor y Board

appointed Abraham Schot as the Company’s Chairman of the
Board of Management. In addition, the Super visor y Board
appointed Hildegard Wortmann as member of the Board of
Management with responsibility for the “Marketing and Sales”
division. Hildegard Wortmann will take up office on July 1,
2019. Until then, Abraham Schot will be in charge of the divi-
sion temporarily.
The Board of Management has suitably taken account of the

economic environment and also of future challenges when
making its plans. It will proceed systematically with the trans-
formation of Audi together with the entire workforce. The
Supervisory Board will continue to support the Board of Manage-
ment actively and constructively on this journey in the future.
Ingolstadt, February 21, 2019
Dr.-Ing. Herbert Diess

Chairman of the Supervisory Board of AUDI AG
088
089 Combined
Management
Report
of the Audi Group and AUDI AG
for the fiscal year
from January 1 to Dezember 31, 2018
BASIS OF THE AUDI GROUP // 090 Production // 127

Structure // 090 Deliveries and distribution // 127
Strategy // 092 Employees // 127
Management system // 094 Research and development // 127
Shares // 095 Procurement // 127
Disclosures required under takeover law // 096 Report on risks and opportunities // 127
ECONOMIC REPORT // 098 SUSTAINABILIT Y ASPECTS // 128

Business and underlying situation // 098 Sustainability Roadmap // 128
Research and development // 105 Employees // 132
Procurement // 109
Production // 110 REPORT ON EXPECTED
Deliveries and distribution // 113 DEVELOPMENTS, RISKS AND
OPPORTUNITIES // 135
FINANCIAL PERFORMANCE Report on expected developments // 135

INDICATORS // 118 Report on risks and opportunities // 140
First-time adoption of Disclaimer // 152
new accounting standards // 118 Report on post-balance sheet date events // 152
Financial performance // 118
Net worth // 122 CORPOR ATE GOVERNANCE
REPORT // 153
Financial position // 123
Corporate Governance // 153
AUDI AG (SHORT VERSION Integrity and compliance // 155
ACCORDING TO GERMAN Remuneration report // 157
COMMERCIAL CODE, HGB) // 125 Members of the Board of Management
Financial performance // 125 and their mandates // 169
Net worth // 126 Members of the Supervisory Board
Financial position // 126 and their mandates // 170
S E PA R AT E N O N -F I N A N C I A L R E P O R T
AUDI AG uses the option pursuant to Section 289b, Para. 2 of the German Commercial Code (HGB) and pursuant to
Section 315b, Para. 2 of the German Commercial Code (HGB) to be exempted from submitting the non-financial
declaration and the non-financial Group declaration, and refers to the combined separate non-financial report of
Volkswagen AG for the 2018 fiscal year, which will be made available on the Internet in German at
https://w w w.volkswagenag.com/presence/nachhaltigkeit /documents/sustainabilit y-report /2018/Nicht finanzieller_
Bericht _ 2018 _d.pdf and in English at https://w w w.volkswagenag.com/presence/nachhaltigkeit /documents/
sustainabilit y-report /2018/Nonfinancial _ Report _ 2018 _e.pdf by no later than April 30, 2019.
BASIS OF THE AUDI GROUP // STRUCTURE
BASIS OF THE AUDI GROUP

The Audi Group, comprising the Audi, Lamborghini and Ducati brands,
is among the best-known manufacturers of premium automobiles,
supercars, Super SUVs and sporty motorcycles. With our strategy,
we want to develop into a worldwide provider of sustainable,
individual premium mobility.
STRUCTURE
/ COMPANY The Audi brand stands for “Vorsprung durch Technik.” For our
The parent company of the Audi Group is AUDI AG. customers, “Vorsprung” is to express sustainable, individual
In addition to AUDI AG, the Audi Group comprises all mate- premium mobility and an extension of their personal freedom.
rial companies or entities over which AUDI AG exercises The model portfolio of the Audi brand spans major automo-
direct or indirect influence. The Audi Group is a decentralized bile segments. Our customers can select whichever model in
organization, with the individual subsidiaries conducting our product range meets their individual requirements, from
their business activities independently. Group management the compact Audi A1 car line across the A3, A4 and A5 prod-
and governance are ensured through guidelines, channels of uct families right up to the full-size car lines A6, A7 and A8.
reporting and committees. In addition, our TT car line emphasizes our brand’s sporty
Our business activities mainly comprise the development, character. We also enjoy a broad presence in the SUV segment
production and sale of cars, along with the task of managing with the Audi Q2, Q3, Q5, Q7 and Audi Q8. Series production
the Audi Group. The Management Reports of the Audi Group of the Audi e-tron SUV began in the 2018 fiscal year. As the
and AUDI AG are combined in this report. first volume-built model with all-electric drive from the brand
with the Four Rings, the Audi e-tron signals the start of our
/ CONSOLIDATED COMPANIES electrification initiative. We present our performance and
The group of consolidated companies has been extended high-performance models under the Audi Sport sub-brand.
since December 31, 2017, to include Audi Immobilien- These include the S and RS models as well as the R8 car line,
verwaltung GmbH, Ingolstadt, and Audi Real Estate GmbH, which is also the mainstay of our customer racing activities.
Ingolstadt. The first-time consolidation of these companies A wide range of customization options available through the
resulted in material impacts on the non-current assets of the programs Audi exclusive and Audi Sport performance parts
Audi Group. In addition, in June 2018, the Audi Group acquired alongside high-quality lifestyle articles in the Audi collection
a one percent participation in SAIC Volkswagen Automotive completes our portfolio.
Company, Ltd., Shanghai (China). The participation is reflected The exclusive high-performance models of the Lamborghini
in the Consolidated Financial Statements using the equity brand are renowned for their excellent driving dynamics,
method based on the rules of IAS 28.6. unmistakable design, consistent use of lightweight construc-
tion and high quality of materials and finish. The product
portfolio of the Lamborghini brand comprises models of the
Read more online about the Group companies in
Huracán and Aventador car lines, as well as their exclusive
the statement of interests pursuant to Sections
special models. The Urus was added to the product range in
285 and 313 of the German Commercial Code
2018. With the Urus, Lamborghini is tapping into the segment
(HGB) at www.audi.com/subsidiaries.
of the Super SUV, which combines off-road capability with
the handling characteristics of a supercar. This third car line
/ BRANDS AND PRODUCT PORTFOLIO also strengthens volume development and brand awareness,
The Audi Group, comprising the Audi, Lamborghini and while improving profitability.
Ducati brands, is one of the best-known manufacturers of
premium automobiles, supercars, Super SUVs and sporty
motorcycles.
090
STRUCTURE // BASIS OF THE AUDI GROUP
With its motorcycles, the Ducati brand particularly embodies the Volkswagen Group to be harnessed more consistently
sportiness, modern design, lightweight construction and and decisions to be made and implemented more rapidly.
high-performance engines. The product portfolio comprises Under the new approach the Audi, Lamborghini and Ducati
the models of the Scrambler series as well as the models brands constitute the “Premium” brand group.
that make up the Diavel, Hypermotard, Monster, Multistrada,
Superbike and SuperSport series.
Read more online about our product portfolio on
our brand websites www.audi.com,

The introduction of the brand groups “Volume,” “Premium”
www.lamborghini.com and www.ducati.com.
and “Sport & Luxury” was among the measures resolved in
spring 2018 as part of the extensive revision of the Volks-
wagen Group’s management structure. The new structure / MAIN PRODUCTION SITES
paves the way for streamlining Volkswagen Group manage- The sites at which cars of the Audi and Lamborghini brands as
ment processes, strengthening the brands and extending well as motorcycles of the Ducati brand were manufactured in
their scope of responsibility. This allows for synergies within the 2018 reporting year are shown in the following diagram.
Brussels/Belgium Ingolstadt/Germany Bratislava/ Győr/Hungary Sant’Agata Changchun/China

Audi Brussels AUDI AG Slovakia Audi Hungaria Zrt. Bolognese/Italy FAW-Volkswagen
S.A./N.V. > Q2 > S4 Avant Volkswagen > A3 Sedan > TTS Coupé Automobili Automotive
> A1 > SQ2 > RS 4 Avant Slovakia, a.s. > A3 Cabriolet > TTS Roadster Lamborghini Company, Ltd.
> A1 Sportback > A3 Sportback 2) > A5 Coupé > Q7 2) > S3 Sedan > TT RS Coupé S.p.A. > Q3
> S1 > S3 Sportback > A5 Sportback > SQ7 > S3 Cabriolet > TT RS Roadster > Huracán Coupé > A4 L Sedan
> S1 Sportback > RS 3 Sportback > S5 Coupé > Q8 > RS 3 Sedan > Q3 > Huracán Spyder > Q5
> e-tron 1) > A4 Sedan > S5 Sportback > TT Coupé > Aventador Coupé > Q5 L
> e-tron Sportback 1) > A4 Avant > RS 5 Coupé > TT Roadster > Aventador Roadster > A6 L Sedan 2)
> A4 allroad quattro > RS 5 Sportback > Urus
> S4 Sedan
Tianjin/China Foshan/China
FAW-Volkswagen FAW-Volkswagen
Automotive Automotive
Company, Ltd. Company, Ltd.
> Q3 > A3 Sedan
> A3 Sportback
> Q2 L
> Q2 L e-tron 1)
Martorell/
San José Chiapa/ Spain
Mexico SEAT, S.A.
Audi México > A1 Sportback
S.A. de C.V. > Q3
> Q5 2) > RS Q3
> SQ5
Neckarsulm/Germany São José dos Pinhais/ Manaus/Brazil Bologna/Italy Aurangabad/ Amphur

AUDI AG, Audi Sport GmbH Brazil DAFRA da Amazônia Ducati Motor India Pluakdaeng/
> A4 Sedan > A7 Sportback 2) Audi do Brasil Indústria e Comércio Holding S.p.A. ŠKODA AUTO India Thailand
> A5 Cabriolet > S7 Sportback Indústria e de Motocicletas Ltda. > Scrambler Private Ltd. Ducati Motor
> S5 Cabriolet > RS 7 Sportback Comércio de > Scrambler > Diavel > A3 Sedan (Thailand) Co., Ltd.
> A6 Sedan > A8 2) Veiculos Ltda. > Diavel > Monster > Q3 > Scrambler
> A6 Avant > A8 L 2) > A3 Sedan > Monster > Hypermotard > A4 Sedan > Diavel
> A6 allroad quattro > S8 > Q3 > Multistrada > Multistrada > Q5 > Monster
> S6 Sedan > S8 L > Superbike > Superbike > A6 Sedan > Hypermotard
> S6 Avant > R8 Coupé > SuperSport > SuperSport > Q7 > Multistrada
> RS 6 Avant > R8 Spyder > Superbike
> SuperSport
1) fully electric vehicles 2) also with plug-in hybrid drive
091
BASIS OF THE AUDI GROUP // STRUCTURE, STRATEGY
Neckarsulm is home to Audi Sport GmbH, a fully owned sub- Verona (Italy), Audi Volkswagen Korea Ltd., Seoul (South
sidiary of AUDI AG. As well as cars, Audi Hungaria Zrt., Győr Korea), Audi Volkswagen Middle East FZE, Dubai (United Arab
(Hungary), builds engines for AUDI AG and other Volkswagen Emirates), Audi Singapore Pte. Ltd., Singapore (Singapore),
Group companies. In addition, vehicles are manufactured in and Audi Volkswagen Taiwan Co., Ltd., Taipei. Effective
Kaluga (Russia) and, since 2018, in Relizane (Algeria) for January 1, 2019, management responsibility for multi-brand
those respective markets at the partner companies sales companies was transferred to Volkswagen AG,
OOO Volkswagen Group Rus and SOVAC Production S.p.A. Wolfsburg, and the companies concerned were deconsoli-
The models are produced at the main plants and prepared dated. Under this approach, similar business activities will be
for shipping. Final assembly then takes place locally at the grouped together at Volkswagen Group level and their
plants in Kaluga and Relizane. management harmonized accordingly. The Audi Group’s
reporting will also become more precise and transparent as a
/ SALES STRUCTURES result. From the 2019 fiscal year, the companies will appear
The Audi Group sells vehicles of the Audi and Lamborghini in the Consolidated Financial Statements of the Audi Group
brands as well as motorcycles of the Ducati brand interna- as associated companies using the equity method. The legal
tionally through its own sales companies and in partnership ownership structure remains unchanged.
with local importers. Besides this, vehicles of the Bentley,
SEAT, Škoda, Volkswagen Passenger Cars and Volkswagen
Commercial Vehicles brands are sold through our multi- Read more about our deliveries on pages 113 ff.
brand sales companies Volkswagen Group Italia S.p.A.,
STRATEGY
The automotive industry is undergoing radical change: New
technologies such as autonomous driving, electric drives and Read more online about the strategic direction of
digital services are becoming incorporated into its products. the Audi Group at audi.com/strategy.
At the same time, regulatory requirements such as WLTP and

diverging regional CO2 and emissions regulations are increas-
ing further. Our customers’ desire for individual mobility, for / AUDI TRANSFORMATION PLAN AS THE BASIS FOR
example in intermodal formats or through ride/car sharing, IMPLEMENTING THE STRATEGY
is rapidly changing and increasingly becoming our focus of We are making Audi fit for the future both strategically as
attention. We at Audi are grasping the need for change as an well as organizationally and financially. For example, over
opportunity to define the future shape of premium mobility. the period 2019 through the end of 2023 we will be investing
some EUR 14 billion in the future topics of electric mobility,
/ STRATEGIC DIRECTION digital services and autonomous driving. This figure includes
We place the customer at the center of our actions. We sys- capex as well as research and development activities. The
tematically assess all decisions in terms of whether they Audi Transformation Plan (ATP), which was launched highly
bring added value for our customers. We therefore rigorously successfully in the 2018 fiscal year, is playing a major role in
look for customer relevance in all our activities and pursue generating the financial resources for these upfront expendi-
them methodically. tures. At the same time, it is helping us achieve our profita-
We will have defined and substantiated our direction as well bility targets. The ATP addresses both the performance side
as our approach, goals and action areas in greater detail by and our cost structures as well as capital employed in the form
the time of the Audi 2019 Annual General Meeting. of invested assets. In the year under review, on the basis of
092
STRATEGY // BASIS OF THE AUDI GROUP
the model decisions taken, we were for example able to Profit potential of Audi Transformation Plan
transfer the “Model initiative” work package to the line 2018 through the end of 2022
organization. Against the background of current peripheral
factors, we adjusted the ATP in the 2018 fiscal year. For > Updated premises
> Additional potential
example, the new “capital employed” work package was
also added to bring the key performance indicator of return EUR 15 billion
on investment (ROI) more sharply into focus.
We generated positive effects on earnings worth EUR 1.9 bil- EUR 10 billion
lion through the ATP in 2018. In addition, a number of ideas
for profit-boosting measures were approved for future years.
EUR 1.9 billion
effect on earnings in 2018
Based on updated assumptions and potential, we now want
to realize a total of around EUR 15 billion in profit potential previously updated
by the end of 2022. In this way we want to safeguard our

return target throughout the intensive transformation phase The ATP is currently subdivided into seven work packages, with
and raise the requisite future investments from our own one Board team responsible for each one. In the individual
resources. work packages, module managers take charge of developing
and implementing the necessary measures. A Project Man-
agement Office (PMO) oversees implementation of the ATP.
The Audi Transformation Plan

Project Management Office (PMO)
Material, invest- Technical

Market Capital
ment and indirect Factory costs Development Organization China
penetration employed
purchasing costs transformation
CHINA ROI
Board team:
Schot/ Martens/ Kössler/ Rothenpieler/ Göbel/ Seitz/ Seitz/Kössler/

Seitz Rothenpieler Göbel Martens Seitz Schot Rothenpieler
Examples:
Profit-oriented Optimization of Optimization of Digitalization of Implementation Optimization of

Process initiative
sales management material costs production processes of China strategy invested assets
/ INTEGRITY AND COMPLIANCE ALONG WITH

RESPECT AND COOPERATION AS THE Read more about integrity and compliance as well
FOUNDATION FOR THE STRATEGY as our corporate culture at Audi on pages 155 ff.
Integrity, respect and values-based, compliant behavior

build trust, make us fit for the future and are the basis of our
success. We want cooperation within Audi itself as well as
throughout the Volkswagen Group to be honest, uncompli-
cated, unreserved, at eye level and in our mutual interest –
entirely in keeping with the Group-wide Code of Cooperation.
093
BASIS OF THE AUDI GROUP // MANAGEMENT SYSTEM
MANAGEMENT SYSTEM
We apply central benchmarks to manage and monitor the A binding first-year plan is derived from the medium-term
strategic and operational goals of the Audi Group. Alongside planning and a budget for operations is drawn up on a month-
important financial key figures, the Audi Group management by-month basis. The level of budgetary target attainment is
system also contains non-financial performance indicators. tracked and reviewed each month with the help of various
In addition, the management’s remuneration is linked to the management tools such as target/actual analyses, year-on-
management system. In the course of repositioning the year comparisons and deviation analyses. If necessary, action
Company, the Audi Group’s management system will undergo plans are developed and implemented to back up the bud-
various changes in the future, for instance to make a clearer geted objectives. On a rolling monthly basis, detailed ad-
distinction between vehicle and service business. vance estimates are drawn up for the full year and also for
The current internal management process is outlined below the following three-month period. Measures developed to
and the current key performance indicators in our manage- reflect the prevailing opportunity and risk position are also
ment system are described. taken into account. Continuously adapting to internal and
external changes is therefore of central importance for
/ MANAGEMENT PROCESS IN THE AUDI GROUP management during the year. At the same time, the current
The Audi Group is integrated into the management process forecast constitutes the basis for the next medium-term and
of the Volkswagen Group. Management of the Audi Group budget planning.
encompasses AUDI AG and the consolidated companies,
which is why there is no separate management and forecast / KEY PERFORMANCE INDICATORS OF GROUP
of the key performance indicators for AUDI AG. Appropriate MANAGEMENT
account is taken of the complex value chains and organiza- The basis for the management of the Audi Group is a value-
tional structures as well as the legal requirements. oriented corporate management approach in combination
with the following key performance indicators, which are
The starting point for the management of the Audi Group is important drivers of our corporate development and have
the long-term strategic planning prepared every year for a been derived from the strategic goals:
period of ten years, as well as the medium-term planning
derived from this for a five-year period. > Deliveries to customers of the Audi brand
> Revenue
In order to shape the future of our Company, the individual > Operating profit/operating return on sales
planning topics are defined on the basis of their time horizons: > Return on investment (ROI)
> Net cash flow
> The product range is the strategic, long-term determinant > Research and development ratio
of corporate orientation. > Ratio of capex
> The long-term sales plan, which highlights market and
segment trends, is the starting point for identifying the The non-financial indicator of deliveries to customers reflects
volume of deliveries. the number of new vehicles handed over to end customers.
> Planning for the individual production sites is based on the This performance indicator reflects demand from customers
capacity and utilization plan. for products of the Audi brand and shows our competitive
and image position in the various markets worldwide. Strong
The coordinated results of the upstream planning processes demand for our products has a major impact on production,
are fed into the financial medium-term planning. This includes and consequently also on the capacity utilization of our sites
investment planning as an input for determining future alter- and the deployment of our workforce. In addition, a continu-
natives for products and courses of action, financial planning ing high level of deliveries to customers reflects a high level
of the income statement as well as financial and balance of satisfaction among our customers.
sheet planning.
The financial key performance indicators include Audi Group
revenue, which is a financial reflection of our market success.
094
MANAGEMENT SYSTEM, SHARES // BASIS OF THE AUDI GROUP
A further financial key performance indicator is the operating loans extended. This key performance indicator serves as a
profit of the Audi Group, which is the balance of revenue and measure of our Company’s level of self-financing.
resources employed (cost of goods sold, distribution costs
and administrative expenses), also taking into account the The research and development ratio expresses the innovative
other operating result (balance of other operating income strength of our Company and also ensures that it maintains
and other operating expenses). Operating profit represents competitive cost structures. The ratio expresses research and
the economic performance of our core business and our fun- development activities as a ratio of the revenue of the
damental business activity. Audi Group. Development projects take shape from product
We place particular emphasis on our return ratios. For exam- or technology decisions or are launched in response to
ple, the operating return on sales is the ratio of operating strategic directions.
profit to revenue.
The ratio of capex is another indicator of our Company’s
Another return ratio is return on investment (ROI), which innovative strength and competitiveness. It is obtained by
reflects how effective our business activities are. This ratio expressing capex according to the cash flow statement as a
considers the return achieved on the capital employed over a ratio of the revenue of the Audi Group. Capex includes invest-
given period. We obtain this indicator by determining the ments in property, plant and equipment, investment prop-
ratio of operating profit after tax to average invested assets. erty and other intangible assets (without capitalized devel-
The standardized average tax rate for the Volkswagen Group opment costs). Here, capital investment in essence comprises
of 30 percent is assumed for this purpose. Invested assets financial resources for modernizing and expanding the prod-
are calculated from the asset items on the balance sheet uct range, for increasing our capacity and for improving the
that serve the core business purpose (intangible assets, Audi Group’s production processes. Investment decisions are
property, plant and equipment, leasing and rental assets, requested by the specialist areas, then scrutinized and priori-
investment property, inventories and receivables) less non- tized by Investment Controlling and the Investment Group
interest-bearing liabilities (trade payables and advance pay- corporate committee. Major decisions affecting investment
ments). The average of the value of invested assets at the policy are also approved by the Company’s Supervisory Board.
start and the value of the invested assets at the end of the
fiscal year is then calculated.
Read more about our key performance indicators
Net cash flow indicates the cash flow from operating activi- on pages 99 ff., 105 ff., 113 ff. and 118 ff.
ties less the cash flow from investing activities, not including
the change in investments in securities or fixed deposits and
SHARES
/ AUDI TRADING PRICE TREND Audi are listed in the General Standard stock exchange seg-
The German Share Index (DAX) showed a negative overall ment and, in a reflection of the low free float of around
development in 2018. The trading prices of German car 0.36 percent, have a comparatively low trading volume. Audi
manufacturers and suppliers listed in the DAX also revealed shares bucked the market trend in displaying a mild upward
downward momentum, with greater volatility than the DAX trend overall over the past fiscal year.
as a whole. The shares of the premium car manufacturer
095
BASIS OF THE AUDI GROUP // SHARES, DISCLOSURES REQUIRED UNDER TAKEOVER LAW
On the first day of trading in 2018, Audi shares closed at the stock market values of automotive shares as a whole
EUR 726. A short time later – on January 18, 2018 – they remain low compared with other sectors. Audi shares closed
recorded the year-high of EUR 846. Against the backdrop of at EUR 782 on the year’s final day of trading, 7.7 percent up
industry-specific negative factors, such as the supply-end on the level at the start of the year.
distortions following the adoption of the WLTP (Worldwide
Harmonized Light-Duty Vehicles Test Procedure) in Septem- Indexed Audi trading price trend in 2018
ber 2018, the trading price of Audi shares generally showed (ISIN: DE0006757008, stock exchange: Xetra)
a sideways shift over the first ten months of 2018 – despite
120 %
some positive and negative fluctuations. On October 16,
2018, AUDI AG published an ad hoc announcement following
110 %
the administrative order imposing a fine from the completed
regulatory offense proceedings conducted by the Munich II 100 %
public prosecutor against AUDI AG. The order penalized the
departure from regulatory requirements for certain V6/V8 90 %
diesel engines and diesel vehicles manufactured or sold by
AUDI AG. A short time later, Audi shares touched their year- 80 %
low of EUR 680 on October 26, 2018. An upward trend in the

Audi trading price then set in and continued for the remain-
der of the year, despite isolated price fluctuations. Among J F M A M J J A S O N D
other factors, the successful presentation of the Audi e-tron

in the second half of the year is likely to have lifted the trad- Audi share German Share Index (DAX)
ing price. As the first volume-built model with all-electric
drive from the brand with the Four Rings, the e-tron signals
the start of its electrification initiative. While investors ap- Read more about Audi shares at
pear to be recognizing the long-term opportunities that arise www.audi.com/shares.
for the Audi Group from its investments in future technologies,
DISCLOSURES REQUIRED UNDER

TAKEOVER LAW
The following disclosures under takeover law are made pur- / SHAREHOLDERS’ RIGHTS AND OBLIGATIONS
suant to Section 289a, Para. 1 and Section 315a, Para. 1 of Shareholders enjoy property and administrative rights.
the German Commercial Code (HGB). The property rights include, above all, the right to a share in
the profit (Section 58, Para. 4 of the German Stock Corporation
/ CAPITAL STRUCTURE Act [AktG]) and in the proceeds of liquidation (Section 271 of
On December 31, 2018, the subscribed capital of AUDI AG the German Stock Corporation Act), as well as a subscription
remained unchanged at EUR 110,080,000 and comprised right to shares in the event of capital increases (Section 186
43,000,000 no-par bearer shares. Each share represents a of the German Stock Corporation Act).
notional share of EUR 2.56 of the subscribed capital. The administrative rights include the right to participate in
the Annual General Meeting and the right to speak, ask ques-
tions, table motions and exercise voting rights there. Share-
holders may assert these rights in particular by means of a
disclosure and avoidance action.
096
DISCLOSURES REQUIRED UNDER TAKEOVER LAW // BASIS OF THE AUDI GROUP
Each share carries an entitlement to one vote at the Annual / AUTHORIZATIONS OF THE BOARD OF
General Meeting. The Annual General Meeting elects the MANAGEMENT IN PARTICULAR TO ISSUE NEW
members of the Supervisory Board to be appointed by it, as SHARES AND TO PURCHASE TREASURY SHARES
well as the auditor; in particular, it decides on the ratification According to stock corporation regulations, the Annual
of the acts of members of the Board of Management and General Meeting may grant authorization to the Board of
Supervisory Board and, if necessary, on amendments to the Management for a maximum of five years to issue new
Articles of Incorporation and Bylaws, as well as on capital shares. The meeting may authorize the Board of Manage-
measures, on authorizations to acquire treasury shares and ment, again for a maximum of five years, to issue convertible
on the conducting of a special audit, the dismissal of mem- bonds on the basis of which new shares are to be issued. The
bers of the Supervisory Board within their term of office and extent to which the shareholders have an option on these
on liquidation of the Company. new shares is likewise decided upon by the Annual General
Meeting. The acquisition of treasury shares is regulated by
The Annual General Meeting normally adopts resolutions by Section 71 of the German Stock Corporation Act (AktG). No
a simple majority of votes cast, unless a qualified majority is resolutions to this effect were passed by the Annual General
specified by statute. A control and profit transfer agreement Meeting of AUDI AG in the 2018 fiscal year.
exists between AUDI AG and Volkswagen AG, Wolfsburg, as
the controlling company. This agreement permits the Board / KEY AGREEMENTS BY THE PARENT COMPANY THAT
of Management of Volkswagen AG to issue instructions. The ARE CONDITIONAL ON A CHANGE OF CONTROL
profit after tax of AUDI AG is transferred to Volkswagen AG. FOLLOWING A TAKEOVER BID
Volkswagen AG is obliged to make good any loss. All Audi AUDI AG is party to the shareholder agreement concerning
shareholders (with the exception of Volkswagen AG) receive a There Holding B.V., Rijswijk (Netherlands), which is the major-
compensatory payment in lieu of a dividend. The amount of ity shareholder of the HERE Group. Under the shareholder
the compensatory payment corresponds to the dividend that agreement, in the event of a change of control at a party to
is distributed in the same fiscal year to Volkswagen AG share- the agreement, that party must offer the shares it holds
holders for each Volkswagen ordinary share. directly or indirectly in There Holding B.V. to the other share-
holders for purchase. In the case of AUDI AG, a change of
/ CAPITAL INTERESTS EXCEEDING 10 PERCENT OF control occurs if a person acquires or loses control over
THE VOTING RIGHTS AUDI AG, wherein control is defined as (i) holding or having
Volkswagen AG, Wolfsburg, holds around 99.64 percent of control over more than 50 percent of the voting rights, (ii)
the voting rights in AUDI AG. For details of the voting rights the scope for controlling more than 50 percent of the voting
held in Volkswagen AG, please refer to the Management rights that can be exercised at Annual General Meetings on
Report of Volkswagen AG. all or virtually all matters, or (iii) the right to determine the
majority of the members of the Board of Management or
/ STATUTORY REQUIREMENTS AND PROVISIONS Supervisory Board. Furthermore, a change of control occurs
UNDER THE ARTICLES OF INCORPORATION AND if competitors of the HERE Group or certain potential com-
BYLAWS ON THE APPOINTMENT AND DISMISSAL petitors of the HERE Group from the technology industry
OF MEMBERS OF THE BOARD OF MANAGEMENT acquire at least 25 percent of AUDI AG. If none of the other
The appointment and dismissal of members of the Board of shareholders takes on these shares, the other shareholders
Management are stipulated in Sections 84 and 85 of the have the right to resolve the dissolution of There Holding B.V.
German Stock Corporation Act (AktG). Members of the Board Other than the above, AUDI AG has not reached any key agree-
of Management are accordingly appointed by the Supervisory ments that are conditional on a change of control following a
Board for a period of no more than five years. A renewal of takeover bid. Nor has any compensation been agreed with
the term of office, in each case for no more than five years, members of the Board of Management or employees in the
is permitted. Section 6 of the Articles of Incorporation and event of a takeover bid.
Bylaws further stipulates that the number of members of
the Board of Management is to be determined by the Super-
visory Board and that the Board of Management must com-
prise at least two persons.
097
ECONOMIC REPORT // BUSINESS AND UNDERLYING SITUATION
ECONOMIC REPORT
In a difficult market environment, the Audi Group pushed ahead with its
biggest-ever model and technology initiative in the past fiscal year.
Switching the entire product portfolio to the new WLTP test procedure
caused deliveries of the Audi brand to decline by –3.5 percent to
1,812,485 cars. In addition, the effects of the diesel issue negatively
impacted our business activity again in 2018.
BUSINESS AND UNDERLYING

SITUATION
/ GLOBAL ECONOMIC SITUATION Brazil’s GDP grew by 1.4 (1.1) percent in the period under
Global economic growth reached 3.2 (3.3) percent in 2018. review. However, the increase was held in check by political
Economic dynamism both in advanced economies and in uncertainties.
emerging countries stayed broadly on the level of the prior-
year period. The global inflation rate was up on the previous The Asia-Pacific region again delivered the most dynamic
year, with interest levels for the most part low. Monetary economic performance worldwide. The Chinese economy
policy as a whole remained expansionary. In addition, such achieved a GDP growth rate of 6.6 (6.9) percent – a high
factors as growing protectionist tendencies worldwide and growth in economic output in international terms – despite
geopolitical tensions triggered rising economic uncertainty. trade disputes with the United States. Economic policy
measures had a stimulating impact on the Chinese economy.
In Western Europe, the growth rate for gross domestic prod- Japan’s GDP improved by 0.8 (1.9) percent.
uct (GDP) reached 1.8 (2.3) in the period under review. Eco-
nomic growth in a majority of Western European countries / INTERNATIONAL CAR MARKET
was down on the prior-year period. Sources of uncertainty in- After eight successive years of growth, worldwide demand
cluded particularly the negotiations on the exit of the United for cars in 2018 amounting to 82.8 (83.8) million vehicles
Kingdom from the European Union (EU) and the budget dis- was down –1.2 percent on the prior-year level. Central and
pute between Italy and the EU. In Germany, the region’s Eastern Europe along with South America saw rises in new
largest national economy, GDP grew by 1.5 (2.5) percent registrations, whereas sales figures were down in Western
based on healthy levels of employment and the relatively Europe as well as the Asia-Pacific and North America regions.
optimistic mood among consumers, despite the dwindling The industry-specific framework conditions were influenced
rate of growth. by fiscal measures that played a major part in the mixed de-
velopment in new registrations between markets in the past
The Central and Eastern Europe region achieved economic fiscal year. The industry saw everything from tax cuts to tax
growth of 2.9 (4.0) percent. While economic momentum in increases, incentive programs, buyer’s premiums and import
Central Europe slowed somewhat, Russia’s economic output duties. Non-tariff trade barriers to protect the domestic auto-
developed positively with GDP growth of 1.6 (1.5) percent, motive industry in various countries also negatively impacted
above all as a result of the rebound in commodity price levels. worldwide sales figures.
Economic output in the United States rose by 2.9 (2.2) percent

on the back of strong consumer spending and the expansion-
ary fiscal policy.
098
BUSINESS AND UNDERLYING SITUATION // ECONOMIC REPORT
Despite the economy’s healthy development, the Western confidence due to the trade conflict between China and the
European car market fell just short of the previous year’s United States, new registrations were down –4.6 percent at
level with 14.2 (14.3) million vehicles sold, a change of 22.8 (23.9) million units. The Japanese car market also
–0.7 percent. The supply-end distortions following the intro- showed a negative development compared with the prior-
duction of the WLTP (Worldwide Harmonized Light-Duty year period. Sales of cars were down –0.4 percent on the
Vehicles Test Procedure) from September 1, 2018, depressed previous year, at 4.4 (4.4) million units.
the sales total. In Germany, market volume remained virtu-
ally flat. New registrations came to 3.4 (3.4) million cars – / INTERNATIONAL MOTORCYCLE MARKET
a change of –0.2 percent compared with the prior-year level. In 2018, international registrations of new motorcycles in the
New registrations in the United Kingdom showed a fall of displacement segment above 500 cc declined by –2.7 percent.
–6.8 percent, reflecting among other things the growing The individual markets presented a mixed picture. While the
uncertainty surrounding the United Kingdom’s expected exit Italian and German motorcycle markets achieved growth of
from the EU. The car market in Italy equally contracted, by 6.2 and 2.8 percent respectively, the world’s largest motor-
–3.1 percent. Conversely, the French car market enjoyed cycle market – the United States – saw the number of newly
3.0 percent growth in new registrations. On the back of the registered motorcycles fall by –8.9 percent.
positive overall development in the economy, the Spanish
1)
passenger car market returned a growth rate of 7.0 percent. / MANAGEMENT’S OVERALL ASSESSMENT
New registrations of vehicles in Central and Eastern Europe // COURSE OF BUSINESS

were 11.0 percent up on the previous year, at 3.4 (3.0) million The 2018 fiscal year was a year of important landmark deci-
cars. The main driver of this development was the Russian car sions for the Audi Group, but also brought major challenges.
market, the largest in the region. With the improving fortunes Abraham Schot was appointed Chairman of the Board of
of the economy as a whole and thanks to pull-forward effects Management of AUDI AG with effect from January 1, 2019.
ahead of the increase in the rate of value-added tax on January He had headed the Company as the interim Chairman since
1, 2019, vehicle sales there rose by 13.2 percent. June 2018. In a difficult market environment, the Audi Group
pushed ahead with its biggest-ever model and technology in-
From January through December 2018, the U.S. market for itiative in the past fiscal year. With a large number of market
passenger cars and light commercial vehicles reached the introductions, such as the Audi Q8 and the Lamborghini
previous year’s comparatively high level with 17.3 (17.2) Urus, we continued to rejuvenate our model portfolio in the
million newly registered units – a change of 0.2 percent. year under review and further enhanced our product portfolio.
Demand continued to shift towards SUV and pick-up models, The most important new product presented in the 2018
while the classic passenger car segments contracted. At the fiscal year was the Audi e-tron. The fully electric SUV is being
same time, higher financing costs due to higher interest well received by customers: By the end of the year, advance
rates put a strain on registration figures. orders had reached around 20,000 vehicles. The e-tron kicks
off our ambitious electrification roadmap. To make electric
In Brazil, the market for passenger cars and light commer- mobility profitable as quickly as possible, we are prioritizing
cial vehicles again benefited from an improved economic optimized cost structures and maximum synergies – between
situation in 2018. The previous year’s volume was increased the individual models, but above all within the context of the
by 13.8 percent to 2.5 (2.2) million units. Volkswagen Group. Up until the end of 2023 alone, we have
plans for upfront spending of around EUR 14 billion on the
In the Asia-Pacific region, the car market contracted by future topics of electric mobility, digitalization and autono-
–2.3 percent to 36.1 (37.0) million units in the period under mous driving. In total, Audi envisages total expenditures of
review. The drop in demand in China, the world’s biggest car around EUR 40 billion over the planning period of the coming
market, was the main reason. In the wake of falling consumer five years.
1) The prior-year figures have been adjusted to reflect the first-time adoption of IFRS 9 and IFRS 15 (see also the comments on IFRS 9 and IFRS 15 in the Notes to the
Consolidated Financial Statements).
099
To ensure our future profitability levels, in the year under launches necessitated by the model initiative and the unfa-
review we adopted significantly more ambitious goals com- vorable currency environment for us compared with the pre-
pared with those expressed in the Audi Transformation Plan vious year were the major factors in this development.
(ATP) at the time it was launched in 2017. This far-reaching
program of measures is the basis for implementing our strat- The Audi Group generated an operating profit amounting to
egy – alongside reallocating resources to future areas, Audi EUR 3,529 (4,671) million in the 2018 fiscal year, represent-
is streamlining costs, tapping fresh income potential and re- ing an operating return on sales of 6.0 (7.8) percent. This
ducing complexity. Thanks to the ATP, we already generated figure includes special items in connection with the diesel
around EUR 1.9 billion in positive effects on earnings in the issue totaling EUR −1,176 (−387) million. Adjusted to take
year under review and therefore compensated for a large account of these special items, operating profit totaled
number of negative factors. The need to switch our model EUR 4,705 (5,058) million and the operating return on sales
portfolio to the new WLTP test cycle was the main adverse came to 7.9 (8.5) percent. There were positive effects espe-
effect in the 2018 fiscal year. Following a good first half, cially from the ATP and our currency management activities.
the constraints of this industry-wide changeover led to a re- In addition to the special items from the diesel issue, aspects
stricted sales range in the second half of the year. The situa- such as our temporarily restricted sales range following the
tion was exacerbated by the political debate about banning introduction of the new WLTP test cycle put pressure on our
the use of diesel vehicles, along with a downward trend in figures. We also provided substantial upfront financing for
demand and intense competition in important passenger car future mobility solutions and new technologies. Furthermore,
markets. Furthermore, there were negative special items in the number of product discontinuations and launches involved
connection with the diesel issue – especially from the legally in implementing our product initiative as well as the restruc-
binding administrative order imposing a fine on AUDI AG by turing of our new production network weighed on our operat-
the Munich II public prosecutor. In addition, the period Janu- ing profit. In the 2017 Annual Report we had anticipated an
ary through December 2018 brought product discontinua- operating return on sales within the target corridor of 8 to
tions and launches for a large number of new models under 10 percent.
our comprehensive model initiative, as well as the restructur-
ing of our production network. The return on investment (ROI), which was also negatively
The overall financial performance of the Audi Group in the impacted by the special items, reached 10.0 (14.4) percent
2018 fiscal year was somewhat weaker than in 2017. and thus exceeded our minimum rate of return of 9 percent.
This key figure also reflects our model and technology initia-
In light of the challenges from WLTP and the general market tive along with the associated effects on invested assets. In
situation, we delivered 1,812,485 (1,878,105) cars of the the 2017 Annual Report we had forecast an ROI of between
Audi brand to customers – a fall of –3.5 percent compared 14 and 17 percent for 2018.
with one year earlier. At the start of the year we had antici-
pated that deliveries to customers of the Audi brand would Thanks to its financial strength and despite the outflows in
approximately reach the previous year’s record level. connection with the diesel issue in the past fiscal year, the
Audi Group achieved a net cash flow of EUR 2,141 (4,312) mil-
The revenue of the Audi Group was almost on a par with the lion. In our forecast from the start of 2018, we had still antici-
previous year at EUR 59,248 (59,789) million. In the 2017 pated a net cash flow of between EUR 2.7 and 3.2 billion.
Annual Report we forecast Audi Group revenue slightly above
the prior-year figure for 2018 as a whole. Especially the supply- In the Third Quarter Report 2018 for the Audi Group we
end distortions following the switch to the new WLTP test announced that, in light of the special items from the diesel
cycle, the large number of product discontinuations and issue, we were likely to fall significantly short of the fore-
casts for operating return on sales, return on investment and
net cash flow for the year as a whole.
100
The research and development ratio of the Audi Group reached period. The ratio of capex for the 2018 fiscal year of
a figure of 7.1 (6.4) percent and therefore – as forecasted – 5.9 (6.5) percent was slightly above our previous strategic
came in slightly above the previous strategic target corridor target corridor of 5.0 to 5.5 percent and therefore in the
of 6.0 to 6.5 percent. range of our updated forecast in the First Quarter Report
2018. In the 2017 Annual Report we had anticipated that
Despite the large number of vehicle launches, we held our the ratio of capex for 2018 would be moderately above the
investment activity steady compared with the prior-year previous target corridor.
Forecast/actual comparison Audi Group 1)
Actual 2017 Forecast for 2018 Actual 2018 Evaluation 2)
Deliveries of cars of the Audi brand to customers 1,878,105 at the previous year’s level 1,812,485
Revenue in EUR million 59,789 slight increase 59,248
Operating profit in EUR million 4,671 within the strategic target corridor 3,529
Operating return on sales in percent 7.8 of 8 to 10 percent 3) 6.0
Return on investment (ROI) in percent 14.4 between 14 and 17 percent and therefore above 10.0
the minimum rate of return of 9 percent 3)
Net cash flow in EUR million 4,312 4) between EUR 2.7 and 3.2 billion 3) 2,141
Research and development ratio in percent 6.4 slightly above the strategic target corridor of 7.1
6.0 to 6.5 percent
Ratio of capex in percent 6.5 moderately above the strategic target corridor 5.9
of 5.0 to 5.5 percent 5)
1) The prior-year figures have been adjusted to reflect the first-time adoption of IFRS 9 and IFRS 15 (see also the comments on IFRS 9 and IFRS 15 in the Notes to the Consolidated
Financial Statements).
2) The evaluation reflects the Company’s assessment of target attainment.
Forecast achieved Significantly above forecast Significantly below forecast Slight forecast deviation
3) Updated in the ad hoc announcement of October 16, 2018, and also in the Third Quarter Report 2018 to significantly below our previous forecast
4) Included a positive non-recurring effect of EUR 3,278 million from the transfer of the minority interest in Volkswagen International Belgium S.A., Brussels (Belgium),
to Volkswagen AG, Wolfsburg.
5) Updated in the First Quarter Report 2018 to “slightly above the strategic target corridor of 5.0 to 5.5 percent”
// EXCEPTIONAL EVENTS and Canada, where the regulations on NOx limits are stricter
than in other parts of the world. The California Air Resources
/// DIESEL ISSUE Board (CARB) – part of the Californian Environmental
Protection Agency – announced its own investigations into
//// IRREGULARITIES IN NO X EMISSIONS this matter.
In September 2015, the U.S. Environmental Protection Agency In response, a large number of court and governmental pro-
(EPA) publicly announced in a “Notice of Violation” that irreg- ceedings were started in the United States and elsewhere in
ularities in relation to nitrogen oxide (NOx) emissions had the world. We have since succeeded in making substantial
been discovered in emissions tests on certain vehicles with progress and ending a great number of these proceedings.
four-cylinder diesel engines of type EA 189 made by the
Volkswagen Group. In this context, the Volkswagen Group //// COMPREHENSIVE INVESTIGATIONS LAUNCHED
announced that noticeable discrepancies between the figures BY VOLKSWAGEN AND AUDI
achieved in testing and in actual road use had been identified After the first “Notice of Violation” was issued, Volkswagen
in around 11 million vehicles worldwide with type EA 189 and Audi immediately initiated their own internal as well as
diesel engines, including around 2.4 million Audi vehicles. In external investigations; both have since been concluded for
November 2015, the EPA announced in a “Notice of Violation” the most part. Extensive inquiries were also conducted at
that irregularities had also been identified in the software AUDI AG in relation to the potential use of unlawful “defeat
installed in U.S. vehicles with type V6 3.0 TDI engines. The devices” under U.S. law in the type V6 3.0 TDI diesel engines
matter affected around 113,000 vehicles in the United States and concluded for the most part.
101
In addition, the Board of Management of AUDI AG has estab- could potentially have an effect on the Annual and Consoli-
lished an internal task force, provided committees and depart- dated Financial Statements as well as on the Combined Man-
ments with the necessary resources and requested regular agement Report for the 2018 fiscal year and previous years.
reports. Furthermore, in September 2015, Volkswagen AG
and AUDI AG filed a criminal complaint in Germany against //// PRODUCT-RELATED LAWSUITS WORLDWIDE
unknown persons. Volkswagen AG and AUDI AG are cooperat- In principle, it is possible that customers in the affected
ing with all relevant authorities. markets will file civil lawsuits or that importers and dealers
will assert recourse claims against Volkswagen AG and other
While Volkswagen AG holds internal development responsi- Volkswagen Group companies, including AUDI AG. Besides
bility for the four-cylinder diesel engines within the Group, individual lawsuits, various forms of collective actions (i.e.
AUDI AG is responsible for the development of the six and assertion of individual claims by plaintiffs acting jointly or as
eight-cylinder diesel engines, such as diesel engines of types representatives of a class) are available in various jurisdic-
V6 and V8. tions. Furthermore, in a number of markets it is possible for
AUDI AG has concluded an agreement with Volkswagen AG in consumer and/or environmental organizations to bring suit
the event that the U.S. authorities, U.S. courts and potential to enforce alleged rights to injunctive relief, declaratory
out-of-court settlements do not differentiate fully between judgment, or damages.
the four-cylinder diesel engine issue for which
Volkswagen AG is accountable and V6 3.0 TDI engines that In the context of the diesel issue, various class action pro-
are the responsibility of AUDI AG, and that joint and several ceedings as well as individual lawsuits are currently pending
liability thus arises. Against the background of the settle- against Volkswagen AG and other Volkswagen Group compa-
ment agreements reached, these costs will be passed on to nies, including AUDI AG. Work in respect of the legal proceed-
AUDI AG according to a causation-based allocation. ings that are still pending in the USA and the rest of the world
is ongoing, still requires considerable efforts and will con-
The members of the Board of Management of AUDI AG at tinue for some time. Volkswagen AG and AUDI AG are being
that time have declared that prior to their notification by EPA advised by a number of external law firms in this connection.
in November 2015, they had no knowledge of the use of
unlawful “defeat device software” under U.S. law in the V6 //// AGREEMENTS AND PROCEEDINGS IN THE
3.0 TDI engines. USA/CANADA
Also, the publications released at the time of preparation of In the USA and Canada three generations of certain vehicles
the Annual and Consolidated Financial Statements as well as with 2.0 TDI engines and two generations of certain vehicles
the Combined Management Report for the 2018 fiscal year, with the type V6 3.0 TDI engines are affected, which come to
along with the continued investigations and interviews in a total of approximately 700,000 vehicles. Due to NOx limits
connection with the diesel issue, did not provide the Board of that are considerably stricter than in the EU and the rest of
Management with any reliable findings or assessments on the world, it is a greater technical challenge here to retrofit
the matter that would lead to a different evaluation of the the vehicles so that the emission standards defined in the
associated risks. settlement agreements for these vehicles can be achieved.
Besides, there are no reliable findings or facts available to
the incumbent members of the Board of Management of Following the publication of the EPA’s “Notices of Violation,”
AUDI AG suggesting that the Annual and Consolidated Finan- Volkswagen AG and other Volkswagen Group companies,
cial Statements as well as the Combined Management Report including AUDI AG, have been the subject of intense scrutiny,
for the 2018 fiscal year and previous years were materially ongoing investigations (civil and criminal), and civil litigation.
incorrect. However, if new findings should come to light that Volkswagen AG and other Volkswagen Group companies,
indicate that individual members of the Board of Manage- including AUDI AG, have received subpoenas and inquiries
ment at that time were aware of the diesel issue earlier, this from state attorneys general and other governmental
authorities.
102
Volkswagen AG and other Volkswagen Group companies are separate agreements with the attorneys general of 13 U.S.
facing litigation in the USA/Canada on a number of different states (California, Connecticut, Delaware, Maine, Maryland,
fronts relating to the matters described in the EPA’s “Notices Massachusetts, New Jersey, New York, Oregon, Pennsylvania,
of Violation.” In that respect, investigations by various U.S. Rhode Island, Vermont and Washington) to resolve their ex-
and Canadian regulatory and government authorities are isting or potential future claims for civil penalties and injunc-
ongoing, particularly in areas relating to securities, financing tive relief for alleged violations of environmental laws. The
and tax. Additionally, in the USA and Canada, certain puta- attorneys general of eight other U.S. states (Alabama, Illi-
tive class actions by customers, investors, salespersons and nois, Montana, New Hampshire, New Mexico, Ohio, Tennes-
dealers as well as individual customers’ lawsuits and state or see and Texas) and some municipalities have suits pending in
municipal claims have been filed in various courts, including state and federal courts against Volkswagen AG, Volkswagen
state and provincial courts. Group of America, Inc. and certain affiliates, including
A large number of these putative class action lawsuits have AUDI AG, alleging violations of environmental laws. The envi-
been filed in U.S. federal courts and consolidated for pretrial ronmental claims of eight states – Alabama, Illinois, Minne-
coordination purposes in the federal multidistrict litigation sota, Missouri, Ohio, Tennessee, Texas and Wyoming – as well
proceeding in the State of California. as Hillsborough County (Florida), Salt Lake County (Utah) and
two Texas counties have been dismissed in full or in part by
In the USA, Volkswagen AG and certain affiliates, including trial or appellate courts as preempted by federal law. Ala-
AUDI AG, reached settlement agreements (including various bama, Illinois, Ohio, Tennessee, Hillsborough County and
consent decrees) with the U.S. Department of Justice (DOJ), Salt Lake County have appealed or may still appeal the dis-
the EPA, the State of California, the CARB, the California missal of their claims.
Attorney General, the U.S. Federal Trade Commission, and
private plaintiffs represented by a Plaintiffs' Steering In the 2018 fiscal year, the EPA and CARB issued the outstand-
Committee in a multidistrict litigation in California. These ing official approvals needed for the technical solutions for the
settlement agreements resolved certain civil claims made in affected vehicles with 2.0 TDI and with V6 3.0 TDI engines.
relation to affected diesel vehicles in the United States. On October 31, 2018, after discussions with DOJ, EPA, and
CARB, the parties agreed to modify the First and Second
Volkswagen AG also entered into agreements to resolve U.S. Partial Consent Decrees to clarify that Volkswagen may repair
federal criminal liability and certain civil penalties and claims certain technical issues with approved emissions modifica-
relating to the diesel issue. As part of its plea agreement, tions through an “AEM Correction” (Approved Emissions
Volkswagen AG agreed to plead guilty to three felony counts Modifications).
under U.S. law – including conspiracy to commit fraud,
obstruction of justice and using false statements to import Since November 2016, Volkswagen has been responding to
cars into the United States – and has been sentenced to three information requests from the EPA and CARB related to auto-
years’ probation. matic transmissions in certain vehicles with gasoline engines.
Additionally, putative class actions filed against AUDI AG and
Additionally Volkswagen and Audi have reached separate certain affiliates have been transferred to the federal multi-
agreements with the attorneys general of 49 states, the district litigation proceeding in the State of California and
District of Columbia and Puerto Rico to resolve their existing consolidated. The lawsuits allege that defendants concealed
or potential consumer protection and unfair trade practices the existence of defeat devices in Audi brand vehicles with
claims in connection with both 2.0 TDI and V6 3.0 TDI vehi- automatic transmissions. Other actions alleging similar claims
cles in the USA. New Mexico still has consumer protection are also pending in the Northern District of California and
claims outstanding. Volkswagen and Audi have also reached two provincial courts in Canada.
103
On December 21, 2017, Volkswagen announced an agreement The Ministry of Environment in South Korea qualified certain
in principle on a proposed consumer settlement in Canada emissions strategies in the engine control software of various
involving V6 3.0 TDI vehicles that was approved by the courts diesel vehicles with V6 or V8 TDI engines meeting the Euro 6
in Ontario and Quebec in April 2018. Also in Canada, a crimi- emission standard as an unlawful defeat device and ordered
nal enforcement-related investigation related to 2.0 and 3.0 a recall on April 4, 2018; the same applies to the Dynamic
diesel vehicles by the federal environmental regulator is on- Shift Program (DSP) in the transmission control of a number
going, and a quasi-criminal enforcement-related offense has of Audi models.
been charged by the Ontario provincial environmental regu-
lator related to 2.0 diesel vehicles. Additionally, in Quebec, a //// CRIMINAL AND ADMINISTRATIVE
certified environmental class action on behalf of residents is PROCEEDINGS IN GERMANY
pending. This environmental class action was authorized on The Munich II Office of the Public Prosecutor is conducting
the sole issue of whether punitive damages could be recover- investigations against 24 persons, including the former
able. Volkswagen is seeking leave to appeal this authoriza- Chairman of the Board of Management of AUDI AG and
tion ruling. Class action and joinder lawsuits have also been another active member of the Board of Management of
filed in Canada, including alleged consumer protection and AUDI AG. The investigations are ongoing. AUDI AG has ap-
securities claims asserting damages among other things. pointed two renowned major law firms to clarify the matters
underlying the public prosecutor’s accusations. The Board of
Management and Supervisory Board of AUDI AG are being
//// CONSULTATION WITH GOVERNMENT AGENCIES regularly updated on the current state of affairs.
ON TECHNICAL MEASURES WORLDWIDE
In agreement with the respective responsible authorities, the The administrative fine order issued on October 16, 2018, by
Volkswagen Group is making technical measures available the Munich II Office of the Public Prosecutor terminates the
worldwide for virtually all diesel vehicles with type EA 189 regulatory offense proceeding conducted against AUDI AG in
engines. this connection. The administrative fine order is based on a
Within its area of responsibility, the German Federal Motor negligent breach of the obligation to supervise occurring in
Transport Authority (Kraftfahrt-Bundesamt or KBA) the organizational unit “Emissions Service/Engine Type
ascertained for all clusters (groups of vehicles) that imple- Approval.” The administrative order imposes a total fine of
mentation of the technical measures would not bring about EUR 800 million, consisting of a penalty payment of
any adverse changes in fuel consumption figures, CO2 emis- EUR 5 million and the forfeiture of economic benefits in the
sion figures, engine power, maximum torque, and noise amount of EUR 795 million. After thorough examination, the
emissions. fine has been accepted and paid in full by AUDI AG, render-
ing the administrative fine order legally final. The adminis-
AUDI AG has worked intensively for many months to check trative fine order terminates the regulatory offense proceed-
all relevant diesel concepts for possible discrepancies and ing against AUDI AG. Further sanctions against or forfeitures
retrofit potentials. The measures proposed by AUDI AG have by AUDI AG are therefore not to be expected in Europe in
been adopted and mandated in various recall notices issued connection with the unitary factual situation underlying the
by the KBA for vehicle models with V6 and V8 TDI engines. administrative fine order.
Currently, AUDI AG assumes that the total cost, including the
amount based on recalls, of the ongoing largely software-based In Germany, the Verbraucherzentrale Bundesverband e. V.
retrofit program that began in July 2017 will be manageable (Federation of Consumer Organizations) filed an action on
and has recognized corresponding balance-sheet risk provi- November 1, 2018, with the Braunschweig Higher Regional
sions. The measures submitted by AUDI AG are being exam- Court for model declaratory judgment against Volkswagen AG.
ined by the KBA and can only be made available to customers The complaint is seeking a ruling that certain preconditions
after corresponding approval by the KBA. for potential consumer claims against Volkswagen AG are met;
104
BUSINESS AND UNDERLYING SITUATION, RESEARCH AND DEVELOPMENT // ECONOMIC REPORT
however, no specific payment obligations would result from The risk provisioning made to date in the form of provisions
any determinations the court may make. Individual claims for the diesel issue is based on current knowledge and funda-
then have to be reduced to judgment afterwards in subse- mentally subject to significant evaluation risks because of
quent separate proceedings. the large number of still-uncertain measurement inputs.
Provisions deemed appropriate were created or contingent
//// FINANCIAL IMPACT OF THE DIESEL ISSUE liabilities were disclosed for identifiable and measurable
In connection with the diesel issue, there were special items risks. Contingent liabilities were not disclosed if they are not
affecting Audi Group operating profit in the amount of currently measurable. In view of the still-ongoing process of
EUR –1,176 (–387) million in the 2018 fiscal year. These are clarifying the facts as well as the complexity of the individual
based mainly on the legally binding administrative order im- factors involved and the ongoing consultations with the gov-
posing a fine on AUDI AG by the Munich II public prosecutor. ernment agencies, the provisions created for the diesel issue
They also reflect spending for technical measures, customer as well as the contingent liabilities reported and the further
measures as well as expenses and provisioning for legal risks. latent legal risks are to some extent subject to substantial
The special items in connection with the diesel issue over the evaluation risks. If these risks should materialize, there
years 2015 through 2018 came to EUR –3,423 million over- could be substantial financial burdens.
all. Of this total, the balance sheet showed outstanding obli-
gations or risk provisioning amounting to EUR –822 million
at the end of the 2018 fiscal year.
RESEARCH AND DEVELOPMENT 1)
The Audi Group continued its technology and product initia- Workforce in the Research and Development area
tive in 2018. For subsequent years through to the end of
Average for the year 2018 2017
2023, we plan to invest up to EUR 40 billion. This includes
spending of EUR 14 billion alone on the future topics of elec- AUDI AG 11,108 10,823
trification, digitalization and autonomous driving. Alongside Audi (China) Enterprise Management
Co., Ltd. 253 242
capex, this figure includes mainly research and development
Audi Hungaria Zrt. 383 348
activities. When developing our products and services, we
Automobili Lamborghini S.p.A. 369 364
focus primarily on the customer experience. We are thus Italdesign Giugiaro S.p.A. 812 785
stepping up the pace of transformation in our Company. PSW automotive engineering GmbH 849 871
The Audi e-tron premiered in 2018 signals not only a new Ducati Motor Holding S.p.A. 237 231
era in electric mobility, but also in our vehicles’ connectivity Other 15 8
within a customer-focused mobility ecosystem. Workforce in the Research and

Development area 14,026 13,672
In the year under review, the Audi Group employed

14,026 (13,672) people on average in Research and In addition to staging the biggest model initiative in our
Development. history, we are consistently advancing the future topics of
electric mobility, digitalization and autonomous driving. For
1) To reflect the first-time adoption of IFRS 9 and IFRS 15, the revenue and consequently also the research and development ratio of the previous year have been adjusted
(see also the comments on IFRS 9 and IFRS 15 in the Notes to the Consolidated Financial Statements).
105
ECONOMIC REPORT // RESEARCH AND DEVELOPMENT
that, we need efficient processes along with clear planning, In addition, we are responsible within the Volkswagen Group
allocation and management of both human and financial for fuel cell technology – with the objective of making the
resources. The transformation in the Research and Develop- h-tron ready for series production in the near future. We are
ment area that we already initiated in the 2017 fiscal year is steadily expanding the competence center for that area of
a logical start. In the year under review, for example, we activity at our Neckarsulm site.
trained more than 2,000 employees in future areas that are
strategically important for us. Moving forward, we will con- The research and development activities of the Audi Group
tinue to promote internal HR development and forge external came to EUR 4,178 (3,809) million in the year under review.
partnerships to promote expertise in crucial areas of innova- This represents a research and development ratio of 7.1 (6.4)
tion quickly and selectively. percent. The year-on-year rise is attributable to increased in-
vestment in automated and autonomous driving as well as in
Competitive cost structures are essential to the long-term expanding the portfolio of hybrid and electric vehicles. Capi-
success of Audi. That is why we have defined the research and talized development costs rose to EUR 1,593 (1,243) million
development ratio as a strategic target corridor and a key – equivalent to a capitalization ratio of 38.1 (32.6) percent.
performance indicator for financial management. As well as This ratio expresses capitalized development costs in relation
allocating resources efficiently and steadily optimizing pro- to total research and development activities. Amortization of
cesses, the task at hand also involves using and building on capitalized development costs totaled EUR 856 (1,025) mil-
synergies even further within the Volkswagen Group. For ex- lion in the 2018 fiscal year.
ample, we are working together with Dr. Ing. h.c. F. Porsche
AG, Stuttgart, on the electrification of both brands’ product Research and development activities
portfolios. The Audi e-tron GT concept, a study unveiled in
EUR million 2018 2017
November 2018, is one early result of this partnership. The
fully electric four-door coupé intended for series production Research expense and non-capitalized
underscores the potential for synergies within the Volkswagen development costs 2,585 2,565
Capitalized development costs 1,593 1,243
Group. We are also pooling our resources with our sister brand
Research and development activities 4,178 3,809
in the joint development of vehicle architectures, modules and
components in what is known as the premium architecture
electrification (PPE). The first model based on this platform is Our activities in the Research and Development area can be
to appear on the market at the start of the next decade. In categorized into three main subject areas: “future topics,”
the smaller vehicle segments, we are collaborating with the “expansion and updating of model portfolio with conventional
Volkswagen Passenger Cars brand on the basis of the modular drive systems” and “basic/cross-area topics.” The “future
electric drive matrix (MEB). topics” include research and development activities that sup-
port us particularly with the implementation of our strategy.
The technological area of autonomous driving calls for the Currently, “expansion and updating of model portfolio with
deployment of considerable human and financial resources, conventional drive systems” mainly reflects our model initia-
which we raise through intra-Group projects, but also by being tive. Under “basic/cross-area topics” we essentially address
increasingly open to cooperation with external parties. cross-model activities in the Research and Development area
Within the Volkswagen Group, Audi for instance holds respon- as well as trial runs and tests. The increasing prioritization of
sibility for the development of the highway pilot, a particularly future topics, ongoing process optimizations as well as a
important future application in our vehicles. Together with differentiated consideration of cross-area topics are the main
our fully owned subsidiary Autonomous Intelligent Driving drivers behind the change year on year.
GmbH, Munich, we are developing hardware and software for
autonomous driving in urban and confined traffic zones.
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RESEARCH AND DEVELOPMENT // ECONOMIC REPORT
Research and development activities by subject area

(EUR million)
4,178
3,809
35%
28 % Future topics
Expansion and updating of model

51% 55% portfolio with conventional drive
systems
14% 17% Basic/cross-area topics
2018 2017
Selected activities in the Research and Development area in the 2018 fiscal year
Future topics
> Development of models with fully electric drive (series-production start of Audi e-tron; Audi e-tron Sportback
and series-production version of Audi e-tron GT concept to follow by 2020; one-third of vehicles produced will
be electrically powered by 2025)
> Development of a shared premium architecture electrification (PPE) with Dr. Ing. h.c. F. Porsche AG
> Expansion of plug-in hybrid range (preparation of plug-in initiative in 2019, e.g. Audi A6, Audi A7, Audi A8,
Audi Q5, Audi Q7)
> Expansion of efficiency technologies (including new mild-hybrid technology)
> New quattro generation: electric all-wheel-drive in the Audi e-tron
Electrification, sustainability
> Expansion of charging infrastructure/systems (including Audi e-tron Charging Service as part of a wider
and efficiency
charging concept, in collaboration with IONITY GmbH, Munich, and Electrify America, LLC, Reston (USA)
> Further development of h-tron fuel cell technology (including envisaged cooperation with Hyundai Motor
Company, Seoul (South Korea); first small-series model at start of next decade)
> Further development of alternative fuels (e.g. Audi e-fuels)
> Systematic lightweight construction involving multi-material applications (including sustainable aluminum
for battery housings in Audi e-tron)
> Development of circular economy solutions (including development of a closed loop for components of
high-voltage batteries)
> Further development of automated driving (including highway pilot and parking garage pilot; expansion of
safety functions including using swarm data via HERE back end)
> Development of autonomous driving (including by the subsidiary Autonomous Intelligent Driving GmbH,
Munich)
> Expansion of enabler technologies for automated and autonomous driving as well as for digital functions
Driver assistance systems,
(modular hardware and software concept E³)
automated driving and
> Expansion of the range of intelligent systems in the vehicle (including new intersection assist in Audi A6)
artificial intelligence
> Further development of connected chassis systems (e.g. active suspension in Audi A8)
> Pioneering computing power in the vehicle (e.g. zFAS as central control unit incorporates up to five wheel
sensors, six cameras, 12 ultrasound sensors and a laser scanner into Audi Q8)
> Expansion of vehicle connectivity with its environment (including seamless integration of Audi e-tron into
connected home; vehicle communication with traffic lights available as option in 15 cities in the United States)
> New display and operating systems (MMI touch response in Audi A7, Audi A6, Audi Q8 and Audi e-tron)
> Expansion of Internet services in vehicle (Amazon Alexa in Audi e-tron; Audi connect with Amazon Music)
> High-precision navigation thanks to HERE map data (e.g. self-learning function based on the route driven:
Audi connect and recognizes the driver’s preferences and can therefore propose appropriate routes)
connectivity technologies > Connectivity beyond the car with the myAudi app (unlocking, locking and engine starting possible via an
Android smartphone using NFC)
> Natural-language voice control as intelligent dialogue partner
> Expansion of broadband connectivity (LTE Advanced, 5G)
> New air quality systems (e.g. optional air quality package with fragrancing and ionizer in new Audi Q8)
> Development of adaptive user interface (UI) and optimum integration of third-party applications into the
User experience (UX) Audi ecosystem
> Functional integration via intelligent components (advance development)
> Development of new UI/UX technologies such as holography or the presentation of light and sound
107
ECONOMIC REPORT // RESEARCH AND DEVELOPMENT
Future topics
> Progressive, sophisticated design solutions for exterior and interior (e.g. new Audi Q8:
luxury coupé meets SUV; octagonal Singleframe as new distinguishing feature of Audi Q family)
Audi design and aerodynamics > Development of new interior concepts that enable a range of application-based worlds of experience for the
customer (including for autonomous driving)
> Aerodynamics (Audi e-tron with range-optimized aerodynamics concept: Cd value of 0.27)
Audi Sport > Formula E
Expansion and updating of model portfolio with conventional drive systems
> Expansion of the model portfolio to tap into new customer segments:
> Audi SQ2
> Audi Q3 Sportback (market introduction in 2019)
> Audi RS 5 Sportback
> Audi Q5 L
> Audi Q8
> Lamborghini Urus
> Updating of existing model portfolio in the fiscal year:
> Audi A1 Sportback
> Audi Q3
> Audi RS 4 Avant
> Audi A6 Avant
Model portfolio > Audi A6 Sedan
> Audi A7 Sportback
> Lamborghini Huracán Performante Spyder
> Lamborghini Aventador SVJ (market introduction in 2019)
> Preparations for models appearing on the market in the near future, including:
> Audi A3 Sportback
> Audi A5
> Audi A6 allroad quattro
> Audi S6
> Audi S7 Sportback
> Audi RS 7 Sportback
> Audi Q7 and Audi SQ7
> Audi SQ8, RS Q8
> Model updates to existing product portfolio (market introduction in 2019):
> Audi TT/TTS Coupé
> Audi TT/TTS Roadster
Updating of model portfolio > Audi R8 Coupé
> Audi R8 Spyder
> Audi A4
> Lamborghini Huracán Evo
Basic/cross-area topics
> Cross-model activities, including trial runs, tests and type approvals
Basic/cross-area topics > Audi System Engineering (including expansion of virtual development)
> Motorsport
Read more about our innovations and technologies
at www.audi.com, www.audi-mediacenter.com
and www.audi.com/innovation.
108
PROCUREMENT // ECONOMIC REPORT
PROCUREMENT
Changed conditions in the automotive industry plus the stra- / CREATING AND SOURCING INNOVATIONS
tegic direction of the Audi Group are also redefining the role The goal of Audi Procurement is to identify innovative suppli-
of Procurement. One priority area in the 2018 fiscal year was ers, join forces with them to turn ideas into innovations and
innovation management and cooperation with suppliers in bring these to market in our Audi models before our compet-
the advance development phase. We also made progress itors do. We ensure a close strategic dialogue with selected
with ensuring sustainability standards in our supply chain. suppliers through the Volkswagen Group initiative FAST
In addition, the emphasis in 2018 was very much on imple- (Future Automotive Supply Tracks). We also secure strategic
menting the Audi Transformation Plan (ATP) with a view to innovations by suppliers through the innovation process in-
systematically making the Company fit for the future. troduced at Audi in 2016 that makes it possible to award
In 2018, the prices of the commodities that are relevant for contracts in the early phase of product development. Our
the Audi Group rose again. To minimize fluctuations in com- long-term goal is to develop into the preferred customer of
modity prices, we fundamentally seek long-term strategic suppliers through this approach. We continued the program
solutions with our partners. In this way we want to guaran- in the 2018 fiscal year, succeeded in concluding further inno-
tee price stability and reliability of supplies. We continuously vation contracts with new partners and made series-produc-
observe the availability of resources and demand, and take tion preparations for a large number of new products.
appropriate action together with our suppliers as necessary.
The cost of materials, which also includes expenses for raw / STRENGTHENING SUSTAINABILITY IN THE
materials and supplies, as well as purchased goods and SUPPLY CHAIN
services, amounted to EUR 41,023 (40,370) million in the past We are convinced that entrepreneurial responsibility is a de-
fiscal year. The increase can be explained by higher purchase cisive factor in success, and therefore attach great importance
costs, including in connection with the volume development to a sustainable supply chain. The previous year had already
of other brands. seen us introduce a sustainability rating for suppliers with
the goal of protecting the environment and guaranteeing
/ REDUCING COMPLEXITY AND OPTIMIZING COSTS social standards. As well as a self-disclosure by our suppliers
As part of the ATP, Procurement is working intensively with based on a standardized questionnaire, the rating includes an
Technical Development to permanently reduce material, in- on-site check. We carry this out together with our partners at
vestment and indirect purchasing costs. This work package is their production locations. The check covers 12 general crite-
the biggest contributor to the overall success of the ATP. For ria in the areas of environment and social. From fall 2019,
that reason, we comprehensively analyze our products right the sustainability rating will then be elevated to the status of
from the early development phase, and also later during a major decision-making criterion for the awarding of con-
series production. In the early product development phase we tracts to all suppliers. Only suppliers that achieve a positive
place even greater emphasis on design to cost, as well as on rating have the prospect of becoming Audi partners. This will
greater standardization. The use of carry-over parts and make sustainability just as important a selection criterion as
reduced product complexity are also important courses of costs, quality, technological expertise and innovativeness.
action for optimizing the cost of materials. We employ tools We have already inspected some 1,000 partners through on-
such as benchmark and cost/value analyses here. In addition, site checks at their production locations. Back in 2013, Audi
we have also cut the costs for services and optimized capital furthermore signed up to the Aluminium Stewardship Initia-
investment on the procurement side. We tap further poten- tive (ASI) for a global sustainability standard for aluminum.
tial by pooling processes, structures and expertise Company- In 2018 we became the world’s first car manufacturer to be
wide and by using ideas generated by suppliers in joint work- awarded a sustainability certificate by the ASI. The produc-
shops as well as suggestions for improvements from our tion and assembly of the battery housing for the Audi e-tron
employees. In all measures, our focus is on premium quality are certified. Our next move will be to work towards ASI cer-
standards and customer benefit. tification with our suppliers in the upstream supply chain.
109
ECONOMIC REPORT // PRODUCTION
PRODUCTION
/ AUTOMOTIVE SEGMENT 1) // AUDI BRAND
In the 2018 fiscal year, we produced 1,864,815 (1,875,784)
Car production by model premium cars of the Audi brand.
We adjusted production operations at our sites due to the
2018 2017
switching of Audi models to the new WLTP test cycle. We
Audi A1 8,750 19,010 produced 491,262 (538,103) vehicles at our Group head-
Audi A1 Sportback 71,637 76,336 quarters in Ingolstadt. In Neckarsulm we manufactured
Audi Q2 108,454 102,084 186,196 (193,016) Audi models, fewer than in the previous
Audi A3 – 7,818 year due in part to new model launches.
Audi A3 Sportback 171,729 167,741
From January through December 2018, we built 173,734
Audi A3 Sedan 123,647 127,204
(158,543) of the second-generation Audi Q5 at our production
Audi A3 Cabriolet 9,571 10,716
Audi Q3 167,800 205,001
site at Audi México S.A. de C.V. in San José Chiapa (Mexico).
Audi TT Coupé 8,756 17,568 Over the same period, Audi Hungaria Zrt. manufactured a total
Audi TT Roadster 3,362 4,606 of 100,000 (105,491) cars at the Győr site (Hungary). The
Audi A4 Sedan 244,484 205,423 new Audi Q3 has also been built in Győr since September
Audi A4 Avant 86,548 99,505
2018 following the restructuring of our production network.
Audi A4 allroad quattro 13,591 20,379
We produced a total of 66,286 (95,288) vehicles at Audi
Brussels S.A./N.V. in Brussels (Belgium). The lower volume
Audi A5 Coupé 18,753 25,102
Audi A5 Cabriolet 12,629 17,574 compared with the previous year is mainly due to the trans-
Audi Q5 298,793 289,892 fer of production of the Audi A1 to Martorell (Spain). In addi-
Audi A6 Sedan 195,270 195,295 tion, series production of the Audi e-tron – our first fully
Audi A6 Avant 51,990 54,131 electric SUV – commenced in Brussels in the third quarter of
2018. In preparation for the series-production start in 2019,
we already built the first Audi e-tron Sportback cars at the
Audi e-tron 2,404 4
Audi e-tron Sportback 21 – end of 2018.
Audi Q7 110,099 106,847 Audi do Brasil Indústria e Comércio de Veiculos Ltda., São
Audi Q8 22,414 436 Paulo (Brazil), manufactured a total of 6,568 (5,159) cars in
Audi A8 24,541 15,854 São José dos Pinhais, near Curitiba, in the 2018 fiscal year.
Audi R8 Coupé 1,224 1,888
At the Volkswagen Group sites in Martorell (Spain) and
Audi R8 Spyder 540 1,291
Bratislava (Slovakia), 83,629 (114,372) and 131,758
Audi brand 1,864,815 1,875,784
(106,640) cars of the Audi brand left the production lines
Lamborghini Urus 2,565 121
Lamborghini Huracán 2,790 2,649 respectively. The production processes at both plants were
Lamborghini Aventador 1,216 1,286 also affected by the restructuring of our production network.
Lamborghini brand 6,571 4,056 The new Q8 is now being built in Bratislava in addition to the
Automotive segment 1,871,386 1,879,840
1) This includes 617,940 (552,659) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).
110
PRODUCTION // ECONOMIC REPORT
Audi Q7, while the new generation of the Audi A1 – which / MOTORCYCLES SEGMENT
previously came from the Brussels plant – is now built in The Ducati brand produced 53,320 (56,743) motorcycles
Martorell. worldwide in the past fiscal year. 44,221 (46,780) units
We manufactured 7,442 (6,513) cars in Aurangabad (India), were built at the company headquarters in Bologna (Italy).
another Volkswagen Group site. Ducati produced 8,150 (8,792) motorcycles at the Amphur
In the 2018 fiscal year, the associated company FAW- Pluakdaeng (Thailand) plant. In addition, 949 (1,171) bikes
Volkswagen Automotive Company, Ltd., Changchun (China), were built on a contract manufacturing basis in Manaus
produced a total of 511,177 (467,468) cars at the company (Brazil).
headquarters in Changchun and 106,647 (85,191) vehicles
in the southern Chinese city of Foshan. Production prepara- Motorcycle production
tions for new models are taking place here, too. For example,
2018 2017
the first Q2 L e-tron cars are now being built there in prepara-
tion for the start of series production in 2019. The Q2 L e-tron Scrambler 14,654 14,461
is our first electric car tailored to Chinese customers. At the Naked/Sport Cruiser
(Diavel, Monster) 10,800 17,069
new site in Tianjin, the first Audi Q3 cars were manufactured
Dual/Hyper
in preparation for its series production there starting in 2019. (Hypermotard, Multistrada) 13,728 14,357
Sport (SuperSport, Superbike) 14,138 10,856
// LAMBORGHINI BRAND Ducati brand 53,320 56,743
Automobili Lamborghini S.p.A. built 6,571 (4,056) cars of Motorcycles segment 53,320 56,743
the Lamborghini brand at its company headquarters in

Sant’Agata Bolognese (Italy) in the year under review. The
major contributor to the increase in volume year on year was Read more about the production sites of the
the series production ramp-up of the Lamborghini Urus. individual models on page 91.
// ENGINE AND MOTOR PRODUCTION

The Audi Group produced a total of 1,955,532 (1,966,434)
engines and motors for cars in the 2018 fiscal year. Of this / SIGNIFICANT EXPANSIONS AT THE GROUP SITES
total, 1,954,301 (1,965,165) units were manufactured by
Audi Hungaria Zrt. in Győr (Hungary). The figure includes // NEW DEVELOPMENTS AT THE INGOLSTADT SITE
electric motors for the electrified powertrain of the Audi e-tron, The focus of our capital investment at the Ingolstadt site is
our first fully electric SUV. Over the same period, Automobili on improving production flexibility. At the north end of our
Lamborghini S.p.A. built 1,231 (1,269) 12-cylinder engines plant in Ingolstadt, for example, we are currently construct-
in Sant’Agata Bolognese (Italy). ing a body shop with which we are introducing greater flexi-
bility into the process of managing the production volume.
Compact segment models are set to share the A4 and A5
assembly line in the future. Furthermore, it will be possible to
manufacture both models with combustion engine and ones
with alternative drives on the same assembly line in the future.
111
ECONOMIC REPORT // PRODUCTION
// EXPANSIONS AT THE NECKARSULM SITE sites. The Audi Q3 will soon be joined by an additional Győr-
In the southeast of the Neckarsulm site we are constructing built SUV model in 2019. Numerous expansion measures
a new body shop, for which we started the groundwork in were carried out in the 2018 fiscal year to accommodate the
2018. Another new building will house logistics and pre- two new models. For example, a new body shop has been
assembly zones. These structural measures will give us greater created on a site covering some 80,000 square meters.
flexibility. In addition, the new Materials Testing Technical Production of electric motors for the Audi e-tron according to
Center was inaugurated in 2018. This is where experts an innovative production concept, modular assembly, has
develop aluminum materials for lightweight construction, also commenced on a site of around 8,500 square meters.
for example. These motors are assembled using a modular approach on
various production islands. In addition, in 2018 a highly
// PRODUCTION START OF AUDI E-TRON IN efficient three-cylinder gasoline engine was added to the
BRUSSELS portfolio of combustion engines manufactured at the site.
Volume production of our first fully electric SUV – the Audi
e-tron – started at the Brussels site in 2018. Another fully // EXPANSION OF LOCAL PRODUCTION IN CHINA
electric car – the Audi e-tron Sportback – will go into produc- In partnership with FAW-Volkswagen Automotive Company,
tion there beginning in 2019. Due to these changes, we com- Ltd., Changchun (China), production capacities in China are
prehensively modernized and reorganized our production being ramped up flexibly over the next few years to over
operations. Since 2018, the site has been certified as carbon- 700,000 units annually, depending on market demand.
neutral and has been given its own battery assembly facility, Furthermore, the locally built product portfolio is to be in-
for example. As part of restructuring our production network, creased to 12 models. To that end, local production opera-
production of the Audi A1 has been transferred from Belgium tions are being expanded, including the Tianjin site. This
to Martorell (Spain). plant will build SUV models for the Volkswagen and Audi
brands. A further plant in Quingdao will also build two Audi
// FUTURE FOCUS IN HUNGARY models in the future. In addition, fully electric vehicles will
In the course of restructuring the production network, we also be locally produced in China in the future. For example,
have transferred production of the Audi Q3 from Martorell to series production of the fully electric Audi Q2 L e-tron, which
Győr (Hungary). We expect this restructuring to give us even is tailored specifically to the requirements of Chinese custom-
greater scope for exploiting synergies within the Volkswagen ers, starts in 2019. The production preparations for it already
Group and for pooling important key expertise – with the started in the 2018 fiscal year. The Audi e-tron will also be
result of further increasing our production efficiency at all produced locally in China starting in 2020.
112
DELIVERIES AND DISTRIBUTION // ECONOMIC REPORT
DELIVERIES AND DISTRIBUTION

/ AUTOMOTIVE SEGMENT 1) match the previous year's record volume. In addition to the
complexities of handling the product discontinuations and
Car deliveries to customers by model launches that the biggest model initiative in Audi history in-
volved, we faced challenging conditions in individual markets.
2018 2017
For instance, switching our entire model portfolio to the new
Audi A1 10,713 19,541 WLTP test cycle in particular negatively impacted the devel-
Audi A1 Sportback 70,800 76,184 opment in our deliveries compared with the previous year.
Audi Q2 97,091 93,483
Audi A3 997 9,166 In Western Europe, our delivery volume fell by –13.9 percent
to 693,330 (805,388) Audi vehicles. The large number of
Audi A3 Sedan 125,861 128,032
model discontinuations and launches as a result of our model
Audi A3 Cabriolet 9,688 12,594
Audi Q3 170,458 207,774
initiative as well as restrictions to the sales range due to the
Audi TT Coupé 11,539 18,901 WLTP changeover adversely affected the sales situation, espe-
Audi TT Roadster 3,102 4,998 cially in the second half of the year. Against this background,
Audi A4 Sedan 244,707 215,146 deliveries in our home market Germany also contracted. In
Audi A4 Avant 83,774 105,503
that market, we delivered 260,456 (294,544) cars to custom-
ers, representing a fall of –11.6 percent compared with the
previous year. In the United Kingdom – our biggest European
Audi A5 Coupé 20,268 25,506
Audi A5 Cabriolet 14,725 13,534 export market – a total of 143,716 (175,217) customers
Audi Q5 294,905 281,854 chose vehicles of the brand with the Four Rings in the 2018
Audi A6 Sedan 197,212 190,696 fiscal year. We consequently experienced a fall of –18.0
Audi A6 Avant 47,721 54,946 percent compared with the prior-year volume, the contrib-
uting factors including the contraction in the market as a
whole in the context of the expected Brexit. In Italy we deliv-
Audi Q7 95,768 106,004
Audi Q8 10,543 40 ered 62,256 (68,954) Audi vehicles to customers, a decrease
Audi A8 20,045 21,323 of –9.7 percent. While we delivered 51,710 (63,980) cars and
Audi R8 Coupé 1,862 1,916 therefore –19.2 percent fewer in France, our volume in Spain
Audi R8 Spyder 898 1,152 came to 53,105 (56,083) Audi models, a total of –5.3 per-
Internal vehicles before market
cent down on the prior-year figure. In Belgium, our volume
introduction 705 –
Audi brand 1,812,485 1,878,105 reached 27,996 (32,760) cars – a decrease of –14.5 percent
Lamborghini Urus 1,761 – compared with the previous year.
Lamborghini Huracán 2,780 2,642
Lamborghini Aventador 1,209 1,173 The Central and Eastern Europe region recorded deliveries of
Lamborghini brand 5,750 3,815
50,283 (55,236) Audi models from January through Decem-
Other Volkswagen Group brands 263,183 223,164
ber 2018, a decline in volume of –9.0 percent. Along with
Automotive segment 2,081,418 2,105,084
most countries in Central Europe, the development in the
Russian car market was also negative for Audi. Our deliver-
// AUDI BRAND ies in Russia decreased by –3.9 percent to 16,216 (16,876)
In the 2018 fiscal year, we delivered 1,812,485 vehicles.
(1,878,105) cars of our core brand Audi to customers world-
wide. The fall of –3.5 percent meant we were unable to
1) This includes 600,700 (545,000) delivered Audi models built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).
113
ECONOMIC REPORT // DELIVERIES AND DISTRIBUTION
In the North America region we delivered 275,012 (277,569) Audi vehicles over to customers in that country in the year
units in the same period, and almost equaled the high prior- under review – a decrease of –12.2 percent.
year level with a fall of just –0.9 percent. The 2018 fiscal
year brought a large number of model changeovers in the Over the period January through December 2018, we deliv-
United States. Despite that, with 223,323 (226,511) Audi ered a total of 739,018 (669,771) Audi vehicles to customers
models delivered, the success of our SUV models meant our in the Asia-Pacific region. The volume was therefore
deliveries figure was only –1.4 percent down on the prior- 10.3 percent up on the previous year’s already high total. In
year period. We achieved satisfying growth of 2.5 percent to our largest market China, we delivered 663,049 (597,866)
36,908 (36,007) cars in Canada. cars of the Audi brand to customers. Despite the contracting
overall market, we were able to improve on the prior-year
With 18,841 (21,864) cars, we saw deliveries in the South volume by 10.9 percent. We have therefore increased our
America region fall by –13.8 percent. The main factor at work volume five-fold since 2008 and again enjoyed the status of
here was the volume development in Brazil – our biggest premium-segment market leader in 2018. In Japan, deliver-
national market in the region. We handed 8,810 (10,035) ies of 26,479 (28,301) units were –6.4 percent below the
prior-year figure.
Market introductions of new Audi models in the 2018 fiscal year
Models Main characteristics and new features
Audi RS 4 Avant > Combines everyday usability with RS performance

(new model) > Sharper RS design (e.g. large air inlets with typical RS honeycomb structure, prominent Singleframe,
striking roof edge spoiler)
> Enhanced efficiency and reduced weight compared with predecessor model
> Phased market introduction since January 2018
Audi A7 Sportback > Four-door coupé embodies dynamic elegance in design and technology
(new model) > Clear, minimalistic formal idiom in interior complemented by new MMI touch response operating concept
> Systematic electrification of the driveline: with new mild-hybrid system as standard
> Extensive range of standard and optional driver assistance systems (e.g. intersection assist)
> Gradual market introduction since March 2018
Audi A6 Sedan > New full-size sedan embodies progress, cutting-edge technology and sophistication
(new model) > Customizable, fully digital MMI touch response system with intuitive operation
> Presentation in February 2018, gradual market introduction since July 2018
Audi A6 Avant > Combines versatility with dynamic design and driving enjoyment
(new model) > Customizable, fully digital MMI touch response system with intuitive operation
> Presentation in April 2018, gradual market introduction since September 2018
Audi Q8 > New face of the Q family with expressive design and comprehensive connectivity
(new model, > Elegant interior with MMI touch response system, high-tech navigation and innovative voice control
no predecessor)
> Systematic electrification of the driveline: new mild hybrid technology with 48-volt electrical system as
standard
> Extensive range of standard and optional driver assistance systems (e.g. intersection assist) and innovative
driver assistance systems such as remote parking pilot or remote garage pilot (expected from 2020)
> Presentation in June 2018, gradual market introduction since August 2018
Audi RS 5 Sportback > Progressive interpretation of a high-performance, five-door coupé
(new model, > Combines emotional design with everyday usability and superior driving performance
no predecessor)
> Powerful V6 biturbo engine, quattro permanent all-wheel drive as standard and RS sport suspension plus
with DRC (optional) ensure dynamic handling with outstanding traction
> Presentation in March 2018, market introduction since fourth quarter of 2018 initially in the
United States and Canada
114
Audi A1 Sportback > Distinctive, masculine design with streamlined styling plus extensive customization options
(new model) > Infotainment and driver assistance systems of full-size caliber (e.g. Audi pre sense front, lane departure
warning as standard in Europe)
> Strongly driver-oriented interior design with fully digital instrument cluster and optional MMI touch display
> Presentation in June 2018, market introduction in fall 2018 in Europe
Audi Q3 > Striking front end with octagonal-design Singleframe plus LED headlights as standard
(new model) > Excellent everyday utility thanks to longer wheelbase, variable interior configuration with sliding rear seat
> Smart infotainment with digital instrument cluster and new form of voice control as an option
> Increased comfort thanks to refined suspension and new adaptive cruise assist (optional)
> Presentation in July 2018, gradual market introduction since November 2018 in Europe
Audi SQ2 > New top model of Q2 family with striking exterior design and many sporty highlights in interior
(new model, > High-performance engine with spontaneous response and increased torque
no predecessor)
> quattro all-wheel drive as standard delivers up to 100 percent of power to rear wheels if required
> Driver assistance systems from full-size class, such as traffic jam assist and park assist (both optional)
> Presentation at end of September 2018, phased market introduction since end of December 2018
Audi models presented in the 2018 fiscal year with phased market introduction in 2019
Audi TT/TTS Coupé > Sporty, sharper exterior design with three-dimensional radiator grille and new bumpers
(product improvement) > Higher-powered engines with gasoline particulate filter, precise and dynamic handling with progressive
steering
> Extended range of standard equipment (e.g. Audi drive select and Bluetooth)
> Digital connectivity thanks to Audi connect (optional) using high-speed LTE standard and Audi smartphone
interface
> Presentation in July 2018, market introduction in first quarter of 2019 initially in Europe
Audi TT/TTS Roadster > Sporty, sharper exterior design with three-dimensional radiator grille and new bumpers
(product improvement) > Higher-powered engines with gasoline particulate filter, precise and dynamic handling with progressive
steering
> Extended range of standard equipment (e.g. Audi drive select and Bluetooth)
> Digital connectivity thanks to Audi connect (optional) using high-speed LTE standard and Audi smartphone
interface
> Presentation in July 2018, market introduction in first quarter of 2019 initially in Europe
Audi e-tron > Full-size SUV as first fully electrically powered series-production Audi model with electric all-wheel drive
(new model,
> Range of up to 417 km (to WLTP), e-tron Charging Service with access to currently over 72,000 charging
no predecessor)
points in 16 EU markets and fast-charging capability at up to 150 kW ensure high everyday suitability
> Virtual exterior mirrors as high-end option available for first time in a series-production car
> Presentation in September 2018, market introduction in first quarter of 2019 initially in Europe
Audi R8 Coupé > Fastest series-production Audi now with more sporty design and more performance
(product improvement)
> Optimized naturally aspirated engines with unique sound feature gasoline particulate filters and deliver
more power and torque
> Improvements to suspension provide even more stability and precision
> Presentation in October 2018, phased market introduction in the course of first quarter of 2019
Audi R8 Spyder > Fastest Audi convertible now with more sporty design and more performance
> Optimized naturally aspirated engines with unique sound feature gasoline particulate filters and deliver
more power and torque
> Improvements to suspension provide even more stability and precision
> Presentation in October 2018, phased market introduction in the course of first quarter of 2019
Read more online about our Audi models at
www.audi.com/models.
115
ECONOMIC REPORT // DELIVERIES AND DISTRIBUTION
// LAMBORGHINI BRAND among young customers. The United States was again the
Our Italian brand Lamborghini delivered a total of 5,750 largest single market for the Lamborghini brand in the year
(3,815) vehicles to customers in the 2018 fiscal year. The under review, followed by the United Kingdom, Japan,
substantial increase of 50.7 percent year on year represents Germany and China. Lamborghini deliveries were well up in
a new high and is based principally on the market introduc- these markets, where it also set new national records.
tion of the new Lamborghini Urus in the year under review.
The Urus is the third Lamborghini product line and has
opened the Super SUV segment. In addition, Lamborghini Read more online about our Lamborghini models
has significantly broadened its customer base with the Urus at www.lamborghini.com.
and substantially increased its brand recognition, especially
Lamborghini models presented or introduced in the period under review
Lamborghini Urus > First Super SUV of the Lamborghini brand combines off-road capability with the handling characteristics of a
(new model, supercar
no predecessor)
> Permanent all-wheel drive and all-wheel steering enable precision handling
> Carbon ceramic brakes, adaptive air suspension and active roll stabilization provide high safety and comfort
(including on long journeys)
> Luxurious interior with room for up to five people
> Gradual market introduction since summer 2018
Lamborghini Huracán Performante > Most powerful Spyder in the Huracán family
Spyder (new model)
> Hybrid aluminum and carbon fiber chassis with clear focus on lightweight construction
> Active aerodynamic system “Aerodinamica Lamborghini Attiva” (ALA) actively distributes the aerodynamic load
(for either high downforce or low drag)
> Presentation in March 2018, gradual market introduction since summer 2018
Lamborghini Aventador SVJ > Limited-edition generation of V12 top model from Lamborghini
(new model)
> New design features with focus on aerodynamic performance
> All-wheel drive, all-wheel steering and lightweight construction for technical brilliance and optimized
handling
> Presentation in August 2018, gradual market introduction from start of 2019
Lamborghini Huracán Evo > Next-generation V10 supercar takes performance of Huracán Performante to the next level
> Fully integrated Lamborghini vehicle dynamics control system combined with permanent all-wheel drive and
all-wheel steering produces even more agility and easiness to drive
> New infotainment system with ultramodern connectivity solutions
> Presentation in January 2019, gradual market introduction in spring 2019
116
// OTHER VOLKSWAGEN GROUP BRANDS In the 2018 fiscal year we brought the Ducati Panigale V4
Our multi-brand sales companies Volkswagen Group Italia onto the market, our first volume-production motorcycle
S.p.A., Verona (Italy), Audi Volkswagen Korea Ltd., Seoul with a four-cylinder engine positioned at the pinnacle of the
(South Korea), Audi Volkswagen Middle East FZE, Dubai Ducati Sport segment. All three versions of the new Panigale
(United Arab Emirates), Audi Singapore Pte. Ltd., Singapore V4 – V4, V4 S and V4 Speciale – raise the bar further still in
(Singapore), and Audi Volkswagen Taiwan Co., Ltd., Taipei, terms of performance and rideability thanks to racing exper-
delivered a total of 263,183 (223,164) vehicles of other tise and technology. We also unveiled the Panigale V4 R as
Volkswagen Group brands in the 2018 fiscal year. These the most powerful series-production motorcycle ever built by
include vehicles of the Bentley, SEAT, Škoda, Volkswagen Ducati. It will be arriving at dealers starting in 2019.
Passenger Cars and Volkswagen Commercial Vehicles brands.
In addition, since the first quarter of 2018, the new Ducati
/ MOTORCYCLES SEGMENT Panigale 959 Corse has represented the sportiest expression
Our Italian motorcycle manufacturer Ducati handed 53,004 of the Panigale 959. The successful Ducati Scrambler portfolio
(55,871) motorcycles over to customers worldwide in the has grown, expanding to include the 1100, 1100 Special and
2018 fiscal year – a decline of –5.1 percent. The Ducati brand 1100 Sport models. The new Ducati Multistrada 1260 Enduro
benefited from a positive trend in deliveries in its home mar- has also joined the Multistrada range. The year under review
ket Italy. In contrast, the volume of deliveries in the United equally saw the presentation of the second-generation
States, the largest market, fell at a time when overall market Diavel 1260 and the new Ducati Hypermotard 950, both of
demand was likewise on the retreat. In Germany, the Ducati which will be going on sale from 2019.
brand also reported a lower volume of deliveries than one
year earlier.
Read more online about our Ducati models at
Motorcycle deliveries to customers www.ducati.com.
2018 2017
Scrambler 13,137 14,055

Naked/Sport Cruiser
(Diavel, Monster, Streetfighter) 13,375 17,173
Dual/Hyper
(Hypermotard, Multistrada) 13,761 14,784
Sport (SuperSport, Superbike) 12,731 9,859
Ducati brand 53,004 55,871
Motorcycles segment 53,004 55,871
117
FINANCIAL PERFORMANCE INDICATORS // FIRST-TIME ADOPTION OF NEW ACCOUNTING STANDARDS, FINANCIAL PERFORMANCE
FINANCIAL PERFORMANCE INDICATORS

The Audi Group generated revenue of EUR 59.2 billion in the 2018 fiscal
year. The operating return on sales was significantly influenced
particularly by special items in connection with the diesel issue as well as
by supply-end distortions following the switch to the WLTP test cycle, and
came to 6.0 percent. Before special items, we achieved an operating
return on sales of 7.9 percent thanks especially to the successfully started
Audi Transformation Plan.
FIRST-TIME ADOPTION OF NEW

ACCOUNTING STANDARDS
The Audi Group has implemented all of the accounting to the designation of options resulted in a minor-extent
standards whose adoption became mandatory with effect restatement of prior-year figures. For IFRS 15, the modified
from the 2018 fiscal year. The changes involved in the first- retrospective transition method was applied. In addition,
time adoption of IFRS 9 were generally applied prospectively. expenses for individual sales programs had to be reclassified.
Retrospective adoption of the IFRS 9 requirements relating
FINANCIAL PERFORMANCE 1)
The Audi Group generated revenue of EUR 59,248 (59,789) Above all due to the new Lamborghini Urus, sales of
million in the 2018 fiscal year. vehicles of the Lamborghini brand increased revenue to
EUR 1,316 (933) million.
In the Automotive segment revenue came to EUR 58,550 In addition to cars of the Audi and Lamborghini brands, the
(59,055) million. Audi Group sells vehicles of the Bentley, SEAT, Škoda, Volks-
We generated revenue of EUR 37,259 (40,728) million wagen Passenger Cars and Volkswagen Commercial Vehicles
through sales of vehicles of our core brand Audi. Revenue brands through its own sales companies. Revenue from the
performance was held back by a temporarily limited sales sale of vehicles of these other brands developed positively
range because of the new WLTP test cycle, model change- thanks to the higher sales volume and reached EUR 4,728
overs affecting a large number of product lines and exchange (3,900) million in the 2018 fiscal year.
rate factors. Positive drivers included especially the market Under the new IFRS 9 accounting standard, results from
success of our new Audi Q8 as well as volume growth in our currency hedging transactions that had previously been
largest single market China. reported mainly under the other operating result were now
We increased revenue from engines, powertrains and parts shown within revenue in the period under review. Other
deliveries to EUR 8,326 (7,607) million, among other things changes arose in connection with sales-related payments,
due to higher proceeds from deliveries of parts sets for local which were still reported in distribution costs in the 2017
production in China. Revenue from other automotive busi- fiscal year but from 2018 are recognized as sales allowances
ness also developed positively to EUR 6,305 (5,886) million, pursuant to IFRS 15 with the effect of reducing revenue. The ef-
especially thanks to the genuine parts business. fects from the adoption of the new accounting standards
were broadly balanced out within revenue.
118
FINANCIAL PERFORMANCE // FINANCIAL PERFORMANCE INDICATORS
In the Motorcycles segment, revenue generated in connection In the 2018 reporting year, the cost of goods sold for the
with the Ducati brand amounted to EUR 699 (736) million. Audi Group totaled EUR 50,117 (50,076) million. Compared
This development was attributable mainly to the downturn with the revenue performance, this is attributable to largely
in volume, in a reflection of the negative market development. constant fixed costs following the adjustment of the produc-
tion range in connection with the switch to WLTP. The cost
Condensed Income Statement, Audi Group of goods sold also includes expenses in connection with the
diesel issue.
Higher purchase costs reflecting the growth in trading trans-
Revenue 59,248 59,789 actions with other Volkswagen Group brands as well as in-
Cost of goods sold − 50,117 − 50,076 creased direct material costs for our parts business equally
Gross profit 9,131 9,713 impacted the cost of goods sold.
Distribution costs − 4,155 − 4,925 We continue to drive forward the transformation of Audi
Administrative expenses − 696 − 682
with high investments in future topics. We are also in the
Other operating result − 751 565
midst of our model and technology initiative. Consistent
Operating profit 3,529 4,671
management of resources and further improvements to effi-
Financial result 831 46
Profit before tax 4,361 4,717
ciency in the Research and Development area are very im-
Income tax expense − 898 − 1,285 portant in that regard. Research and development activities in
Profit after tax 3,463 3,432 the 2018 fiscal year amounted to EUR 4,178 (3,809) million.
Relative to revenue, the research and development ratio came
to 7.1 (6.4) percent. An amount of EUR 1,593 (1,243) million
Key operating performance figures, Audi Group of development activities was capitalized – this represents a
capitalization ratio of 38.1 (32.6) percent. Research and devel-
EUR million 2018 2017 opment expenditure recognized as an expense declined to
EUR 3,441 (3,590) million in the period under review. The
Operating profit before special items 4,705 5,058
Special items − 1,176 − 387
amortization of capitalized development costs fell to
Operating profit 3,529 4,671 EUR 856 (1,025) million, while research and non-capitalized
Automotive segment 3,505 4,643 development costs came to EUR 2,585 (2,565) million.
Motorcycles segment 25 28
adjusted for effects of PPA 1) 49 51 The gross profit of the Audi Group reached EUR 9,131
(9,713) million in the year under review.
in % 2018 2017
Distribution costs fell to EUR 4,155 (4,925) million. The
Operating return on sales before

decrease year on year is due in part to changes in connection
special items 7.9 8.5 with IFRS 15. For example, sales-related payments were
Operating return on sales 6.0 7.8 recognized within revenue as sales allowances from the start
Automotive segment 6.0 7.9
of 2018 – these payments had still been reported under dis-
Motorcycles segment 3.6 3.8
tribution costs in the previous year. New priorities within our
adjusted for effects of PPA 1) 7.0 7.0
sales and marketing activities also had the effect of holding
Return on sales before tax 7.4 7.9
distribution costs in check.
1) Adjusted for the effects of subsequent measurement in connection with the purchase
price allocation (PPA) amounting to EUR 23 (23) million
119
FINANCIAL PERFORMANCE INDICATORS // FINANCIAL PERFORMANCE
The administrative expenses of the Audi Group were almost

on a par with the previous year at EUR 696 (682) million. Read more about the diesel issue on pages 101 ff.
The other operating result fell to EUR −751 (565) million.

Year on year, this is primarily due to expenses in connection
with the diesel issue. For example, it contains the costs of In the Automotive segment, taking into account the negative
the legally binding administrative order imposing a fine on special items, we achieved an operating profit of EUR 3,505
AUDI AG by the Munich II public prosecutor. In response to (4,643) million and an operating return on sales of 6.0 (7.9)
the new accounting standard IFRS 9, hedging transactions on percent. In addition to the special items, operating profit
the development of residual values have additionally been was influenced especially by the supply-end distortions in
recognized within the other operating result rather than in connection with the switch to the new WLTP test cycle. The
the financial result since the start of the 2018 fiscal year. In implementation of our product initiative and the model dis-
the opposite direction there were positive effects from the continuations and launches it involves also adversely
measurement of receivables and liabilities settled in foreign affected the situation. Upfront financing for future mobility
currency at the reporting date. solutions and new technologies, increased depreciation and
amortization and the restructuring of our production net-
The operating activities of the Audi Group are reflected in work equally had a negative impact on operating profit. The
operating profit before special items of EUR 4,705 (5,058) successful establishment of the Audi Transformation Plan in
million. This represents an operating return on sales before the Company had a positive impact. As a result, operating
special items of 7.9 (8.5) percent. With the adverse effect of profit for the 2018 reporting period already benefited from
special items totaling EUR −1,176 (−387) million, operating measures worth EUR 1.9 billion in terms of revenue and
profit of the Audi Group came to EUR 3,529 (4,671) million. costs; this helped us compensate for an array of negative
This corresponds to an operating return on sales of 6.0 (7.8) factors. These efforts saw us put the first successful projects
percent. The special items amounting to EUR −1,176 million into routine operation. Our currency management activities
resulted mainly from the legally binding administrative order also had a positive effect on operating profit. Following the
imposing a fine in connection with the diesel issue. They also ramping-up of our production operations in Mexico, we are
reflect spending for technical measures, customer measures now also capitalizing on the natural hedge in the U.S. dollar
as well as expenses and provisioning for legal risks. In the region. The adoption of the new accounting standards had a
prior-year period, the special items affecting profit or loss negative overall effect on operating profit.
from the diesel issue amounted to EUR −387 million and
related to updated measurement assumptions following the In the Motorcycles segment, the fall in volume was the dom-
settlement agreements in North America. Special items inant factor shaping operating profit, which came to EUR 25
reflect certain matters in the financial statements in cases (28) million. This represents an operating return on sales of
where we believe their separate disclosure, based on our 3.6 (3.8) percent. After adjusting for the effects of subse-
assessment, permits a more accurate evaluation of the eco- quent measurement in connection with the purchase price
nomic performance of the Audi Group. allocation of EUR 23 (23) million, operating profit reached
EUR 49 (51) million and the operating return on sales
7.0 (7.0) percent.
120
FINANCIAL PERFORMANCE // FINANCIAL PERFORMANCE INDICATORS
Financial result, Audi Group the investments accounted for using the equity method in
There Holding B.V., Rijswijk (Netherlands), as a result of
the participation of a new investor in the mapping services
Result from investments accounted for company HERE.
using the equity method 261 526
of which FAW-Volkswagen
Automotive Company, Ltd. 171 301
The Audi Group posted a profit before tax of EUR 4,361
of which Volkswagen Automatic (4,717) million in the 2018 fiscal year. The return on sales
Transmission (Tianjin) Company before tax was 7.4 (7.9) percent. After deduction of income tax
Limited 176 86
of which SAIC Volkswagen
expense, we generated a profit of EUR 3,463 (3,432) million.
Automotive Company Ltd. 21 −
of which There Holding B.V. − 106 121
Return on investment, Audi Group
Net interest result 118 − 39
Other financial result 452 − 441 EUR million 2018 2017
of which brand settlement/
performance-related income, Operating profit after tax 2,471 3,270
China business 1) 540 271
Invested assets (average) 24,829 22,659
of which dividend from FAW-Volkswagen
Automotive Company, Ltd. 2) 162 − Return on investment (ROI) in % 10.0 14.4
of which China business 3) 1,071 658
1) Financial brand settlement agreed between AUDI AG and Volkswagen AG, Wolfsburg, The return on investment (ROI) expresses the return achieved
and performance-related income for China business in connection with associated
companies on the capital employed. We obtain this indicator by deter-
2) Share of available-for-sale assets
3) Includes the items FAW-Volkswagen Automotive Company, Ltd., Volkswagen Automatic
mining the ratio of operating profit after tax to average in-
Transmission (Tianjin) Company Limited, SAIC Volkswagen Automotive Company Ltd., vested assets. The return on investment for the Audi Group
brand settlement/performance-related income for China business and dividend from
FAW-Volkswagen Automotive Company, Ltd. consequently reached 10.0 (14.4) percent in the 2018 fiscal
year, and therefore exceeded our minimum rate of return of
9 percent for invested assets. Year on year, the development
The financial result of the Audi Group showed an increase to in return on investment is largely attributable to the lower
EUR 831 (46) million in the past fiscal year. The result from operating profit after tax because of the special items from
our China business increased to EUR 1,071 (658) million. the diesel issue. Our ongoing product and technology initia-
This was also influenced positively by the restructuring of tive as well as higher inventories were reflected in the higher
participations in connection with our shares in FAW-Volks- level of invested assets. That, too, weighed on ROI. Operat-
wagen Automotive Company, Ltd., Changchun (China), and ing profit after tax of the Audi Group for the year under re-
the associated dividend. The restructuring of participations view reached EUR 2,471 (3,270) million. The standardized
means the financial performance is now reported largely average tax rate for the Volkswagen Group of 30 percent was
within the brand settlement for China business and therefore assumed for this purpose. The average invested assets came
under the other financial result. to EUR 24,829 (22,659) million and are calculated from the
asset items on the balance sheet that serve the core business
The adoption of IFRS 9 had a positive impact on the financial purpose (intangible assets, property, plant and equipment,
result. In the 2018 fiscal year, hedging transactions for mat- leasing and rental assets, investment property, inventories
ters such as developments in residual values were reported and receivables) less non-interest-bearing liabilities (trade
under the other operating result instead of under the other payables and advances received). The average of the value
financial result. of invested assets at the start and the value of the invested
In addition, there had been a positive non-recurring effect assets at the end of the fiscal year is then calculated.
amounting to EUR 183 million in the prior-year period from
121
FINANCIAL PERFORMANCE INDICATORS // NET WORTH
NET WORTH
The balance sheet total of the Audi Group as of December 31, The equity of the Audi Group as of December 31, 2018, rose
2018, rose to EUR 65,598 (63,680) million. to EUR 29,698 (28,171) million. The consolidated net profit
remaining after the transfer of profit in accordance with IFRS
Condensed Balance Sheet, Audi Group increased retained earnings by EUR 2,286 million. The devel-
opment in equity was held back by the measurement effects
EUR million Dec. 31, 2018 Dec. 31, 2017
to be recognized with no effect on profit or loss under IFRS
Non-current assets 32,393 29,469 rules, which led overall to a decrease in equity of
Current assets 33,205 33,846 EUR −852 million. These result primarily from fluctuations in
Available-for-sale assets − 365 the market value of hedge-effective currency hedging instru-
Balance sheet total 65,598 63,680 ments mainly in connection with the revaluation of the U.S.
Equity 29,698 28,171
dollar as well as the pound sterling and the Chinese renminbi
Liabilities 35,900 35,509
against the euro. The equity ratio of the Audi Group as of
of which non-current liabilities 14,549 14,301
December 31, 2018, was 45.3 (44.2) percent. It expresses
of which current liabilities 21,351 21,208
Balance sheet total 65,598 63,680 equity as a percentage of the balance sheet total as of
December 31 of the respective fiscal year.
As of the end of 2018, non-current assets of the Audi Group As of the end of 2018, the Audi Group’s non-current liabili-
totaled EUR 32,393 (29,469) million. The increase stems ties of EUR 14,549 (14,301) million were virtually on a par
especially from the development in other financial assets to with the prior-year level.
EUR 5,742 (4,940) million. Above all because of the capital-
ized development costs balance sheet item, intangible assets The current liabilities of the Audi Group as of December 31,
increased to EUR 7,585 (6,785) million. Property, plant and 2018, grew to EUR 21,351 (21,208) million mainly because
equipment also rose to EUR 14,293 (13,660) million. The of the rise in trade payables to EUR 8,565 (7,313) million.
balance sheet item of investments accounted for using the Other financial liabilities as of the end of 2018 showed a
equity method reflects the acquisition of 1 percent of the movement in the opposite direction to EUR 4,067 million,
shares in SAIC Volkswagen Automotive Company, Ltd., compared with EUR 4,928 million as of December 31, 2017.
Shanghai (China), in the fiscal year. These include a liability in connection with the upcoming
profit transfer to Volkswagen AG, Wolfsburg, for the 2018
Total capital investments in the 2018 fiscal year rose to fiscal year.
EUR 5,552 (5,235) million.
In the 2017 fiscal year, the balance sheet item “Available-
Current assets at December 31, 2018, were almost on a par for-sale assets” relates to the following two matters: In
with the previous year at EUR 33,205 (33,846) million. Lower December 2017, contracts for the sale of a combined
cash funds of EUR 9,309 (11,273) million were the main 3.9 percent of the shares in There Holding B.V., Rijswijk
reason for the fall in current assets. The drivers included a (Netherlands), were signed between the Audi Group and
partial change in the investment horizon. In addition, the Robert Bosch Investment Nederland B.V., Boxtel (Nether-
fine imposed under the administrative order by the Munich II lands), and Continental Automotive Holding Netherlands
public prosecutor in connection with the diesel issue led to a B.V., Maastricht (Netherlands).
cash requirement of EUR -800 million. On the other hand, In addition, the sale of 5 percent of the shares in FAW-Volks-
inventories of EUR 9,406 (7,893) million showed an increase wagen Automotive Company, Ltd., Changchun (China), was
on the previous year. This change is attributable to such factors negotiated with Volkswagen AG, Wolfsburg.
as the measures taken to manage inventories for our sales
and retail organization in connection with WTLP.
122
NET WORTH, FINANCIAL POSITION // FINANCIAL PERFORMANCE INDICATORS
The above transactions were approved by the respective As of January 1, 2019, the Audi Group will for the first time
government agencies in the 2018 year under review and recognize leases according to the rules of IFRS 16. Due to the
successfully completed. first-time recognition of rights of use and the corresponding
lease liabilities, the balance sheet total will increase by
around 1 percent after preliminary calculations.
FINANCIAL POSITION 1)
/ PRINCIPLES AND GOALS OF The cash used for investing activities attributable to operating
FINANCIAL MANAGEMENT activities came to EUR 4,871 (1,861) million in 2018. The
Our overriding financial goal is to ensure the solvency and prior-year period was influenced by a positive non-recurring
financing of the Audi Group at all times, while at the same effect in connection with the transfer of the minority interest
time achieving a suitable return on the investment of surplus in Volkswagen International Belgium S.A., Brussels (Belgium),
liquid funds. To that end, we identify cash flows in a multi- to Volkswagen AG, Wolfsburg, totaling EUR 3,278 million.
stage liquidity planning process and consolidate them at Despite high investments in the future of the Audi Group and
Audi Group level. The material companies of the Audi Group the continuing product initiative, we reduced capex – which
are included in the cash pooling of the Volkswagen Group. also contains investment property and other intangible assets
This permits the efficient handling of intra-Group and exter- (without capitalized development costs) – to EUR 3,493
nal transactions, and also reduces transaction costs for the (3,872) million. The 2018 fiscal year consequently saw us
Audi Group. invest principally in manufacturing structures for the pro-
duction start of our new models, and in the expansion and
conversion of our sites – a new body shop is being built in
Read more about the principles and goals of Ingolstadt, for example. We also started to bring our new
financial management, and in particular about products – such as the Audi A6, the Audi A7 and also the
financial opportunities and risks, in the report Audi Q3 – onto the markets. In addition, series production of
on risks and opportunities on pages 150 ff. the Audi e-tron – our first fully electric full-size SUV – got under
way and initial preparations were made for the series produc-
tion start of the Audi e-tron Sportback in 2019. The ratio of
/ FINANCIAL SITUATION capex in the year under review of 2018 came to 5.9 (6.5)
The Audi Group generated cash flow from operating activities percent. This expresses capex in relation to revenue.
of EUR 7,013 (6,173) million in the 2018 fiscal year. The in- In terms of segments, EUR 5,018 (5,047) million of invest-
crease was achieved essentially through our working capital ments in property, plant and equipment, investment property
management. Higher inventories contrasted with optimized and intangible assets (including capitalized development
management of liabilities. As expected, cash used in connec- costs) was for the Automotive segment and EUR 69 (69)
tion with the diesel issue of around EUR 1.2 billion impacted million for the Motorcycles segment.
cash flow from operating activities unfavorably. This figure
reflects the outflows for provisions drawn on, as well as tem-
porary inventory effects within working capital.
123
FINANCIAL PERFORMANCE INDICATORS // FINANCIAL POSITION
The investing activities attributable to operating activities obligations in the form of contingent liabilities and financial
also include capitalized development costs amounting to guarantees amounting to EUR 289 (281) million.
EUR 1,593 (1,243) million. The increase compared with the
prior-year period highlights the high product-related upfront
spending on the future of Audi. In the year under review, the Read more about other financial obligations and
acquisition and sale of participations totaled EUR 136 (3,190) contingent liabilities in the Notes to the Consolidated
million. In the 2017 fiscal year, the Audi Group had transferred Financial Statements under Note 42 and Note 39.
its minority interest in Volkswagen International Belgium

S.A., Brussels (Belgium), to Volkswagen AG, Wolfsburg, thus
generating a payment flow of EUR 3,278 million. Condensed Cash Flow Statement, Audi Group

From January through December 2018, we generated an over-
all net cash flow of EUR 2,141 (4,312) million. The figure was Cash and cash equivalents at beginning
once again clearly positive despite the cash used in connec- of period 11,255 11,395
tion with the diesel issue and substantial investments.

Cash flow from operating activities 7,013 6,173
Investing activities attributable to
Taking account of changes in cash deposits and loans extended, operating activities 1) − 4,871 − 1,861
the total cash flow from investing activities came to of which capital expenditure 2) − 3,493 − 3,872
EUR −7,169 (−5,498) million. The changes in cash deposits and of which capitalized development
costs − 1,593 − 1,243
loans extended in the year under review also include loans of which acquisition and sale of
extended to affiliated companies of the Volkswagen Group. participations 3) 4) 136 3,190
Net cash flow 2,141 4,312
Change in cash deposits and loans
Cash flow from financing activities amounted to extended 4) − 2,297 − 3,637
EUR −2,564 (−524) million. It comprises for example the Cash flow from investing activities − 7,169 − 5,498
profit transfer to Volkswagen AG, Wolfsburg, of Cash flow from financing activities − 2,564 − 524
EUR 2,406 million. In the previous year this item contained Change in cash and cash equivalents due
to changes in exchange rates 16 − 292
returns on the capital injection into AUDI AG by
Volkswagen AG, Wolfsburg, amounting to EUR 459 million. Change in cash and cash equivalents − 2,705 − 140
As of the balance sheet date, cash funds showed a decrease Cash and cash equivalents at end of
period 8,550 11,255
to EUR 8,550 (11,255) million.
1) The item also includes other cash changes of EUR 79 (64) million.
2) This includes investments in property, plant and equipment, investment property and
The net liquidity of the Audi Group as of December 31, 2018, other intangible assets.
3) Including changes in capital
amounted to a total of EUR 20,442 (20,788) million. This 4) For reasons of internal management, the disposal of the minority interest in
sum includes an amount of EUR 98 (126) million on deposit Volkswagen International Belgium S.A., Brussels (Belgium), in the amount of
EUR 3,278 million and the related long-term loan extended to Volkswagen AG were
at Volkswagen Bank GmbH, Braunschweig, mainly for the reported gross in the 2017 fiscal year.
financing of independent dealers and which is only available

to a limited extent. Furthermore, as of December 31, 2018, EUR million Dec. 31, 2018 Dec. 31, 2017
the Audi Group had committed but currently unused external

Cash funds as per Cash Flow
credit lines amounting to EUR 349 (282) million. Statement 8,550 11,255
Fixed deposits, securities and loans
extended 12,319 10,180
Other financial obligations, which comprise ordering com-
Gross liquidity 20,869 21,435
mitments in particular, totaled EUR 4,758 (4,883) million as Credit outstanding 5) − 427 − 647
of December 31, 2018. There were other off-balance-sheet Net liquidity 20,442 20,788
5) Current financial liabilities and non-current financial liabilities
124
AUDI AG (SHORT VERSION ACCORDING TO GERMAN COMMERCIAL CODE, HGB)
AUDI AG (SHORT VERSION ACCORDING TO

GERMAN COMMERCIAL CODE, HGB)
Despite a difficult environment, AUDI AG revenue for the 2018 financial
year came to EUR 50.2 billion. Reflecting the negative impact of special
items from the diesel issue, AUDI AG generated
profit before tax of EUR 1.7 billion.
FINANCIAL PERFORMANCE
AUDI AG generated revenue of EUR 50,203 (51,402) million AUDI AG posted a gross profit of EUR 4,316 (5,691) million
in 2018. Revenue from the sale of cars of the Audi brand came for the past fiscal year.
to EUR 36,907 (38,833) million. The main positive factor
was the market success of the new Audi Q8. At the same Distribution costs were reduced to EUR 3,425 (3,725) mil-
time, revenue performance was held back by a temporarily lion through such factors as our priorities within sales and
limited sales range because of the new WLTP test cycle, marketing activities.
model changeovers affecting a large number of product lines
and exchange rate factors. Administrative expenses increased to EUR 385 (361) million.
Within other automotive business, in particular higher reve-
nue from deliveries of parts sets for local production in China The other operating result of AUDI AG fell to EUR 1,350
made a positive contribution to the revenue performance. (1,431) million in the past fiscal year. Especially the expenses
in connection with the diesel issue were in evidence in the
Condensed Income Statement, AUDI AG other operating result. Positive effects were generated by
the sale of shares in FAW-Volkswagen Automotive Company,
Ltd., Changchun (China), to Volkswagen AG, Wolfsburg,
Revenue 50,203 51,402 among other things by way of a restructuring of participations
Cost of goods sold – 45,887 – 45,711 as well as by a better result for the settlement of foreign cur-
Gross profit 4,316 5,691 rency hedges.
Distribution costs – 3,425 – 3,725
Administrative expenses – 385 – 361
AUDI AG generated a financial result of EUR –192 (521) million
Other operating result 1,350 1,431
in the 2018 fiscal year. The net interest result declined, in
Financial result – 192 521
particular reflecting the change in the actuarial interest rate
Income tax expense – 568 – 1,151 applied in measuring pension obligations. The investment
Profit transferred under a profit transfer result also fell.
agreement – 1,096 – 2,406
Net profit for the year – –
As a result of the effects presented here, AUDI AG posted a
profit before tax of EUR 1,664 (3,557) million. The figure
The cost of goods sold was almost on a par with the previous also includes special items for the diesel issue amounting
year at EUR 45,887 (45,711) million. Lower production mate- to EUR –1,176 (–387) million. After deduction of income tax
rial and other direct costs than in the previous year contrasted expense, AUDI AG earned EUR 1,096 (2,406) million. Conse-
with higher research and development costs in particular. quently, the return on sales after tax was 2.2 (4.7) percent.
The cost of goods sold additionally included expenses in con-
nection with the special items from the diesel issue, which
were at the previous year’s level.
125
NET WORTH
The balance sheet total of AUDI AG as of December 31, Borrowed capital (including deferred income) was at the pre-
2018, was at the previous year’s level at EUR 39,492 vious year’s level at EUR 25,784 (25,604) million. Provisions
(39,312) million. rose due to such factors as measurement-related higher pro-
visions for pensions, whereas liabilities fell among other rea-
Fixed assets rose to EUR 16,772 (16,425) million – especially sons because of the lower profit transfer to Volkswagen AG,
as a result of higher property, plant and equipment. Wolfsburg.
In the 2018 fiscal year, the total capital investments of Condensed Balance Sheet, AUDI AG
AUDI AG came to EUR 3,316 (3,070) million.
The development in current assets (including deferred ex- Fixed assets 16,772 16,425
penses) to EUR 22,720 (22,887) million is attributable espe- Current assets incl. deferred
expenses 22,720 22,887
cially to lower liquid assets and lower receivables. By con-
Balance sheet total 39,492 39,312
trast, inventories rose in connection with measures taken to
Equity incl. special reserve with an
manage inventories for our sales and retail organization in equity portion 13,708 13,708
conjunction with the new WLTP test cycle. Provisions 17,341 16,317
Liabilities incl. deferred income 8,443 9,287
Balance sheet total 39,492 39,312
Equity including the special reserve with an equity portion
came to EUR 13,708 (13,708) million as of December 31,
2018. This represents an equity ratio for AUDI AG of
34.7 (34.9) percent.
FINANCIAL POSITION
AUDI AG generated a cash flow from operating activities total- Conversely, the driver of the decrease compared with the
ing EUR 5,021 (2,582) million in the 2018 fiscal year. Posi- previous year was the sale of shares in FAW-Volkswagen
tive effects from working capital management in particular Automotive Company, Ltd., Changchun (China), to Volks-
contrasted with the lower profit before tax. The figure also wagen AG, Wolfsburg, in the course of the restructuring of
includes cash outflows in connection with the diesel issue – participations. The net cash flow before the change in cash
these were approximately at the previous year’s level. deposits in marketable securities came to EUR 2,676 (–467)
million, with the result that all investments were financed
In the same period, the cash used in investing activities from own resources. Including cash deposits in securities,
attributable to operating activities, excluding the change in the cash used in investing activities came to EUR 2,003
securities, amounted to EUR 2,345 (3,049) million. The (3,176) million, leading to a net cash flow of EUR 3,018
investment focus in the 2018 fiscal year was above all on (–594) million. Net liquidity as of December 31, 2018, was
manufacturing structures for the production start of our new EUR 12,446 (12,679) million.
models, and on the expansion and conversion of our sites.
126
PRODUCTION
In the 2018 fiscal year, AUDI AG produced 1,228,189 It also manufactured a total of 639,480 (560,150) parts
(1,295,792) cars of the Audi brand. sets for local production in China.
DELIVERIES AND DISTRIBUTION

In the past fiscal year, 1,812,485 (1,878,105) cars of the were handed over to customers. Deliveries to international
Audi brand were delivered to customers worldwide. In the customers dropped to 1,552,029 (1,583,561) cars.
home market Germany, a total of 260,456 (294,544) vehicles
EMPLOYEES
Workforce, AUDI AG In the 2018 fiscal year, AUDI AG had an average of 61,289
(60,963) employees. As of the end of the year, the workforce
Average for the year 2018 2017
increased to 61,497 (61,172) employees. The year-on-year
Ingolstadt plant 42,784 42,498 rise is mainly attributable to the many product launches for
Neckarsulm plant 16,029 15,995 our model initiative. We also hired further experts for our
Employees 58,813 58,493 strategic future areas such as electric mobility, digitalization
Apprentices 2,476 2,470 and autonomous driving.
Workforce 1) 61,289 60,963
1) Of these, 1,732 (1,304) were in the passive stage of their partial retirement.
RESEARCH AND DEVELOPMENT

On average, 11,108 (10,823) people were employed in the Research and development activities came to EUR 3,796
Research and Development area of AUDI AG in the past fiscal (3,401) million.
year.
PROCUREMENT
The cost of materials for AUDI AG fell to a total of EUR 35,595
(37,358) million in the 2018 fiscal year, partly as a result of
the reduction in volume.
REPORT ON RISKS AND

OPPORTUNITIES
In essence, the risks and opportunities affecting the busi-
ness performance of AUDI AG are the same as for the Read more about the risks and opportunities of
Audi Group. the Audi Group on pages 144 ff.
127
SUSTAINABILITY ASPECTS // SUSTAINABILITY ROADMAP
SUSTAINABILITY ASPECTS
To us, sustainability means future viability. We take economic, social and
ecological aspects into account when making corporate decisions. Our
ambition is to act in a comprehensively responsible manner. That applies
to our products and services, the entire value chain and our responsibility
for our employees.
SUSTAINABILITY ROADMAP
For us, sustainable action means considering both the imme- > BEV (Battery Electric Vehicle)/
diate and long-term consequences of our decisions. Economic FCEV (Fuel Cell Electric Vehicle)
success, environmental compatibility and social responsibil- > Viable combustion engines
ity are equally important. We therefore developed our Sus- > Responsibility in the value chain
tainability Roadmap in the year under review. Through it, we > Circular economy/resources
are detailing our goals and benchmarks. Our Sustainability
Roadmap places the spotlight on goals relating to climate, The action areas are underpinned by a variety of projects.
health and the circular economy/conservation of resources. In addition, the sustainability projects are closely linked
to the future Audi product range. In the first instance the
Goals and action areas of the Sustainability Roadmap roadmap focuses on our products and value creation pro-
cesses, but will soon be widened to include additional social
Sustainability Roadmap areas of focus.
Goals Circular / BEV/FCEV

economy/
Climate Health
conservation of With the BEV/FCEV action area, we are pushing the further
Action areas resources
development of alternative drive concepts. For example, we
are systematically expanding our product portfolio and the
BEV/FCEV
accompanying system offerings in the direction of electrifica-
tion. As well as fully electric models (BEV), we also offer
Viable
combustion part-electrified vehicles, for example with plug-in hybrid
engines
drive or 48-volt main electrical system. By 2025, the goal is
Responsibility in for one in three Audi models delivered to be electrified. The
the value chain
Audi e-tron presented in the year under review and available
Circular from the first quarter of 2019 will be joined by the
economy/ Audi e-tron Sportback in the same year. A little later on, we
resources
will be bringing the series-production version of the four-
door coupé Audi e-tron GT concept onto the market. Other
Specific key figures are defined for the individual goals and all-electric vehicles will follow. We also continue to expand our
their attainment will be consistently monitored over the portfolio of models with plug-in hybrid drive. The general
coming years. Based on these goals, we have defined the fol- objective is a significant reduction in our vehicle fleet’s CO2
lowing main action areas: emissions.
128
SUSTAINABILITY ROADMAP // SUSTAINABILITY ASPECTS
As part of our holistic approach to electric mobility, we also depending on engine version, to enter the start/stop range
promote the further development of charging technologies from speeds as high as 22 kilometers per hour.
and the charging infrastructure. For example, to comple-
ment our product range we are developing a comprehensive Alongside innovative and sustainable drive technologies, there
network of fast-charging stations together with other manu- is also scope for carbon-neutral synthetic fuels to improve our
facturers through IONITY GmbH, Munich. By 2020, there are vehicles’ emissions. As well as Audi e-gas, which we have been
to be around 400 stations installed along Europe’s main producing in Werlte, north Germany, since 2013, these include
transport routes. At the end of 2018 there were already the manufacture of Audi e-diesel. In addition, we are working
around 40 fast-charging stations in operation, and many on the development of renewable gasoline fuels and reached a
more under construction. These stations reduce charging major milestone for Audi e-gasoline in 2018. For the first time,
time significantly compared with existing charging solutions. together with our development partner Global Bioenergies
By offering the new e-tron Charging Service to coincide with S.A., Evry (France), we produced a sufficient quantity of the
the market launch of the Audi e-tron, we are also providing renewable fuel for initial engine tests.
access to currently about 80 percent of all public charging
stations in Europe. That means more than 72,000 charging // CO 2 EMISSION STATISTICS FOR AUDI MODELS
points at present. In addition, the Volkswagen Group is setting According to provisional figures released by the European
up a total of 2,000 fast-charging stations along major traffic Commission, the average CO2 emissions figure for newly
routes in the United States via its subsidiary Electrify America registered Audi vehicles in the European Union (EU 28 1)) in
LLC, Reston (United States). This move is a component of 2017 was 126 g/km. Based on our provisional calculations,
the settlement agreement with the authorities in the United the average CO2 emissions of newly registered Audi vehicles
States as a consequence of the diesel issue. The first 500 in the EU 28, calculated in the NEDC, is expected to be
stations are expected to go into service in 2019. around 129 g/km in 2018 2). The year-on-year increase is
mainly attributable to shifts in the model portfolio driven by
A green electricity offering for our customers is another supply and demand. The reasons for this include the model
building block that will help us to cut the life-cycle emissions changeover of the Audi A1 and a lower share of vehicles with
of our electric vehicles still further and promote emission-free diesel engine. For the 2019 fiscal year, we anticipate lower
mobility as part of an environmentally friendly ecosystem. CO2 emissions from newly registered Audi vehicles in the
European Union following the market introduction of the
The development of an environmentally friendly fuel cell Audi e-tron and of further plug-in hybrid models.
vehicle (FCEV) is also part of this action area. A small series is
planned for the start of the next decade. As part of the prep- / RESPONSIBILITY IN THE VALUE CHAIN
arations for it, we are steadily expanding our competence
center for fuel cell technology in Neckarsulm. For this tech- // SUSTAINABILITY IN THE SUPPLY CHAIN
nology – where hydrogen serves as the energy source – Audi In our supply chain we have also set ourselves the goal of
has development responsibility within the Volkswagen Group. rendering CO2 emissions transparent and reducing them over
the long term. In the previous year we had therefore already
/ VIABLE COMBUSTION ENGINES introduced a sustainability rating for suppliers with the goal
As well as developing electric cars, we believe it is important to of protecting the environment and ensuring social standards.
continue development work on our conventional drive concepts In addition to a self-disclosure based on a standardized
to create a comprehensive range for sustainable mobility. For questionnaire, we actively conduct an on-site check at the
example, in addition to the Audi A8, the new generations of
the Audi A6 and A7 which appeared in the year under review 1) For 2017: EU28 including Iceland; for 2018: EU28 including Norway and Iceland
2) Provisional internal calculations for 2018 subject to confirmation by the EU. Based on
as well as the new Audi Q8 are equipped with mild-hybrid regulation UN ECE R83/101 on the measurement of CO2 emissions. According to
EU Directive 1999/94/EC relating to the availability of consumer information on fuel
technology as standard, and in some cases have a 48-volt
economy, the official fuel consumption must be stated as determined by the approval
main electrical system. The 48-volt main electrical system authorities under the type approval procedure pursuant to Directive 80/1268/EEC,
taking the UN-specified type approval approach of the NEDC (New European Driving
opens up completely new potential for improving efficiency. Cycle) as the basis. Differences may occur in everyday practical operation as a result,
for example, of different speed profiles, payloads or auxiliary systems, because not all
The benefits of this technology include the ability to coast at
possible factors influencing consumption have been standardized for the type approval
speeds of between 55 and 160 kilometers per hour and, approach.
129
SUSTAINABILITY ASPECTS // SUSTAINABILITY ROADMAP
production location together with the supplier. The check co- // EMISSIONS REDUCTION AND RESOURCE
vers 12 general criteria in the areas of environment and so- EFFICIENCY
cial. From fall 2019, the sustainability rating will then be ele- Our site-based environmental activities focus on reducing
vated to the status of a major decision-making criterion for the ecological footprint of automotive manufacturing. To
the awarding of contracts to all suppliers. Only suppliers that this end, the Audi Group has set itself ambitious targets for
achieve a positive rating have the prospect of becoming Audi the sparing use of resources. For example, by 2025 we want
partners. This will make sustainability just as important a se- to reduce the environmental impact of Audi production sites
lection criterion as costs, quality, technological expertise and by 35 percent per vehicle produced compared with the refer-
innovativeness. ence year 2010. We apply the following five key performance
By joining the “Global Battery Alliance” back in 2017 – a plat- indicators (KPI):
form for cooperation with the goal of promoting a sustainable > CO2 emissions (kg/vehicle)
battery supply chain – Audi took a major step towards sus- > Energy consumption (kWh/vehicle)
tainability for the age of electric mobility. > Solvent and VOC emissions (kg/vehicle)
> Water consumption (m³/vehicle)
> Volume of waste (kg/vehicle)
// ENVIRONMENTAL MANAGEMENT
The environmental management systems implemented at our
The changes in the key performance indicators over the refer-
sites target, among other things, the effective and efficient
ence period are combined into the overall indicator “environ-
use of the resources required and are intended to promote a
mental impact reduction in Production” as the measure of
culture of innovation aimed at making our products and pro-
target attainment. In 2018, we already succeeded in reducing
cesses environmentally acceptable. With that objective in
environmental impact by just under 24 percent as against the
mind, we have installed the rigorous environmental manage-
reference year 2010. Compared with the previous period, for
ment system of the European Union, EMAS (Eco-Management
the indicators disclosed we have switched from an absolute
and Audit Scheme), at many European automotive plants of
figure to a figure relative to the vehicles produced because
the Audi Group. The Ingolstadt, Neckarsulm, Győr (Hungary),
this approach allows a clearer assessment of how the figures
Brussels (Belgium) and Sant’Agata Bolognese (Italy) sites
have developed. This enables us to observe how effective our
also meet the requirements of energy management systems
emissions reduction and resource efficiency measures are.
according to ISO 50001, which sets high standards for sys-
tematic and continuous reductions in energy consumption.
Environmental structural data 1)
Furthermore, our plants in Neckarsulm, Győr, Sant’Agata
Bolognese and our motorcycle plant in Bologna (Italy) as 2018 2017
well as our Mexican plant in San José Chiapa are accredited
CO2 emissions 2) kg/veh. 599 660
under the worldwide ISO 14001 environmental management
Energy consumption 3) kwh/veh. 2,678 2,647
standard. The same accreditation has been received for the
VOC emissions 4) kg/veh. 1.06 1.31
Volkswagen Group production sites that we use in Bratislava Water consumption m3/veh. 3.98 3.78
(Slovakia), Martorell (Spain), São José dos Pinhais (Brazil) Volume of waste 5) kg/veh. 6.16 9.33
and Aurangabad (India) as well as for the Changchun and 1) Ingolstadt, Neckarsulm, Brussels, Győr, San José Chiapa, Sant’Agata Bolognese sites;
2018 figures provisional
Foshan plants of the associated company FAW-Volkswagen 2) This figure is made up of CO2 emissions generated by the use of fuel at the plant, and
Automotive Company, Ltd., Changchun (China). CO2 emissions produced by the operation of test rigs.
3) Total electrical energy, heat, fuel gases for production processes and externally
Back in 2014, we were the first premium car manufacturer to supplied refrigeration
4) VOC emissions (volatile organic compounds): This figure is made up of emissions from
start disclosing our corporate carbon footprint and obtaining
the paint shops, test rigs and other facilities.
its certification in accordance with ISO 14064. This process 5) Excluding non-production-specific waste
involves disclosing our Company-wide greenhouse gas emis-

sions along the entire value chain so that we can analyze
them even more specifically and reduce them further.
130
SUSTAINABILITY ROADMAP // SUSTAINABILITY ASPECTS
In the year under review, we achieved certification of the N.V., Brussels (Belgium), in the year under review, we are
first carbon-neutral Audi plant for the Brussels (Belgium) developing a closed cycle for high-voltage battery components.
site in parallel with the series-production start of the The objective of this is to be able to keep reusing batteries.
Audi e-tron. Through 2030, our goal is to achieve vehicle In this way, especially valuable materials could then be re-
production certified as carbon-neutral at all our sites. trieved from a commodity bank at the end of their life cycle
and incorporated into new products.
Another important step towards making our sites environ-
mentally friendly is the multi-stage reprocessing method for Furthermore, for aluminum processing Audi is cooperating
waste water at our plant in Mexico. This has enabled us to with a variety of stakeholders with the goal of establishing
make our production operations completely waste water-free intelligent material cycles along the supply chain in order to
since 2018. Our long-term vision for all Audi sites worldwide minimize environmental risks and prevent wasting resources.
is to avoid generating any waste water in production. Back in 2013, Audi signed up to the Aluminium Stewardship
Initiative (ASI) for a global sustainability standard for alumi-
In addition to the ongoing optimization of our processes, for num. In 2018 we became the first automotive manufacturer
the environmental activities at our sites we also place the in the world to receive a sustainability certificate from the
focus on energy-saving measures when planning production ASI for the sustainable production of the aluminum compo-
and supply facilities, buildings and when defining logistics nents in the battery housing for the Audi e-tron. Our next
processes. move will be to assure sustainability in the upstream supply
chain for these components and to work specifically with
// EMISSIONS TRADING partners that also have ASI certification.
The third trading period in the EU-wide trading of CO2 emission
rights has been running since 2013. This phase ends in 2020. / AUDI ENVIRONMENTAL FOUNDATION
The Ingolstadt, Neckarsulm, Brussels and Győr (Hungary) Audi Stiftung für Umwelt GmbH, Ingolstadt – the Audi Envi-
sites are subject to EU emissions trading rules. Unused certif- ronmental Foundation – is an active supporter of research in
icates from previous years are sufficient to minimize the risk new technologies and scientific methods for a livable future.
of a future shortfall in cover during the third trading period It was established by AUDI AG in 2009 as a fully owned sub-
and of the potential costs that would arise for the Audi Group. sidiary and is part of the Company’s social and environmental
commitment. Its declared aim is to help protect the environ-
/ CIRCULAR ECONOMY/RESOURCES ment through suitable projects and events, and to create and
As part of the circular economy/resources action area, we promote opportunities for sustainable action. The founda-
want to conserve resources by reusing processed and raw tion sees its goals as falling into the three action areas of
materials. We therefore examine the environmental impact greenovation, enthusiasm and responsibility. These comprise
of our products and components throughout their entire life the fields of environmental technology, environmental edu-
cycle. The transparency that this achieves enables us to opti- cation as well as specific protective measures for natural
mize the manufacture of vehicles with regard to resource habitats. The objectives are to advance and experience envi-
efficiency or to recondition and reuse certain vehicle compo- ronmental technologies, to make people enthusiastic about
nents. In this respect, recycling scrap also plays an important the environment and to give something back to society and
role – this is used as secondary raw materials. the environment.
By repairing or reusing battery components, for example, the
utilization phases of certain components can be significantly
extended. Based on this consideration, we are investigating Read more about the Audi Environmental
the topic in a focus project. Through the strategic research Foundation on the Internet at
partnership for battery recycling concluded between Audi www.audi-umweltstiftung.de.
and the materials technology and recycling group Umicore
131
SUSTAINABILITY ASPECTS // EMPLOYEES
EMPLOYEES
/ WORKFORCE In the 2018 fiscal year, the average level of the Audi Group
workforce was 91,477 (90,402) employees. There were
Average for the year 2018 2017 91,674 (91,231) employees at the end of 2018. The year-on-
year change, including between the companies, is mainly
Domestic companies 1) 59,754 59,448
attributable to the large number of product launches in the
of which AUDI AG 58,813 58,493
Ingolstadt plant 42,784 42,498 wake of our model initiative. We also hired further experts
Neckarsulm plant 16,029 15,995 for the strategic future areas of electric mobility, digitaliza-
Foreign companies 28,702 27,904 tion and autonomous driving. We assign our employees to
of which AUDI BRUSSELS S.A./N.V. 2,768 2,656 plant and model startups according to needs. This involves
of which Audi Hungaria Zrt. 12,825 11,888 posting experts to key strategic positions worldwide, for
of which AUDI MÉXICO S.A. de C.V. 5,682 6,211
example. We also increasingly include employees from our
of which Automobili Lamborghini S.p.A. 1,643 1,465
sites outside Germany in this international exchange. In
of which Ducati Motor Holding S.p.A. 1,278 1,240
Employees 88,456 87,352 addition, employees were posted internationally in 27 coun-
Apprentices 2,582 2,618 tries in the 2018 fiscal year.
Employees of Audi Group companies 91,038 89,970
Staff employed from other Volkswagen / THE AUDI GROUP’S HUMAN RESOURCES POLICY
Group companies not belonging to the
Audi Group 439 432 As part of our human resources policy, we create a needs-
Workforce Audi Group 91,477 90,402 based human resources structure as well as an attractive
social and working environment for our workforce. Further-
Workforce Audi Group at year-end 91,674 91,231 more, the workforce of AUDI AG enjoys an employment guar-
1) Of these, 1,732 (1,304) employees were in the passive stage of their partial antee up until the end of 2025. The very cornerstones of the
retirement.
working world at Audi include flexible forms of work and the
entitlement to mobile work as well as agile structures, pro-
Employee structural data (AUDI AG) cesses and models for collaboration. This freedom introduces
flexibility in a global context, encourages people to be innova-
2018 2017 tive, and helps employees strike a better balance between
their work and personal lives. We apply strategic resource
Average age 2) 3) Years 41.2 40.8
Average length of service 3) Years 17.5 17.0 and competence management to plan our human resources
Proportion of women 2) 3) Percent 14.9 14.6 requirements sustainably and in a goal-oriented way, and to
Proportion of academics get our employees fit for the future. Enabling employees to
(indirect employees) 3) Percent 50.9 49.9
participate in the Company’s financial success is a further im-
Proportion of foreign
nationals Percent 8.4 8.4 portant component of our human resources policy. There are
Proportion of people with also specific profit-sharing arrangements for a large number
severe disabilities Percent 6.5 6.1
of domestic and international subsidiaries.
Contracts to workshops EUR
for people with disabilities million 7.9 7.0
Frequency of accidents 4) 5.6 5.0
Attendance rate 3) Percent 95.2 95.5
Savings through Audi EUR
Ideas Program million 109.1 108.6
of which
implementation rate Percent 55.5 54.9
2) Audi Group
3) Excluding apprentices
4) The accident frequency figure indicates how many industrial accidents involving one or
more days’ work lost occur per million hours worked.
132
EMPLOYEES // SUSTAINABILITY ASPECTS
/ CORPORATE CULTURE AND COLLABORATION / HEALTH MANAGEMENT

We have made a commitment to four corporate values as the A fundamental goal of our occupational health management
basis for cooperation at Audi: responsibility, appreciation, is to maintain and promote the health of our employees. We
openness and integrity. We promote a leadership and collab- have anchored all the relevant measures and programs in a
orative culture that is in keeping with these values and with works agreement. Our holistic approach addresses a variety
our Code of Cooperation. Audi wants to stand for trust-based of topics ranging from workplace design and providing advice
cooperation and individual responsibility in the future – in on health-appropriate working assignments to gradual rein-
accordance with the values and rules of the Company as well as tegration after lengthy absences. We also offer comprehen-
individuals’ own moral compass. Various tools and platforms sive preventive programs. In doing so, the Company goes
offer possibilities for knowledge transfer, skills development well beyond what is required by law.
and an innovative corporate culture with the objective of jointly To sensitize and motivate our employees on health matters,
shaping future areas. With our “MQ! Innovation Summit” we we offer various health activities and fitness programs, for
have created an attractive platform for open dialogue between example. We are also providing these in digital formats. In
internal and external experts as an opportunity to question addition, we are extending health protection arrangements
the status quo and thus enhance the readiness for transfor- at the international locations.
mation to a new age of mobility.
Another mainstay of occupational health management is the
/ TRAINING AND DEVELOPMENT Audi Checkup. The aim of this individual preventive program
Around 800 young people embarked on an apprenticeship at is the prevention and early detection of health risks. Around
the German sites in 2018. As well as the apprentices, dual 90 percent of employees regularly take part in the program,
studies students started out on their career paths once again which has been in existence since 2006.
at the Ingolstadt and Neckarsulm sites. Vocational training
today gives particular emphasis to topics of future relevance / JOB AND PERSONAL LIFE
such as electric mobility and digitalization. For example, all We offer a large number of working time models and the
prospective automotive mechatronics technicians already option of mobile work to improve the work-life balance. Our
learn about handling high-voltage technology and connected employees can also take time off for personal reasons – for
in-car systems as part of their training. instance, to look after their children or to care for close rela-
tives. From 2019, the pay deal for the German sites will
Key expertise relating to the topics of training and develop- additionally enable all eligible employees at Audi to convert
ment are pooled at Audi Akademie. It organizes specialist their collectively agreed extra pay into an additional six or,
and interdisciplinary training for employees and managers, subject to certain criteria, eight days’ paid leave.
and assists the various areas of the Company in an advisory
capacity. In order to handle the transformation at Audi suc-
cessfully, we increased our further training budget by one-
third to an annual total of EUR 80 million in the year under
review.
133
SUSTAINABILITY ASPECTS // EMPLOYEES
/ FROM EQUAL OPPORTUNITIES TO DIVERSITY The Company has set itself targets for women in leadership
MANAGEMENT positions for the time horizon up until 2021: By the end of
To us, diversity is an important prerequisite for competitive- 2021, women should comprise 8 percent of the first
ness and sustained corporate success. The aim is to create an management tier below the Board of Management and
environment that promotes the individuality of each person 16 percent in the second management tier.
in the interest of the Company. There are currently people
from around 100 different nations working at AUDI AG. As Proportion of women at AUDI AG
well as cultural background, we focus on such aspects as age
in % 2018 2017
and gender in our diversity management work and actively
strive for inclusion. For example, the Company employs Total proportion of women 15.4 15.2
around 3,200 severely disabled people and people with an Apprentices 27.2 29.1
equivalent status at its German sites in Ingolstadt and of which industrial apprentices 24.2 26.3
Neckarsulm. Audi also supports the Prout-at-Work founda- of which clerical apprentices 81.1 80.6
tion. As an open-minded enterprise, we create awareness of Management 10.9 10.1
diversity and are receptive to all people, whatever their sexual

orientation or gender identity. There are also diversity con- The proportion of women on the Board of Management of
cepts for the Supervisory Board and management of AUDI AG. AUDI AG is also to be increased in the long term. The
Supervisory Board of AUDI AG decides each year on the tar-
get quota of women on the Board of Management. Up until
Read more online about the diversity concepts for December 31, 2018, the Supervisory Board of AUDI AG had
the Board of Management and Supervisory Board resolved a target quota of zero, for the sake of formality.
of AUDI AG pursuant to Section 289f, Para. 2, No. 6 There were no women on the Board of Management at the
of the German Commercial Code (HGB) in the Group end of 2018. In the year under review, the target quota for
Management Declaration at the proportion of women on the Board of Management up
www.audi.com/corporate-management. until December 31, 2019, was resolved to be zero percent, for
formality’s sake. However, the Supervisory Board has since
succeeded in recruiting one woman, Hildegard Wortmann,
A major focus of our human resources strategy is to recruit with high specialist expertise as member of the Board of
and promote well-qualified women. In this respect, we depend Management for Marketing and Sales.
on certain surrounding conditions because many areas of the
Company need predominantly technical graduates. For that In addition, the legally prescribed quota of 30 percent applies
reason, we use the proportion of female graduates from each to the Supervisory Board. As of December 31, 2018, there
degree program as a guideline. Averaged across all degree were 35 percent women on the Supervisory Board of AUDI AG.
programs that are relevant for the Company, the target pro-
portion of women among new recruits has been determined
to be around 30 percent.
134
REPORT ON EXPECTED DEVELOPMENTS // REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES
REPORT ON EXPECTED DEVELOPMENTS,

RISKS AND OPPORTUNITIES
The 2019 fiscal year will be dominated by particular challenges. We will,
for example, take important structural and strategic decisions that will
lay the foundations for a long-term increase in the value of the
Audi Group. 2019 will be a year of transition with a forecast operating
return on sales of between 7.0 and 8.5 percent. For the long term, we
have adjusted our strategic target corridor to 9 to 11 percent.
REPORT ON EXPECTED
DEVELOPMENTS
/ ANTICIPATED DEVELOPMENT OF THE We expect lower economic momentum in Central and Eastern
ECONOMIC ENVIRONMENT Europe compared with the past fiscal year. The Russian econ-
omy is also likely to exhibit slightly slower growth than in
// GLOBAL ECONOMIC SITUATION 2018.
Our statements on the general economic situation are based
in particular on current assessments by external institutions. For 2019, we expect economic development in the United
These include economic research institutes, banks, multi- States to weaken somewhat. The Federal Reserve could fur-
national organizations and consultancy firms. ther raise the key interest rate during the course of the year.
Meanwhile, fiscal measures should continue to have a sup-
For 2019, the Audi Group anticipates a slightly weaker pace porting effect.
of economic growth in the world economy. We expect lower
growth rates than in 2018 for both advanced and emerging The Brazilian economy is expected to stabilize further in
economies. As before, we believe the Asia region will deliver 2019 and grow at a slightly faster rate. The large number
the highest rates of GDP growth. However, political uncer- of reforms announced should have a positive impact.
tainties, a sharper than expected rise in inflation or early exit
from the overall expansionary monetary policy could addi- We expect to see the highest rates of economic growth
tionally dampen global growth prospects. In addition, geo- worldwide in the Asia-Pacific region. China’s economy is
political tensions and conflicts, structural weaknesses in likely to achieve high growth by international comparison,
individual countries and financial market turbulence con- albeit with reduced momentum. Japan’s economy will prob-
tinue to represent potential disruptive factors. ably grow at a similar rate as in the previous year.
Western Europe’s economic growth is likely to weaken in // INTERNATIONAL CAR MARKET

2019 as a result of economic factors. The region’s economic The Audi Group expects individual regions to develop at dif-
development continues to suffer from structural problems ferent rates in 2019. Overall, worldwide demand for new
that remain to be overcome, especially in southern Europe. vehicles is likely to remain at the 2018 level.
In addition, uncertainties surrounding the United Kingdom’s
exit from the European Union could slow economic growth. We anticipate that new registrations in Western Europe will
In all probability, Germany’s economic expansion will equally be on a par with the 2018 reporting year. On the German
lose some momentum amid a stable situation on the labor passenger car market, on the other hand, demand for cars is
market and good consumer sentiment. expected to drop slightly. In the Central and Eastern Europe
region, we expect a further rise in new registrations.
135
REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES // REPORT ON EXPECTED DEVELOPMENTS
Sales of passenger cars and light commercial vehicles in the The Audi Transformation Plan (ATP) is the basis for imple-
United States will probably be below the previous year’s level. menting this strategy and for future viability. Through the
Conversely, in South America the market for passenger cars ATP, we have again stepped up targets within the Company
and light commercial vehicles should continue to develop up until 2022 and embarked on a new work package focusing
positively. on capital employment. Through the ATP, we will be seeking to
exploit overarching potential in particular in the 2019 fiscal
The Asia-Pacific region is again expected to be the biggest year. For example, we want to focus even more strongly on
contributor to worldwide growth in the automotive market in customer benefit when making decisions, reduce the com-
2019. The Chinese passenger car market is also expected to plexity of our products and processes further and continually
put in a positive performance. In Japan, we are anticipating a scrutinize and optimize work flows and investments. The
fall in demand for cars. profitable employment of our capital will thus be put at the
center of our actions. We are systematically exploiting syner-
// INTERNATIONAL MOTORCYCLE MARKET gies within Audi and the Volkswagen Group for this
For 2019 we expect to see a downward trend in demand purpose.
worldwide for motorcycles in the displacement segment We are also advancing the further development of our China
above 500 cc. In particular the U.S. market for motorcycles, business. We therefore want to build further on our research
the largest in the world, is expected to show a negative and development expertise there, so that we can bring even
development. more China-specific model versions and digital services onto
the market. In addition, the locally built product portfolio is
/ OVERALL ASSESSMENT OF THE ANTICIPATED to be increased to 12 models over the next few years. The
DEVELOPMENT OF THE AUDI GROUP Audi Q2 L e-tron – the first fully electric vehicle tailored
The forecasts for the 2019 fiscal year are based on our expec- specifically to Chinese customers – will become available on
tations with regard to how the global economy and the inter- the Chinese market in the 2019 fiscal year, for example.
national car market will develop. For example, we expect
slightly weaker growth in the world economy in 2019 com- The target vision of a lean, agile company also involves con-
pared with 2018. We anticipate a slight overall rise in demand tinuously examining organizational structures. For example,
for cars worldwide for the 2019 fiscal year – though with management responsibility for multi-brand sales companies
variations from region to region. Above all economic uncer- was transferred to Volkswagen AG, Wolfsburg, as of January 1,
tainties, growing protectionist tendencies and geopolitical 2019, and the companies concerned were deconsolidated.
tensions make it more difficult to predict future developments. Under this approach, similar business activities will be grouped
together at Volkswagen Group level and their management
Along with growing macroeconomic uncertainties, the radical harmonized accordingly. The Audi Group’s reporting will also
transformation of the entire automotive industry in particular become more precise and transparent as a result.
is also likely to define our 2019 fiscal year. Customer expec-
tations and traditional value added streams are changing The 2018 fiscal year was clearly dominated by our model
dramatically. Market participants expect urban mobility of initiative and efforts to deal with the new emissions require-
the future with comprehensive digital connectivity and a high ments of the WLTP test cycle. These factors will continue to
degree of automation in products and processes, while satis- impact the 2019 fiscal year, especially at the start of the
fying sustainability aspects. Automotive manufacturers need year. The focus is also on the market introduction of the new
to make huge capital investments and upfront spending – Audi e-tron – our first SUV with fully electric drive – which
especially for new technologies and business areas – to be will be gradually rolled out on markets from the first quarter
viable in the future. In addition, new competitors, in some of 2019. The Audi e-tron will be followed by other fully and
cases from outside the industry, are also entering the mobil- partly electric vehicles. As part of our model initiative and the
ity business with the effect of noticeably increasing competi- associated market introductions of the new models, we will
tion. As well as shifting customer expectations, increasingly again be confronted with the growing challenge of handling
tough regulations and laws worldwide will again drive the the product launches and the required homologation pro-
further development of alternative drive concepts in the cesses for these products in the 2019 fiscal year. In addition,
2019 fiscal year. we will need to implement the next stage of the WLTP test
cycle with its stricter statutory requirements. This could also
136
result in substantial in-year fluctuations in our deliveries and Emirates), and Audi Volkswagen Taiwan Co., Ltd., Taipei, was
in our financial key figures over the course of 2019. transferred to Volkswagen AG, Wolfsburg, under a control
Abraham Schot, the new Chairman of the Board of Manage- agreement and the companies concerned were deconsoli-
ment, has headed Audi since January 1, 2019. The Company dated. From the 2019 fiscal year, the companies will appear
will continue to drive forward its repositioning as well as its in the Consolidated Financial Statements of the Audi Group
operational, strategic and cultural transformation. The 2019 as associated companies using the equity method. The legal
fiscal year will also be dominated by particular challenges. ownership structure remains unchanged.
We will take further structural and strategic landmark deci- The deconsolidation of these companies will affect the devel-
sions as we develop into a lean and agile company. We cannot opment of the following key performance indicators in the
rule out that the processes involved will weigh on our finan- 2019 fiscal year:
cial performance in the form of non-recurring effects, but > Revenue
also as a result of upfront expenditures on the future viabil- > Operating profit/operating return on sales
ity of Audi. We also expect to have to contend with unfavor- > Return on investment (ROI)
able macroeconomic developments and a weaker position re- > Net cash flow
garding exchange rates and commodities, for example once > Research and development ratio
previously advantageous hedges expire. The Board of Manage- > Ratio of capex
ment nevertheless regards the Company as generally well
placed to regain its status as a top performer financially, and To render the development of these key performance indicators
to implement successfully the plans to increase the long- transparent in the 2019 fiscal year, adjusted figures are pro-
term value of the Audi Group. vided as a basis for comparison alongside the figures disclosed
in the 2018 Consolidated Financial Statements of the Audi
The following forecasts on the development of our key per- Group. The figures reported in the 2018 Consolidated Financial
formance indicators are subject to various risks and opportu- Statements of the Audi Group are presented after elimination
nities which could result in the actual development in the key of the respective shares in the multi-brand sales companies.
performance indicators deviating from the respective forecast.
We present the material risks and opportunities of the Audi
Group in the report on risks and opportunities. The adjusted figures that represent the basis of
the forecast of our key performance indicators in
The effects of the diesel issue are reflected and presented in 2019 can be found in the table on page 139.
the 2018 Annual Financial Statements, in our forecasts for the

2019 fiscal year as well as in the report on risks and opportu-
nities, based on current assessments. Bearing in mind the // ANTICIPATED DEVELOPMENT OF DELIVERIES
matters that have not yet been fully clarified and their limited In the 2018 fiscal year, the Audi Group delivered 1,812,485
predictability, it cannot be ruled out that risks and opportu- vehicles of the Audi brand to customers amid challenging
nities, particularly those in the form of reporting-date meas- conditions. It is likely that we will again have to contend with
urements, may be assessed differently in the future. a difficult environment in the 2019 fiscal year. The develop-
ment in deliveries especially at the start of 2019 should re-
/ KEY PERFORMANCE INDICATOR FORECASTS flect our efforts to handle the emissions requirements of the
Effective January 1, 2019, management responsibility for the WLTP test cycle introduced in 2018. As the year progresses
multi-brand sales companies Volkswagen Group Italia S.p.A., we will then need to implement the next stage of the WLTP
Verona (Italy), Audi Volkswagen Korea Ltd., Seoul (South test cycle with its stricter statutory requirements. There may
Korea), Audi Volkswagen Middle East FZE, Dubai (United Arab also be distortions in the delivery figures in the course of
137
REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES // REPORT ON EXPECTED DEVELOPMENTS
the year as a result of the high fluctuations in the prior-year the euro to be slightly weaker against the U.S. dollar in
figures. In addition, our continuing model initiative and the the 2019 fiscal year. On the other hand, the euro should
model discontinuations and launches that it involves will shape strengthen somewhat against the pound sterling and the
the 2019 fiscal year. We therefore currently anticipate that Chinese renminbi.
the volume potential of our new and improved products will
not yet be fully reflected in the figures for the 2019 fiscal We want to regain our financial strength over the next few
year. In light of our plans to optimize stocks, we neverthe- years and increase the value of the Audi Group over the long
less forecast a delivery volume for Audi brand vehicles that is term. In light of that – and taking account of the effects of
likely to be moderately up on the 2018 level. Provided the the deconsolidation of multi-brand sales companies – we
tougher WLTP requirements are successfully implemented, have adjusted our long-term strategic target corridor for
we expect growth especially in the second half of 2019. operating return on sales to 9 to 11 percent. To achieve this,
important structural and strategic decisions will be our prior-
In terms of regional developments, we expect to see a rise in ity in the 2019 fiscal year. These are to form the foundations
deliveries of the Audi brand in the core regions compared for the long-term increase in the value of the Audi Group.
with 2018. For example, we anticipate catch-up effects for Within this context we see the 2019 fiscal year as a period of
the Western Europe region and improved availability of our transition, with an anticipated operating return on sales of
models for the North America region following model between 7.0 and 8.5 percent, and therefore not yet in line
changeovers. We also expect a positive development in vol- with our new long-term strategic target corridor.
ume in China, with a large number of product launches. The main pressures will stem from the high upfront expendi-
tures for the future viability of Audi – for instance in the elec-
On the models side, our plans envisage that our SUV models trification of our vehicle fleet and for potential new areas of
in particular will provide positive volume stimulus in the 2019 business connected with autonomous driving and digitaliza-
fiscal year. The Audi Q2 L e-tron will become available as our tion. We also expect adverse effects from a lower capitaliza-
first fully electric vehicle for the Chinese market that is pro- tion quota than in the previous year, in a reflection of our
duced locally. The new Audi Q3 and the Q5 will also contrib- product cycle. In addition, a further tightening of emissions
ute to growth. We expect that the new Audi Q8 and the requirements and the costs incurred in that connection will
Audi e-tron – our first series-production model with all-elec- affect the operating return on sales in 2019. Furthermore,
tric drive – will provide clearly positive growth impetus. Con- we currently anticipate currency and commodity price devel-
versely, we anticipate a falling trend in deliveries for the car opments to be negative from our perspective, compared with
lines that will see model changeovers in the 2019 fiscal year. the previous year. Nor can effects from structural non-recur-
ring expenses be ruled out. There should be positive effects
// ANTICIPATED FINANCIAL PERFORMANCE in particular from the development in revenue and the next
For the 2019 fiscal year, we expect revenue of the Audi Group stage of the Audi Transformation Plan (ATP).
to increase slightly. Our basis for comparison is the figure for
the 2018 fiscal year after elimination of the effects of the In the 2018 fiscal year, the operating return on sales was in-
deconsolidation of multi-brand sales companies. fluenced by special items in connection with the diesel issue.
The risk provisioning undertaken in 2018 in the form of pro-
Volume growth in particular should help to lift revenue. The visions was also adjusted accordingly to reflect up-to-date
development in other automotive business should also have information. Our current plans for the 2019 fiscal year work
a positive impact on revenue performance. By contrast, we on the assumption that there will be no additional special
expect adverse exchange rate effects compared with the pre- items. However, it cannot be ruled out that the assessment
vious year. However, these expectations are dependent on of the risks may change in the future.
economic conditions and actual exchange rate trends. Com-
pared with the average exchange rates in 2018, we expect
138
For the 2019 fiscal year, we forecast a return on investment // RESEARCH AND DEVELOPMENT COSTS,
(ROI) for the Audi Group within the range of 11 to 14 percent. CAPITAL INVESTMENTS
This means we should again exceed our minimum rate of In connection with the deconsolidation of multi-brand sales
return of 9 percent in the 2019 fiscal year. It is based on our companies and the related development in revenue, we have
forecast operating return on sales. Above all in connection adjusted our strategic target corridor for the research and
with the new rules on the recognition of leasing transactions development ratio to 6.5 to 7.0 percent and the target corri-
under IFRS 16, we also expect a rise in average invested assets. dor for the ratio of capex to 5.5 to 6.0 percent.
// ANTICIPATED FINANCIAL POSITION For the 2019 fiscal year, we forecast a research and develop-
The Audi Group again intends to finance itself fully from ment ratio that is likely to come in slightly above our strate-
internally generated cash flow in the 2019 fiscal year. We gic target corridor. Our focuses here are on the future topics
expect a net cash flow of between EUR 2.5 and 3.0 billion. of electrification as well as automated and autonomous driv-
The main drivers of the positive net cash flow should include ing. Investment in a cutting-edge electronics architecture as
the profit performance. Conversely, continuing high cash the basis for new services and products as well as the further
outflows for investing activities combined with the upfront rejuvenation of our product range are equally reflected in the
spending to ensure the future viability of Audi are likely to development spending plans for the 2019 fiscal year. Efficiency
reduce the net cash flow. Cash requirements for continuing improvements in the Research and Development area are
obligations in connection with the diesel issue are again accompanied by high investments in the future.
expected to have a negative impact on the financial position
in the 2019 fiscal year, though to a much lesser extent than In connection with the repositioning of Audi, we place partic-
in the 2018 fiscal year. ular focus on the profitable employment of capital. We have
consequently given this issue the status of a new work pack-
age within the ATP. We already expect it to produce the first
positive results in the course of the 2019 fiscal year. In that
connection we anticipate that the ratio of capex for 2019 will
be within our strategic target corridor. Preparations for the
production starts of our new models are likely to be major
investment priorities.
Anticipated development in the key performance indicators of the Audi Group
Actual 2018 Basis for the Forecast 2019 2)

forecast 1)
Deliveries of cars of the Audi brand to 1,812,485 1,812,485 moderately above the previous year’s level
customers 3)
Revenue in EUR million 59,248 53,617 slight increase
Operating profit/operating return on sales 6.0 6.6 between 7.0 and 8.5 percent and therefore not yet within our strategic
in percent target corridor of 9 to 11 percent
Return on investment (ROI) in percent 10.0 10.4 between 11 and 14 percent and therefore above our minimum rate of
return of 9 percent
Net cash flow in EUR million 2,141 2,080 between EUR 2.5 and 3.0 billion
Research and development ratio in percent 7.1 7.8 slightly above the strategic target corridor of 6.5 to 7.0 percent
Ratio of capex in percent 5.9 6.5 within the strategic target corridor of 5.5 to 6.0 percent
1) Calculation of the adjusted figures: The figures reported in the 2018 Consolidated Financial Statements have been adjusted for the respective effects of the multi-brand sales
companies (Volkswagen Group Italia S.p.A., Verona (Italy), Audi Volkswagen Korea Ltd., Seoul (South Korea), Audi Volkswagen Middle East FZE, Dubai (United Arab Emirates),
and Audi Volkswagen Taiwan Co., Ltd., Taipei).
2) The forecast for 2019 is based on the adjusted figures.
3) This includes delivered Audi models built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).
139
REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES // REPORT ON RISKS AND OPPORTUNITIES
REPORT ON RISKS AND

OPPORTUNITIES
/ RISK MANAGEMENT SYSTEM IN THE AUDI GROUP continually monitored and are acted on promptly if relevant
for the Company. The integration of all material participations
// OPERATING PRINCIPLE OF THE RISK into the risk management system is ensured. New companies
MANAGEMENT SYSTEM are gradually integrated.
As a company with global operations, the Audi Group is ex-
posed to a dynamic environment. Furthermore, the automo- The RMS/ICS is closely interlocked with the compliance func-
tive industry is undergoing a comprehensive process of trans- tionality (central governance, risk & compliance (GRC) organ-
formation that is bringing changing customer requirements, ization/central GRC organization) as part of an integrated
value chains and business models. This situation continually and comprehensive management approach. The Board of
confronts us with diverse and new opportunities and risks. Management and the Supervisory Board, especially the Audit
Integrity as well as behavior that complies with statutory Committee, are kept regularly informed about the RMS/ICS
and regulatory requirements are the basis of our entrepre- as well as the Compliance Management System (CMS) in a
neurial actions and are treated as a top priority. We seek to combined report.
maintain a constructive dialogue and address opportunities
and risks openly so that we can ensure lasting success with
our entrepreneurial activities. The particular purpose of an For information about integrity and compliance,
effective Risk Management System (RMS) – besides fulfilling please refer to the Corporate Governance Report
statutory requirements – is to validate entrepreneurial goals, on pages 155 ff.
protect stakeholders against negative corporate develop-

ments, fulfill the Company’s far-reaching duty of care in
respect of how it handles risks as well as protect long-term The central tasks of risk management are to identify and
viability and competitiveness. The risk propensity of the analyze risks, ensure transparent reporting of these risks and
Audi Group is reflected in the ambitious corporate targets it improve their controllability using suitable risk management
formulates based on conscientious risk/return analyses. tools. This process also creates scope for generating and
These are synchronized both Company-wide and with the exploiting opportunities. Using the COSO framework, risk-
Volkswagen Group. Our Internal Control System (ICS) is appropriate internal controls are defined and performed along
designed to ensure the functioning and stability of our pro- the entire value chain (ICS). The Audi Group promotes the
cesses. In the past fiscal year we launched further initiatives further development of the RMS/ICS through cross-divisional
to reinforce our ICS. and cross-company projects. The priority here is to interlink
the system closely with corporate financial planning and
The Risk Management System of the Audi Group is based on management, as well as with accounting. In view of its high
the internationally recognized standard of the Committee of strategic relevance, the regulatory framework for the RMS/ICS
Sponsoring Organizations of the Treadway Commission is firmly established both in an internal Corporate Policy of
(COSO). Risks are to be identified, evaluated and appropri- AUDI AG and at the material participations.
ately managed by those responsible. A control is also to be
carried out on the management of risks. The higher-level To systematically structure its risk management architecture,
internal business units and Group functionalities responsible the Audi Group follows the “Three Lines of Defense” model –
must communicate in a transparent, accurate and timely a recommendation of the European Confederation of Insti-
manner. All organizational levels of the Audi Group are inte- tutes of Internal Auditing (ECIIA). Taking this basis, the
grated into the Risk Management System in order to satisfy RMS/ICS of the Audi Group features three lines of defense
both business and statutory requirements. Changes in the that are intended to protect the Company against the occur-
legal framework with respect to risk management are also rence of material risks.
140
REPORT ON RISKS AND OPPORTUNITIES // REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES
The “Three Lines of Defense” model Each line of defense furthermore submits reports independently
and at least ad hoc to the full Board of Management and the
Supervisory Board Supervisory Board of AUDI AG.
Board of Management
// OPERATING PRINCIPLE OF OPPORTUNITIES
MANAGEMENT
To secure the sustained success of the Audi Group, as well as
First Second Third
line of defense line of defense line of defense managing risks effectively it is necessary to identify and take
entrepreneurial opportunities. In all business decisions that
have a long-term impact, we therefore consider not only the
Central
Divisions Internal Audit risks but also the opportunities that they present. Opportuni-
GRC organization
ties management – which includes such aspects as optimiz-
Coordination of
ing revenue, costs and products – is integrated into the oper-
Operational risk control processes, ational and organizational structure of the Audi Group and is
Audit of RMS/ICS
management governance and
methodology closely aligned with our strategic objectives. To that end we
continuously analyze the international context for potential
impacts on the business model in order to identify trends and
The individual risk owners of the AUDI AG divisions and par- industry-specific key factors early on. Relevant developments
ticipations are responsible for the operational management are studied in detail with the help of scenario analyses. The
of risks and their control, as well as for reporting on them. possible consequences for Audi are identified jointly with
They represent the first line of defense. Strategic Corporate Planning, the divisions affected and the
Controlling area. The purpose of this cooperation is to create
In the second line of defense, the central GRC organization and exploit opportunities. Medium and short-term potential
takes charge of the fundamental functionality of the RMS/ICS opportunities are identified and operationalized by the divi-
as well as the CMS. Core activities involve monitoring system sions. We also aim to secure our long-term competitiveness
performance and submitting an aggregated report on the and future viability through efficiency and opportunities initi-
risk situation to the Board of Management and the Audit atives, such as the Audi Transformation Plan (ATP), as well
Committee of the Supervisory Board. This ensures that the as through benchmarking. Over and above pursuing specific
statutory requirements for the early identification of risks and targets, further opportunities may come to light when im-
the effectiveness of the RMS/ICS are met. Ad hoc projects on plementing these initiatives.
operational risk management and regular training courses
are also held to reinforce awareness of risk management and // INTEGRATED RISK MANAGEMENT AND INTERNAL
compliance as well as promote a positive risk culture in the CONTROL SYSTEM FOR THE FINANCIAL REPORTING
Audi Group. In the year under review, the training program PROCESS
was significantly extended and focused on the various target The financial reporting section of the RMS/ICS that is rele-
groups through mandatory modules and function-specific vant for the financial statements of AUDI AG and the
programs. AUDI AG also has risk compliance coordinators Audi Group contains all measures that are designed to en-
who liaise between the first and second lines of defense. At sure the complete, accurate and prompt communication of
the participations, this function is handled by clearly desig- all relevant information. Its purpose is to minimize or alto-
nated risk and compliance officers. gether avoid risks in the preparation of the AUDI AG financial
statements and the Consolidated Financial Statements as
In the third line of defense, Internal Audit as an impartial well as the Combined Management Report.
body examines the security, regularity and economic effec-
tiveness of the systemic and operational activities of the In light of the decentralized organization of the accounting
RMS/ICS. The RMS/ICS for accounting is additionally subject system in the Audi Group, the consolidated companies for
to scrutiny by the independent auditor of the Consolidated the most part handle accounting tasks independently. In
Financial Statements. individual instances, tasks are passed on to AUDI AG and
141
companies of the Volkswagen Group on the basis of service and maximum flexibility to adapt to changes in the legal
agreements. The individual financial statements of AUDI AG framework. Data consistency is checked with the aid of sys-
and the participations are prepared in keeping with the appli- tematic, multi-stage validation functions, such as complete-
cable national legislation and transferred to the ness and content plausibility checks on the Balance Sheet,
Consolidated Financial Statements of the Audi Group in Cash Flow Statement, Statement of Comprehensive Income,
accordance with IFRS. Income Statement and Notes.
The IFRS accounting manual issued by the Volkswagen Group // RISK EARLY WARNING SYSTEM AND
is used in order to ensure uniformity of accounting and MONITORING EFFECTIVENESS
measurement principles in accordance with the applicable Section 91, Para. 2 of the German Stock Corporation Act
accounting standards. The Audi Group guideline for the an- (AktG) governs the early identification obligations of the
nual financial statements details further rules on the scope Board of Management concerning risks that are a threat to
of reporting and the definition of the group of consolidated the Company as a going concern (supplemented by the
companies for the Consolidated Financial Statements, as German Corporate Control and Transparency Act [KonTraG]).
well as the uniform application of statutory requirements. Section 107, Para. 3 of the German Stock Corporation Act (AktG)
Intra-Group business transactions are duly reflected by (supplemented by the German Accounting Law Modernization
means of proven processes and instruments such as compre- Act [BilMoG]) furthermore obliges the Audit Committee of
hensive rules on the reconciliation of balances between the the Supervisory Board to monitor the effectiveness of the
Group companies. RMS/ICS.
The Board of Management is responsible for the organizational
At Audi Group level, the IFRS individual financial statements structure of the RMS/ICS. A Group-wide systematic risk iden-
of the participations are analyzed and validated as part of tification process (regular governance, risk & compliance
control activities. The reports presented by the independent (GRC) process) plays a key role in meeting statutory require-
auditors and the findings of the concluding discussions with ments. Within this process, fundamental recurring risks,
representatives of the individual companies are also taken countermeasures and controls within the Company are sys-
into account. Systematic plausibility checks are run to some tematically identified, evaluated and documented so as to
extent automatically, but also conducted by experts. Com- generate an overall picture of the risk situation. Meanwhile,
plex specific matters are regularly coordinated during the the effectiveness of the control processes and overall system
year between the Consolidated Financial Statements depart- is assessed.
ment and the participation in question. The dual control
principle and the separation of functions are likewise applied /// REGULAR GRC PROCESS
as key instruments of control in the preparation of the finan-
cial statements by the Group companies. In addition, Group
Auditing examines the regularity of the financial reporting Entity scoping
(risk consolidation
process for domestic and foreign companies. Changes in the group)
statutory framework and prescribed standards with respect
to the financial reporting process are continually monitored
and are acted on promptly where relevant for the Company.
This ensures compliance with standards. Risk identification,
Subsequent actions assessment and
documentation
Financial reporting is mapped on the basis of the Group-wide
Volkswagen consolidation and corporate management system
(VoKUs). Furthermore, information is continually shared with
Volkswagen Group Accounting. VoKUs contains both historical
data from Accounting and planning data from Controlling, Reporting
Effectiveness
monitoring
and as such provides extensive scope for consolidation and
analysis. The system also offers central master data manage-
ment, a uniform reporting system, an authorization concept
142
//// RISK CONSOLIDATION GROUP system. Risks are evaluated using a standard procedure for
The risk consolidation group is formed by a uniform selection the Volkswagen Group. The risk score for each case is obtained
process in which all participations and other relevant compa- by multiplication of the criteria probability of occurrence and
nies are assessed according to quantitative and qualitative potential impact. The probability of occurrence is determined
features, and classified according to risk criteria. In the 2018 by the risk manager based on ranges. The second criterion of
fiscal year, there were 22 companies fully integrated into the potential impact is broken down into various subcategories.
regular GRC process in addition to AUDI AG. This allows criminal-law aspects to be considered as well as
material and non-material evaluation aspects. We fundamen-
Germany: tally adopt the net perspective, in other words the probability
> AUDI AG of occurrence and potential impact are considered in the
> Audi Electronics Venture GmbH light of any countermeasures already taken. The appropriate-
> Audi Interaction GmbH ness and plausibility of risk reports are examined on a random
> Audi Sport GmbH basis in more in-depth interviews conducted by the central
> PSW automotive engineering GmbH GRC organization with the appropriate divisions and compa-
nies. Based on the process documentation, the independent
International: auditor also assesses whether the Board of Management has
> Audi Australia Pty. Ltd. taken appropriate measures for the early indication of risks
> Audi Brussels S.A./N.V. in accordance with Section 91, Para. 2 of the German Stock
> Audi Canada Inc. Corporation Act (AktG).
> Audi (China) Enterprise Management Co., Ltd.
> Audi do Brasil Indústria e Comércio de Veículos Ltda. //// MONITORING OF EFFECTIVENESS, REPORTING
> Audi Hungaria Zrt. AND SUBSEQUENT ACTIONS
> Audi Japan K.K. By way of a functionality check, the regular GRC process
> Audi México S.A. de C.V. includes departments or external assessors conducting an
> Audi of America, LLC effectiveness check of all material risks and of significantly
> Audi Singapore Pte. Ltd. risk-reducing countermeasures and management controls.
> Audi Tooling Barcelona S.L. If effectiveness is deemed inadequate, the department in
> Audi Volkswagen Korea Ltd. question must carry out improvements as a subsequent action.
> Audi Volkswagen Middle East FZE The central GRC organization monitors timely implementa-
> Audi Volkswagen Taiwan Co., Ltd. tion. The regularity and effectiveness of selected elements
> Automobili Lamborghini S.p.A. are also monitored by Internal Audit in its capacity as an
> Ducati Motor Holding S.p.A. impartial body. The status and evolutionary developments of
> Italdesign Giugiaro S.p.A. the RMS/ICS are reported to the Board of Management and
> Volkswagen Group Italia S.p.A. the Audit Committee of the Supervisory Board both on a
regular and an ad hoc basis.
Participations that are not included in the risk consolidation
group are included in the Risk Management System of the /// RISK QUARTERLY PROCESS AND AD HOC
Audi Group on the basis of Group-wide minimum require- INFORMATION
ments. This is subject to a majority interest or management The regular GRC process is supplemented by a Risk Quarterly
responsibility being held. Process (RQP) that represents the current operational risk
situation of the Audi Group. Its focus is on implementation
//// RISK IDENTIFICATION, ASSESSMENT AND of countermeasures and the associated short-term manage-
DOCUMENTATION ment of risks. In an initial step the overall risk situation as
Under the regular GRC process, the risk managers in the re- well as accompanying countermeasures are presented to top
spective divisions and departments as well as the participa- management in the Audi Executive Committee (AEC) on a
tions record and evaluate the risks that fundamentally apply quarterly basis, examined and then reported to the Board of
to the Audi Group once a year using a specially developed IT Management. Any further countermeasures are initiated by
143
the AEC and Board of Management as appropriate. This serves order of significance and are explained within the context of
to increase risk transparency, further raise risk awareness in the overall assessment of the risk and opportunity situation.
the Company and ensure effective, prompt risk management.
The evaluation of risks from this Risk Quarterly Process is // ECONOMIC RISKS
synchronized with the regular GRC process. There are fundamentally economic risks for the Audi Group
from external developments that it is unable to influence.
The Risk Quarterly Process (RQP) For instance, the United Kingdom’s planned exit from the
EU (Brexit) would have macroeconomic and political conse-
Detection of risks, reporting and countermeasures

quences that are likely to have a direct impact on the Audi
Group. A possible collapse in the overall passenger car market
in that region would also adversely affect our volume devel-
1st quarter 2nd quarter 3rd quarter 4th quarter
opment in the automotive and accessories area. Possible
consequences could stem from a potential economic slow-
down or recession, for example, a possible devaluation in the
pound sterling and additional import duties on vehicles in
+ transparency + risk awareness + risk management
the event of a hard Brexit – in other words, a no-deal exit. In
addition, extensive border checks may lead to delays in the
supply of vehicles to the market at the sales end as well as in
In addition, a separate process is used to deal with significant our supply chain. To manage the risk, a cross-division work-
changes in the risk situation that may occur at short notice ing group was set up to define and coordinate countermea-
due, for example, to unexpected external events. A signifi- sures and monitor their implementation. The risk previously
cant change in the risk situation occurs if there is a risk that recorded in the 2017 fiscal year continues to be rated as
poses a threat to the Company as a going concern or to its high.
strategy, or if critical monetary thresholds are exceeded.
Other potential triggers include serious inaccuracies in Brexit aside, the economic environment is generally of major
financial reporting and compliance breaches. All Group importance to the business success of our Company. Our
companies are obliged to inform the Board of Management focus is especially on the sales markets in Europe, the United
of AUDI AG and the central GRC organization of such devel- States and China. There are risks to economic development
opments by means of an internal ad hoc announcement. from potential turbulence on the financial markets, protec-
Priority is given to defining preventive measures for limiting tionist trends, political upheaval and structural deficits in
losses, communicating the updated risk situation to the cor- individual countries. For example, risks may result from pro-
porate bodies and examining whether an ad hoc announcement tectionism in North America and China. The situation of a
needs to be published in accordance with capital market number of financial establishments in the southern euro-
principles. zone, trade disputes as well as the high indebtedness of the
private and public sector in parts of Europe further exemplify
/ RISKS AND OPPORTUNITIES OF THE AUDI GROUP this type of risk. The monetary policy of the central banks is
The most significant risks and opportunities for the Audi Group also important in this regard. In addition, geopolitical tension
are described below. Based on current assessments, these and conflicts can suddenly influence the economic develop-
have been categorized as materially relevant to future devel- ment of individual countries and regions. A further escalation
opment and may lead to negative or positive deviations from of conflicts in individual regions could also trigger fluctua-
the key performance indicators forecast. The basis for the risks tions in worldwide financial, energy and commodity markets.
stated comprises both the regular GRC process and the Risk Social conflicts, terrorist activities or pandemics could equally
Quarterly Process. The opportunities listed are determined have a negative effect. Corruption, inadequate government
analytically and are operationalized when they become suffi- structures and a lack of legal certainty also pose risks. As
ciently specific. In addition, latent risks and opportunities that there may be marked deviations from our planning in the
exist for the Audi Group are listed. For the sake of clarity, the economic development of individual regions and countries,
risks and opportunities are presented in various categories. reflected for example in deliveries, price enforcement and
The risks within each category are presented in descending plant utilization, there are risks to the attainment of volume
and profit goals. As a countermeasure we can draw on the
144
support of our worldwide sales network to compensate for // ECONOMIC OPPORTUNITIES

market weakness in certain countries by shifting volumes to A positive economic development in the principal sales markets
different markets. In addition, for risk management, we beyond general expectations could create additional sales
employ comprehensive risk early warning systems with which potential for the Audi Group. To realize these opportunities,
we continuously monitor sales markets. We also conduct Audi is steadily increasing its market presence especially in
market research and maintain a regular dialogue with our the growth markets. The international production network is
counterparts in the sales regions. In this way we seek to secure boosting worldwide brand awareness and helping the Audi
the competitiveness and long-term commercial success of the Group to meet specific customer requirements flexibly. To
Audi Group – with the help of our strong brand, an attractive exploit opportunities afforded by innovative solutions and new
product portfolio, the focus on premium quality and a clear technologies at an early stage, economic developments and
emphasis on future technologies. We respond to short-term customer requirements are continually monitored worldwide.
developments with market-specific measures and management
tools. Thanks to fundamentally needs-based production // INDUSTRY RISKS
planning, we are able to respond flexibly to fluctuations in National legislation on CO2 limits in various markets has a
demand. However, the Audi Group would also have difficulty direct impact on the development, manufacturing and sale of
resisting global economic weakness. vehicles. As a consequence, the Audi Group is exposed to the
risk of not meeting statutory CO2 fleet targets and poten-
There are also latent risks in connection with our supply chain. tially having to make compensatory payments as a result. To
Fluctuations in our production may lead to violations of con- meet the CO₂ limits, Audi applies clearly defined CO2 targets
tractually agreed terms with corresponding financial conse- for the vehicle fleet and individual vehicles. These are contin-
quences. In addition, temporary supply bottlenecks may be uously monitored in the form of a comparison between limit
caused by disruptions to the supplier network and its environ- value and current CO2 figure for the forecast volume mix. In
ment. Their causes may include natural disasters, political addition, we build appropriate technical and product-specific
unrest and strikes, but also economic crises, as well as quality measures into our plans early on. In automotive development,
problems and disrupted or lost production at suppliers and we also focus on steadily reducing weight, fuel consumption
their own suppliers. In addition to permanently analyzing and vehicle emissions. In addition, the Audi Group pursues a
the wider situation, we manage supply-chain risks by preven- product and powertrain strategy that emphasizes alternative
tive and reactive risk management within Procurement. In drive concepts with hydrogen, synthetic fuels and above all
addition, decisions on the awarding of contracts to suppliers the electrification of our vehicles, in addition to conventional
are subject to rigidly defined processes and are reached on combustion engines. We ensure this strategy is implemented
the basis of a risk assessment. Comprehensive scenario and by defining and following an electrification roadmap as well
future analyses, emergency plans and appropriate insurance as with clearly defined CO2 targets for the vehicle fleet and
cover are also adopted to reduce risks. Furthermore, the Audi individual products. The risk assessment remains unchanged
Group continues to develop its crisis organization to reinforce from the previous year.
Group-wide crisis management.
In connection with the electrification of our product portfolio,
the supply chain for batteries in particular is becoming ever
more important. To counter the risk of batteries being un-
available or of high costs, permanent monitoring is already
practiced as part of the product process.
145
A prolonged failure to address market-determining sustaina- industries are emerging as challengers to the classic auto-
bility and responsibility aspects in our products and processes motive industry. We are responding to this development by
could lead to significant competitive disadvantages through, focusing on the transformation of our Company. In addition,
for example, image losses, volume losses or violations of the our customers appreciate our progressive brand and attractive
law. Specific goals and scopes of responsibility were defined product range, coupled with the distinctive design and high
and project plans drawn up to counteract this risk. These are quality of our products. We also actively watch and manage
managed both brand-wide and Group-wide through central markets, and are receptive to new areas of business.
functions, committees and work groups. In the 2018 fiscal
year, we also approved our Sustainability Roadmap, through // INDUSTRY OPPORTUNITIES
which we will use defined key figures to monitor and manage Extensive megatrends offer diverse opportunities which we
attainment of our sustainability goals. Awareness-raising want to exploit. We have set ourselves the goal of making our
measures to promote sustainable action by the management cars an integral part of everyday digital life for our custom-
and employees as well as a systematic drive to embed sus- ers. We are therefore supplementing our existing business
tainability aspects in our management and decision-making- model with new digital services. The scaling of our mobility
processes also counteract this risk. This risk has not changed concepts and services also unlocks extra business potential.
compared with the previous year. In addition, digitalization gives us the opportunity to further
streamline our processes in order to leverage extra potential
An intensification of current international trade disputes – for efficiency.
above all between Europe and the United States – potentially In the medium and long term, we also expect electrification
leading to the raising of import tariffs could adversely affect and the development of additional innovative drive technolo-
the development of our deliveries volume and therefore also gies to provide fresh stimulus for the market. We therefore
our financial key figures. We endeavor to manage this risk to took the Audi e-tron, our first volume-built fully electric
the best of our ability by means of ongoing tracking and pos- vehicle, into series production in the year under review. The
sible price adjustments. In addition, over the medium and Audi e-tron will be followed by other fully electric vehicles
long term there is the possibility of countering these risks and models with plug-in hybrid drive over the next few years.
through regional adjustments to the value chain. The risk We see further opportunities in the area of automated and
was recorded for the first time in the year under review. autonomous driving and in the use of artificial intelligence.
The challenge will be to rethink and redefine individual
Risks continue to exist in connection with potentially defective mobility, and come up with new solutions so that individual
airbags from suppliers. By way of a countermeasure, exten- mobility does not grind to a halt. To seize this opportunity,
sive analysis programs were launched with the manufacturers we are developing Ingolstadt, for example, into a model city
in order to identify or exclude a systematic fault. We are also for autonomous driving and testing pioneering future tech-
in permanent dialogue with government agencies to report nologies. Through Pop.Up Next, we have teamed up with
swiftly on the latest results of the analyses. Risks in connec- AIRBUS S.A.S. and our subsidiary Italdesign Giugiaro S.p.A.,
tion with airbags were already recorded in the previous year. Turin (Italy), to investigate a modular mobility concept that
combines autonomous transport on roads with new possi-
The intensive competitive situation worldwide is a latent risk bilities for autonomous air taxis. In addition, in São Paulo
for the development of the industry and therefore also for (Brazil) and Mexico City (Mexico) Audi provides the chauffeur
the Audi Group. It manifests itself through restrictions in service for the air taxi arrangements with helicopters of the
price positioning or the increased use of sales incentives, for Airbus subsidiary Voom.
example. The public debate surrounding diesel technology
is also reflected in a change in demand behavior. There are Alongside the megatrends we intend to use the opportunities
equally financial risks associated with the development of provided by further developments in the automotive indus-
residual values of diesel vehicles in the used car business. try. For example, we are using the opportunities for growth
Furthermore, new competitors from previously separate created by the expansion of our SUV portfolio kicked off in
the year under review.
146
An easing of the current trade disputes leading to a lowering capacity bottlenecks in engine development and at the test
of import tariffs could improve the economic conditions. That centers could lead to certain engine and transmission versions
could, in turn, increase our customers’ willingness to buy. being temporarily unavailable, thus putting the volume at
risk and adversely affecting our financial key figures. By way
// RISKS FROM OPERATING ACTIVITIES of measures to minimize the risk, capacities in the areas af-
In the automotive industry, the development of new technol- fected were increased. We are also revising, optimizing and
ogies in particular leads to high upfront expenditures in the simplifying our powertrain portfolio in response. The risk
form of development costs and capital investment. For the remains high.
most part these are spread over several years and only pay
off over the course of the product life cycle, which also In view of the high complexity of market-specific statutory
stretches over several years. requirements and the speed with which they are changing,
There is the risk here of deviations in vehicle and powertrain there is the risk that it may not be possible to implement re-
projects from the planned project goals during the product quired changes to product characteristics adequately during
process. The reasons for technical, temporal, content-related product development. This can also be caused by inadequate
or financial deviations may include changes in statutory or knowledge of the requirements. Violations may result in, for
market requirements, altered customer expectations or shifts example, sales restrictions, penalty payments, image losses
in planning assumptions. The high complexity of entirely as well as other financial costs. As a countermeasure, we
new projects – which to some extent are also developed regularly and extensively scrutinize our internal processes and
jointly with other Group companies – may also lead to revise them. We also introduce control mechanisms includ-
delayed timings and deadline overshoots. To counter these ing a review process. This risk has not changed compared
risks, we have implemented a systematic product process in with the previous year.
the Audi Group with clear milestones, quality approvals, per-
manent monitoring and clear responsibilities. This also takes Field measures for certain engines and the resulting change
account of new requirements that arise from the future in their characteristics could potentially cause problems in
topics of electrification and digitalization as well as from tech- other components. A countermeasure, for example in the
nology partnerships. In addition to the separation of func- form of software solutions, is being developed. Audi is also
tions and principles of multiple-party control, the process in dialogue with the relevant government agencies. This
entails a wide range of management and monitoring tools, issue emerged for the first time in the year under review.
along with regular reporting to top management to validate
both the projects’ maturity and their financial objectives. New // OPPORTUNITIES FROM OPERATING ACTIVITIES
products are defined on the basis of a comprehensive analysis Through the Audi Transformation Plan (ATP), we aim to
of the environment and customers. The main revenue and cost scrutinize, query and improve mainly procedural, cross-
drivers in the product development process are managed and disciplinary and structural issues, as well as improve effi-
monitored by the Controlling area and as a product manage- ciency and reduce complexity. The plan also offers scope to
ment task. The key performance indicators applied for this pinpoint and utilize further potential. The expansion of
are for the management of project-based cost and pricing, virtual development brings cost savings and greater flexi-
and for corporate financial management. In addition, needs- bility, for example. Optimized tracking of deadlines and
based task forces are being put in place and additional capaci- financial targets is designed to leverage extra potential. The
ties are being created in the areas affected. The deadline risk fact that we are part of the Volkswagen Group also means we
in particular has increased compared with the previous year. can enjoy further potential for synergies in the future, such
as in the Research and Development area, where we are
Even tougher exhaust, emission and homologation regula- working jointly with Dr. Ing. h.c. F. Porsche AG, Stuttgart, on
tions worldwide, for example the WLTP in Europe, con- the development of vehicle architectures, modules and
tinue to present us with challenges in the development and components for what is known as the premium architecture
homologation of our engine/transmission versions. Above all electrification (PPE).
147
// LEGAL RISKS German luxury vehicles in bringing lawsuits against several

Despite considerable progress on the final agreement with car manufacturers, including Volkswagen Canada Inc., Audi
various agencies and stakeholders, there continue to be risks Canada Inc. and other companies of the Volkswagen Group.
in connection with the diesel issue. For example, there is the Neither provisions nor contingent liabilities have been stated
fundamental risk that the agreements reached with the U.S. because it is currently not yet possible to evaluate the pro-
agencies cannot be met in time or in full, despite the ceedings based on their current status.
measures introduced to implement them. This would involve
new financial consequences. The implementation of these Because it has to deal with a large number of country-specific
agreements is managed by a specially created organizational legal systems and standards, the Audi Group is confronted
unit in the Audi Group. with a complex regulatory framework governing the approval
In addition, there is a fundamental risk of further govern- of its vehicles – including the risk of non-attainment of market-
mental investigations and inquiries, judicial decisions as well specific certification requirements. Restrictions on the approval
as current and new lawsuits and proceedings – such as the of our products as well as sales bans could consequently be
consumer class action against Volkswagen AG or individual imposed on the Audi Group, or delays to their market intro-
actions – including on similar technical matters, possibly in duction could occur. The Audi Group addresses these risks
other jurisdictions. through ongoing monitoring of the legal framework as well as
Where manageable and economically practicable, appropri- through processes and control systems that include suitable
ate levels of insurance cover were taken out to hedge risks. reporting. The countermeasures are steadily refined and are
Provisions deemed appropriate were created or contingent supported by specific IT systems. The risk is on a par with the
liabilities were disclosed for identifiable and measurable previous year.
risks. Contingent liabilities were not disclosed quantitatively
if they are not currently measurable. Because some risks Under the antitrust investigations of the automotive industry
cannot be assessed or only assessed to a limited degree, that are already in the public domain, on September 18, 2018,
losses arising that are not covered by the insured or reserved the European Commission instituted formal proceedings
amounts cannot be ruled out. This applies in particular to the against the companies concerned. The investigations have
assessment of legal risks arising from the diesel issue. been continuing for some time. As indicated in the European
Commission press release, the European Commission has now
narrowed down its investigations exclusively to the subject
Read more about the diesel issue on pages 101 ff. area of emissions. The instituting of proceedings is a custom-
ary and purely procedural move that Volkswagen was expect-
ing. The Volkswagen Group and the Group brands affected
In 2017, plaintiffs in various U.S. jurisdictions filed numerous are cooperating fully with the European Commission, and
lawsuits against several car manufacturers, including Volks- will continue to do so.
wagen AG and other companies of the Volkswagen Group, on
behalf of putative buyer classes of German luxury vehicles; the We are also exposed to the latent risk of litigation, especially
proceedings are now being instituted through two consoli- in the areas of competition and antitrust law, product liabil-
dated class actions in the multidistrict litigation in California. ity and patents. New risks may arise in the future especially
The lawsuits claim that since the 1990s, the defendants had in light of advancing digitalization. Necessary decisions and
engaged in a conspiracy to unlawfully increase the prices of actions in all legal areas are therefore backed up with the
German luxury vehicles and therefore violated U.S. antitrust expertise of the Audi internal legal counsel. In selected cases
and consumer protection laws. A similar argument was used we also consult external legal experts.
by plaintiffs in Canada on behalf of putative buyer classes of
148
There are fundamentally other risks associated with legisla- breaches in connection with IT systems for the storage or
tive changes, which could also give rise to differences in in- deletion of personal data, for example, face high financial
terpretation. Internal processes are continually adapted and penalties. The Audi Group counters this risk with a data
improved accordingly and supervisory functions incorporated. privacy management system, data protection contacts in the
All activities by corporate bodies, managers and employees departments and by holding awareness-raising measures for
must comply with the current legal framework and with inter- all employees. The system’s ongoing development has also
nal corporate guidelines. We are able to sensitize employees been commissioned. The risk was recorded for the first time
through the preventive action of the Audi Group’s compliance in the 2017 fiscal year and has not increased since.
organization, for instance through a wide range of internal
communication and information measures. In the 2018 fiscal The growing professionalization of white-collar crime poses
year, we substantially extended our training program and an increased threat to IT security for the businesses affected,
focused it on the various target groups through mandatory for example. It may take the form of unauthorized access to
modules and function-specific programs. Additional advisory and manipulation of data as well as deliberate sabotage.
programs on how to handle compliance topics are widely There are also threats in the form of data theft and system-
offered and are being expanded further. These organizational atic espionage of sensitive information. This risk is countered
measures ensure that all actions are in accordance with the as effectively as possible by means of comprehensive IT secu-
law, even if misconduct by individuals cannot be ruled out rity regulations and ongoing refinement of the IT security
altogether. organization as well as by specifying Group-wide security
standards and regular simulations of hacker attacks. We run
// INFORMATION AND IT RISKS risk analyses, security audits and optimization projects to
The UNECE (United Nations Economic Commission for Europe) sustainably ensure the continuity and security of internal
is currently discussing mandatory management systems in processes. In addition, new IT systems are subjected to
connection with cyber security and software updates, which increased stress testing both before their adoption and also
could already be introduced from 2020. A certified Cyber while in use. This risk has not increased compared with the
Security Management System (CSMS) as a requirement for previous year.
the homologation of vehicles along with a type approval cer-
tificate for cyber security as part of the approval process could // INFORMATION AND IT OPPORTUNITIES
be required in the future. The aim is to protect and safeguard Further digitalization of our internal processes along the
the increasingly networked and autonomous functions in the entire value chain as well as the standardization of our IT
vehicle more effectively. Along similar lines, a system for systems are being advanced intensively. For instance, we are
software updates needs to be introduced to ensure that these targeting further efficiency improvements that will therefore
are protected against manipulation and misuse. Because of save resources.
the system’s high complexity, there is the risk that the new
requirements will not be implemented by the planned intro- The use of data analytics offers us opportunities to align our
duction date, which could lead to an approval freeze and products and new business models even more closely with
consequently put the volume at risk. By way of a counter- what customers want, and develop them in a way that adds
measure, the certification requirements are currently defined value and boosts efficiency. Data protection enjoys top prior-
cross-divisionally. A project team is also already working on ity in that regard. We are very aware of the sensitivity of the
implementing the requirements on a process, organization debate surrounding data protection in connection with vehi-
and content-related level. The risk was recorded for the first cle data, and we are continuously developing appropriate
time in the period under review. solutions consistent with new technical innovations that
strictly adhere to the principles of data protection law, in
Since the EU General Data Protection Regulation came into particular transparency, customer self-determination and
force in May 2018, the demands on data protection and data data security. This subject area also offers us extensive op-
security have risen significantly. Companies that commit portunities and potential for our ATP.
149
// FINANCIAL RISKS Audi Group supports the management of these risks. The
As a globally active company, the Audi Group is exposed to current risk situation and the related hedging strategies, for
currency risks. Exchange rate fluctuations can, for example, example, are agreed regularly with the full Board of Manage-
influence payment streams and assets of the Audi Group. ment and actioned by Volkswagen Group Treasury. The deriv-
These fluctuations may be caused by economic or political atives used, provided the conditions are met, are fundamen-
developments, such as Brexit, trade disputes or a debt crisis. tally also reflected in the accounts as hedging relationships.
Changes in the sales volume with the result that there is an To minimize transaction costs, hedging transactions are con-
excess or shortfall in hedging may equally drive such devel- cluded in collaboration with the Volkswagen Group. The Audi
opments. These risks are minimized by natural hedging and Group additionally protects itself from commodity price
the use of original and derivative financial instruments. developments by concluding long-term contracts. The goal is
Natural hedging is achieved, for example, through local pro- to ensure price stability in product costing.
duction in important sales regions and through the local
sourcing of components. We reduce the residual exchange The most important financial goal is to ensure the solvency
rate risk by means of foreign currency hedging transactions and financing of the Audi Group at all times. At the same
with matching currencies and maturities, in the form of for- time, we seek to achieve a suitable return on the investment
ward transactions and options contracts. The goal of this cover of surplus liquidity. Particularly if there are substantial devia-
is to hedge planned payment streams particularly from invest- tions from plan – for example in the event of short-term neg-
ment, production and sales planning. This approach then also ative economic developments – there could be liquidity risks
increases short, medium and long-term planning certainty. in the form of higher capital costs or increased difficulty in
Methodologically, simulations of multiple stress scenarios raising financing for capital investment. This permanent risk
are used as the basis for currency risk management. Risks are is countered through a multi-stage liquidity planning process,
predominantly connected with the following currencies: U.S. the involvement of decision-making committees and daily
dollar, Chinese renminbi, pound sterling and Canadian dollar. cash disposition. Furthermore, the material companies
The risk has increased compared with the previous year as a of the Audi Group are included in the cash pooling of the
result of a change in the measurement model. The underlying Volkswagen Group. This arrangement makes intra-Group and
risk situation has not changed materially. external transactions efficient and also reduces transaction
costs.
Alongside exchange rate movements, the development in
interest rates, commodity prices as well as stock and bond Counterparty risks also fundamentally occur if a contracting
markets fundamentally represents a financial risk for the partner is no longer able to meet its contractual payment or
Audi Group. delivery obligation. This can have considerable financial con-
In organizational terms, the management of financial and sequences. These credit risks are managed centrally by Volks-
liquidity risks is the responsibility of the Treasury area, which wagen Group Treasury. A diversification strategy is applied and
uses original and derivative financial instruments to minimize contracting partners are evaluated using creditworthiness
these risks. An established regular process within the criteria to counter the risk of losses or default.
150
Through cooperation with Volkswagen Financial Services AG, times in order to maintain business operations. Their failure
Braunschweig, the Audi Group is able to offer its customers or operational restriction – for example in the event of a fire
borrowing and leasing arrangements. In connection with the or earthquake – would interrupt production and therefore
refinancing of leasing agreements, deterioration in the cost have a major impact on our ability to deliver products. As
of capital could fundamentally lead to financial or volume well as the image loss, there would above all be financial
risks for the Audi Group. consequences. Fire prevention measures and safety plans
as well as insurance cover constitute risk-reducing measures
and are regularly reviewed and developed. This risk has not
Read more about the hedging policy and risk increased compared with the previous year.
management in the area of financial risks in the
Notes to the Consolidated Financial Statements Tougher statutory requirements and the absence of uniformity
under Note 37. in safety standards between delivering countries as well as
quality problems in the production and development process
can cause delays in the product development process and
// FINANCIAL OPPORTUNITIES price fluctuations within the product range. There is also
Rising growth rates for economic output in export markets potential for a negative impact on the delivery volume, image
that are of importance to us may prompt appreciation of a and financial targets. Ducati ensures that the required char-
country’s national currency and have a correspondingly bene- acteristics are achieved by following a comprehensive product
ficial impact on the Audi Group. Political changes can also development process including the appropriate validations
play a decisive role in such developments. In addition, rising and quality checks.
interest rates may have a positive effect on returns from the
investment of surplus liquidity. Our targeted working capital // OPPORTUNITIES FOR MOTORCYCLES SEGMENT
management can equally have positive financial consequences. A positive development in the worldwide economic situation
An advantageous development in commodity prices from our and consequently a rise in demand for motorcycles in the
perspective represents a further financial opportunity for us. premium segment fundamentally create additional sales
opportunities for Ducati. The expansion of Ducati’s product
/ MOTORCYCLES SEGMENT range and the development of new customer segments as
As well as the most significant and latent risks and opportu- well as new markets could generate further market opportu-
nities for the Audi Group, we are exposed to specific risks and nities for the Company.
opportunities from the Motorcycles segment. The significance
of these risks is also reflected in the order in which they are The expertise and know-how of the Audi Group can help with
presented here. the quick and efficient implementation of the Ducati brand’s
internationalization measures. In addition, Ducati can bene-
// RISKS FOR MOTORCYCLES SEGMENT fit from far-reaching synergy potential in the Audi Group’s
Both the main production plant and the main warehouse of development, operating and purchasing processes.
Ducati are situated in Bologna (Italy). It is therefore indis-
pensable to keep these functioning and operational at all
151
REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES // REPORT ON POST-BALANCE SHEET DATE EVENTS, DISCLAIMER
/ OVERALL ASSESSMENT OF THE RISKS AND as well as the future technologies such as autonomous driving.
OPPORTUNITIES SITUATION OF THE AUDI GROUP By being part of the Volkswagen Group, we also benefit from
The overall risks and opportunities situation for the Audi a wide range of synergies and increased competitiveness. In
Group arises from the individual risks and opportunities pre- addition to the production network, this also applies to other
sented above. The most significant risks are currently in con- elements of the value chain, such as in the areas of Research
nection with deviations from planned project goals during and Development as well as Procurement.
product development, the further tightening of exhaust,
emissions and homologation regulations worldwide as well The current risk situation has already been built into the fore-
as future potentially mandatory management systems for cast for the 2019 fiscal year. The residual overall risk within
cyber security and software updates. These risks could have the Audi Group that is not reflected in the forecast has fallen
an adverse impact particularly on the planned volume devel- slightly compared with the previous year. However, particularly
opment, as well as on our financial key figures. the number of risks reported has increased. Nevertheless, on
the basis of the information known to us there continue to
Principal opportunities are offered by the implementation of be no risks that could pose a threat to the Audi Group and
the ATP, the renewal and expansion of our product portfolio material Group companies as going concerns.
DISCLAIMER
The report on expected developments, risks and opportunities assessments and are by their very nature subject to risks and
contains forward-looking statements relating to anticipated uncertainties. Actual outcomes may differ from those pre-
developments. These statements are based upon current dicted in these statements.
REPORT ON POST-BALANCE SHEET

DATE EVENTS
There were no reportable events of material significance
after December 31, 2018.
152
CORPORATE GOVERNANCE // CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE
/ GERMAN CORPORATE GOVERNANCE CODE IN 2018 in line with the recommendations of the currently valid German
On April 24, 2017, the Federal Ministry of Justice and Con- Corporate Governance Code for the first time for the 2019 fis-
sumer Protection announced a new version of the German cal year. Against this background, the deviation from the rec-
Corporate Governance Code dated February 7, 2017, in the ommendation in No. 4.2.3, Para. 2, Sentence 3 regarding the
official section of the Federal Gazette (Bundesanzeiger). The variable components of Board of Management remuneration
Board of Management and Supervisory Board of AUDI AG also relating to future periods is declared for the 2018 fiscal year.
considered at length the recommendations and suggestions
in the Code during the 2018 fiscal year and made inferences. According to the recommendation No. 5.3.2, Sentence 3, the
Chairman of the Audit Committee should, among other
things, be “independent.” The Chairman of the Audit Commit-
Read online the current joint declaration of the tee’s membership of the Supervisory Board of Volkswagen AG
Board of Management and the Supervisory Board and of the Board of Management of Porsche Automobil Hold-
of AUDI AG on the recommendations of the ing SE may be indicative of a lack of independence as defined
German Corporate Governance Code at in the recommendations. In the view of the Board of Manage-
www.audi.com/cgc-declaration. ment and of the Supervisory Board, these activities neither
give rise to a conflict of interest, nor do they have an adverse
effect on the work of the Chairman of the Audit Committee.
/ IMPLEMENTATION OF THE RECOMMENDATIONS The exception is declared merely as a precaution.
AND SUGGESTIONS
The recommendations of the “Government Commission on With regard to No. 5.3.3 (Nominating Committee), a Nomi-
the German Corporate Governance Code” announced by the nating Committee would, in the view of the Supervisory Board,
Federal Ministry of Justice on April 24, 2017, in the official only increase the number of committees without, however,
section of the Federal Gazette (Bundesanzeiger), in the ver- leading to a noticeable improvement in the work of the Board.
sion dated February 7, 2017, were implemented in the period
since the most recent Declaration of Conformity of Regarding the recommendation set forth in No. 5.4.1, Para. 6
November 30, 2017, and continue to be implemented with on the disclosure of certain circumstances when the Super-
the exception of the following numbers: visory Board makes election recommendations to the General
Meeting, the requirements in the Code are vague and not
> 4.2.3, Para. 2, Sentence 3 (variable components of Board clearly defined. An exception is therefore declared merely as
of Management remuneration, multi-year measurement a precaution, while the Supervisory Board will endeavor to
basis mainly relating to future periods), fulfill the requirements of the recommendation in the Code.
> 5.3.2, Para. 3, Sentence 2 (independence of the Chairman
of the Audit Committee), The Board of Management and the Supervisory Board believe
> 5.3.3 (Nominating Committee), that the current remuneration arrangements for Supervisory
> 5.4.1, Para. 6 (disclosure with regard to nominations), Board members set forth in Section 16 of the Articles of Incor-
> 5.4.6, Para. 2, Sentence 2 (performance-related remuner- poration and Bylaws of AUDI AG provide for a performance-
ation of the Supervisory Board). related component that is oriented toward the sustainable
growth of the enterprise. In view of the vagueness of the rec-
The Supervisory Board of AUDI AG considers a multi-year meas- ommendation in No. 5.4.6, Para. 2, Sentence 2 of the Code,
urement basis for Board of Management remuneration, which and considering that the scope of a performance-related re-
is essentially a forward-looking approach, to be sensible. It has muneration component aimed at a sustainable growth of the
therefore approved an adjustment to the remuneration system
153
CORPORATE GOVERNANCE REPORT // CORPORATE GOVERNANCE
enterprise has not yet been clarified, the Board of Manage- transactions that the Company conducts. To that end, the
ment and the Supervisory Board declare this exception merely members of the Supervisory Board must as a whole be famil-
as a precaution. iar with the sector in which the Company operates. Core com-
petences and requirements for the Supervisory Board as an
The response to the suggestions made in the Code is as fol- overall body include in particular:
lows: The Supervisory Board concurs that all suggestions
with the exception of the suggestion from No. 4.2.3, Para. 2, > Knowledge of or experience in the manufacturing and sale
Sentence 9 (multi-year, variable remuneration components of vehicles and powertrains of all kinds or of other technical
should not be paid out early) are met. The Supervisory Board products,
will only approve such a remuneration rule in the future. > Knowledge of the automotive industry, business model
and market, knowledge of the products,
/ STOCK OPTION PLANS AND SIMILAR SECURITIES- > Knowledge of the Research and Development area, in par-
BASED INCENTIVE ARRANGEMENTS ticular in the technological fields that are relevant for the
There were no agreements with members of the Board of Company,
Management concerning any such plans or incentive arrange- > Experience in positions of entrepreneurial leadership or on
ments in the 2018 fiscal year. Supervisory Boards of major corporations,
> Knowledge of the governance, legal and compliance areas,
> In-depth knowledge of the fields of finance, accounting or
Read more about the planned reorganization of financial audit,
the remuneration system as well as the perfor- > Knowledge of the capital market,
mance share plan in the Notes to the Consolida- > Knowledge of the areas of Controlling/Risk Management,
tion Financial Statements under Note 47. Internal Control System,
> Human resources competence (in particular searching for
and recruiting Board of Management members, successor
/ GOALS FOR THE COMPOSITION OF THE process) as well as knowledge of incentive and remunera-
SUPERVISORY BOARD tion systems for the Board of Management,
Taking into account the specific situation of the Company, > In-depth knowledge of or experience in the areas of co-
the business purpose, the size of the Company and the pro- determination, employee affairs and the working world in
portion of international business activities as well as the the Company.
ownership structure, the Supervisory Board heeds the follow- The current composition of the Supervisory Board satisfies
ing elements when working towards its target composition: the competence profile.
> At least two seats on the Supervisory Board for persons / GROUP MANAGEMENT DECLARATION
who fulfill the criterion of internationality to a particular ON THE INTERNET
extent, The Group Management Declaration pursuant to Section 315d
> At least one shareholder seat on the Supervisory Board for of the German Commercial Code (HGB) in conjunction with
persons with no potential conflicts of interest, in particu- Section 289f of the German Commercial Code (HGB) contains
lar as a result of performing an advisory or executive func- both the Declaration of Conformity by the Board of Manage-
tion at customers, suppliers, lenders or other third parties, ment and Supervisory Board pursuant to Section 161 of the
> At least one shareholder seat on the Supervisory Board German Stock Corporation Act (AktG) and disclosures on cor-
for independent Supervisory Board members within the porate governance practices. The methods and practices of the
meaning of No. 5.4.2 of the Code (in this case, currently Board of Management and Supervisory Board as well as the
Dr. Julia Kuhn-Piëch), committees established and gender quotas are also described.
> At least one seat on the Supervisory Board for persons who In addition, disclosures on the diversity concept for the
contribute to the Board’s diversity in particular. Board of Management and Supervisory Board are made.
The Supervisory Board as an overall body must possess the Read more online about the Group Management Decla-
requisite expertise and competences to be in a position to ration at www.audi.com/corporate-management.

perform its supervisory function and assess and monitor the
154
INTEGRITY AND COMPLIANCE // CORPORATE GOVERNANCE REPORT
INTEGRITY AND COMPLIANCE

Integrity and compliance with laws and regulations are the ethical standards and our corporate values. Behaving with in-
basis of our corporate activity and have top priority in the tegrity stems from the personal conviction of every individual
Audi Group. They form the basis for a good reputation, for the to do the right thing and to adhere to the right principles re-
trust of customers and business partners, for the wellbeing gardless of emotional, economic or social pressure. This sets
of employees as well as for sustainable economic success, integrity apart from compliance, which we take to mean ad-
which should not be diminished by the risk of high financial hering to statutory regulations as well as internal corporate
damage resulting from fines, a loss of profit, mandatory policies and our Code of Conduct. Compliance is about pro-
compensation payments or criminal investigations. To avoid tecting employees and the Company. In our understanding,
the aforementioned, effective compliance is needed within an organization whose employees operate in a legally com-
the Company in addition to a culture based on integrity. The pliant way and observe internal policies and codes of conduct
Audi Group pursues primarily a preventive approach in this can be considered a reliable and trustworthy partner.
regard. Its aim is to eliminate in advance any possible
breaches of the rules. Distinction between integrity and compliance in the
Audi Group
Within the Audi Group, the topics of integrity, compliance
and risk management at AUDI AG are handled by a dedicated Integrity Compliance
organizational unit. This is headed by the Chief Compliance
Officer and reports directly to the Board Member for Finance, Mainly intrinsic Mainly external
China, Compliance and Integrity. Since June 2017, this organ- Motivation motivation (out of pressure (e.g. through
conviction/reason) legislation)
izational unit has also coordinated cooperation with the
Independent Compliance Monitor/Auditor Mr. Larry D.
Promotion of moral Prevention of unlawful
Thompson, appointed by the U.S. authorities. Objective
behavior actions
Mr. Thompson will assess and oversee the fulfillment by
Volkswagen and Audi of the conditions from the agreements
with the U.S. agencies on the diesel issue for a period of Values, Clear rules, policies,
Approach
corporate culture controls
three years. These include measures to further strengthen
compliance and the reporting and control systems as well
as implementing an extended program for compliance and
ethical conduct. The resources for integrity and compliance We also attach particular importance to our corporate cul-
were substantially increased in the year under review, to ture. Culture means the sum total of all values according to
anchor the numerous building blocks of effective integrity which we work together. It is evident in the way people,
and compliance management in the Company. This was partly teams and departments within the company treat each other
driven by the comprehensive substantive requirements under and work together. We believe every company needs not only
the agreement with the United States. Further conditions ideals, but also shared cultural values. Our four corporate
and requirements from the settlement agreements with the values at Audi provide the basis: appreciation, openness,
U.S. agencies were already implemented and met according responsibility and integrity.
to schedule in the period under review. Our integrity program is designed to further strengthen the
corporate culture at Audi. It places the spotlight on a dialogue
/ INTEGRITY AND CORPORATE CULTURE on the topic of integrity. We want to promote the open shar-
Behaving with integrity generally means acting in a way that ing of ideas within the Company, propagate a corporate cul-
consciously reflects chosen values, principles and personal ture based on trust and firmly embed moral, values-based
convictions. At Audi, we interpret integrity as acting in a action at Audi. To that end we defined six subject areas that
responsible and entrepreneurial way that embraces general have also been agreed within the Volkswagen Group.
155
CORPORATE GOVERNANCE REPORT // INTEGRITY AND COMPLIANCE
Subject areas of the Audi integrity program (T4I) in the 2018 fiscal year. The program is based on the
principles of the Ethics & Compliance Initiative (ECI), a glob-
ally recognized standard for ethical corporate principles. T4I
brings together all previous measures, projects and initia-
tives dealing with integrity and compliance. It aims to give
employees a firm handle on behaving with integrity and pro-
mote cultural change at Audi.
/ COMPLIANCE MANAGEMENT SYSTEM IN THE

AUDI GROUP
The Compliance Management System (CMS) is intended to
ensure that the Company’s corporate bodies and employees
suitably comply with statutory and internal regulations. It
incorporates all measures and systems to coordinate and
ensure compliance within the Company – and in particular
implementation of the compliance program. In addition to
AUDI AG, around 50 participations worldwide fall within the
scope of the CMS, with predominantly local compliance
The topic of integrity was given further exposure at Audi in officers acting as multipliers.
2018 through regularly recurring events and dialogue-based
communication measures. For example, we held the manda- Within the Audi Group, we have defined intrinsic compliance
tory Audi Convention for all leaders from the Ingolstadt and topics which need to be observed in order to protect our
Neckarsulm sites on the topics of integrity, culture and com- brands. These are permanently tracked and supplemented by
pliance, in the form of web-based training and a one-day the annually updated compliance program. They also essen-
face-to-face event. In all, 3,350 managers, leaders and tially reflect the statutory framework that a company must
Works Council members took part. The objective of the Audi comply with. Audi already offers various information and
Convention was to raise awareness of the economic and social training measures as well as ad hoc consultancy services for
relevance of integrity-led, upright behavior and value-based the intrinsic compliance topics. The requirements on specific
leadership. To communicate the topics addressed throughout topics are additionally set forth in corporate policies that
the Company and thus raise awareness of them among all have been enacted on behalf of the Board of Management
employees, after the event the participants were supplied and are binding for all employees.
with a starter kit containing various work materials. In addi-
tion, several fireside chats on the subject of integrity took place Intrinsic compliance topics at Audi:
in the year under review. These provided Board of Management > Anti-corruption/anti-fraud
members, managers and employees with an opportunity to > Data protection
discuss the topic of integrity and its significance for Audi. A > Prevention of money laundering
comprehensive web-based training range as well as face-to- > Business partner approval
face events on compliance and integrity, some of them man- > Information security
datory, help to spread these topics among the workforce. > Insider information
> Antitrust law
AUDI AG also launched a pilot project for the Volkswagen > Issue of external contracts
Group’s integrity and compliance program “Together4Integrity”
156
INTEGRITY AND COMPLIANCE, REMUNERATION REPORT // CORPORATE GOVERNANCE REPORT
The compliance program is an important tool for creating a Internal Compliance Risk Assessment (ICRA) was carried out
uniform basis for compliance activities within the Audi Group at 52 companies in Germany and internationally in the year
and is approved annually by the Board Member for Finance, under review. A questionnaire on the risk areas of corruption,
China, Compliance and Integrity. As well as continuously money laundering and fraud served to render the risk land-
addressing the intrinsic compliance topics, it encompasses scape of the companies transparent so that suitable action
selected focal areas that reflect current developments in the to reduce the risk profile in each specific case can be taken as
Company and the industry. The activities in the period under required.
review continued to be determined especially by requirements
resulting from the settlement agreements reached with the The Audi Compliance Cockpit is the central digital compliance
U.S. agencies as a result of the diesel issue. portal that brings together all digital applications of the
Compliance area and is intended in particular to help the par-
// IMPLEMENTATION OF THE RECOMMENDATIONS ticipations conduct their compliance work. Its components
FROM THE MONITORSHIP include for instance conducting business partner approval,
With the publication of the first Monitor Report and the easy custom solutions for online training and digital report-
recommendations that resulted from it for the Audi Group, ing of compliance measures required and implemented in
a large share of resources in the year under review was dedi- the companies. The Audi Compliance Cockpit was introduced
cated to implementing these punctually. The recommenda- in 2018.
tions included the organizational structuring and expansion
of the compliance organization at head office and the sites The revision of the Audi Corporate Regulations, started in
worldwide, expanding the training programs and also revising 2017, also continued. The aim here is to restructure and
or supplementing the corporate regulations. For example, simplify the collected internal corporate regulations and
the explicit inclusion of compliance in mergers & acquisitions communicate them highly effectively. An important partial
projects was also a new stipulation. aspect of this project are the Volkswagen Group Policies, the
influence of which on the regulatory hierarchy needs to be
// FURTHER MAIN FOCUSES taken into account when defining the next steps.
As well as regular recording of detailed risk assessments on
the subject of compliance for the regular GRC process, the
REMUNERATION REPORT
/ SYSTEM OF REMUNERATION FOR THE / BASIC FEATURES AND DEVELOPMENT OF

SUPERVISORY BOARD AND BOARD OF REMUNERATION PAID TO THE BOARD OF
MANAGEMENT MANAGEMENT
The remuneration report includes details of the remunera- The full Supervisory Board passes resolutions on the remu-
tion paid to the members of the Board of Management and neration system and the total remuneration for individual
Supervisory Board of AUDI AG, broken down by individual members of the Board of Management of AUDI AG on the
member and by component, as well as information on the basis of the Presiding Committee’s recommendations. The
pension arrangements for members of the Board of Manage- remuneration of active members of the Board of Management
ment, broken down by individual member, pursuant to Sec- complies with the statutory requirements of the German
tion 314, Para. 1, No. 6a), Sentence 5 ff. of the German Com- Stock Corporation Act (AktG) and the recommendations of the
mercial Code (HGB) and the German Corporate Governance German Corporate Governance Code (DCGK). In particular,
Code (DCGK). We also explain the main elements of the the remuneration structure is focused on ensuring the sus-
remuneration system for the Board of Management and tainable growth of the enterprise in accordance with the
Supervisory Board. German Act on the Appropriateness of Management Board
Remuneration (VorstAG; Section 87, Para. 1 of the German
Stock Corporation Act [AktG]).
157
CORPORATE GOVERNANCE REPORT // REMUNERATION REPORT
The system of remuneration for members of the Board of The basic remuneration is reviewed on a regular basis and
Management was approved by the 121st Annual General adjusted as necessary.
Meeting on May 20, 2010, by 99.70 percent of the votes cast.
/// VARIABLE REMUNERATION
The level of remuneration paid to the Board of Management The variable (performance-related) remuneration consists of
should be appropriate and attractive by national and interna- a business performance bonus, based on the year under re-
tional comparison. The relevant criteria include the tasks of view and the previous year (two-year period), and, since 2010,
the individual Board member, the member’s personal perfor- has also included a Long Term Incentive (LTI) based on per-
mance, the Company’s economic situation, performance and formance in the year under review and over the previous
future prospects, and also the standard nature of the remu- three fiscal years (four-year period). These two components
neration, taking account of competitors on the market and of variable remuneration are therefore calculated using a
the pay structure otherwise in place within the Audi Group measurement basis spanning several years and take account
and the Volkswagen Group. Regular comparisons of remuner- of both positive and negative developments. In addition, a
ation levels are carried out in this regard. bonus may be awarded for the individual performance of
members of the Board of Management (one-year variable
// COMPONENTS OF THE REMUNERATION PAID TO remuneration).
THE BOARD OF MANAGEMENT
The remuneration paid to the Board of Management comprises The figures shown in the table “Board of Management remu-
fixed (non-performance-related) and variable (performance- neration for 2018 pursuant to German Commercial Code
related) components. The fixed components guarantee basic (HGB)” reflect the figures reported in the 2018 financial
remuneration that allows the individual members of the statements as expense.
Board of Management to execute their duties conscientiously
and in the best interests of the Company, without becoming The figures shown in the tables “Board of Management remu-
dependent upon achieving short-term targets only. Variable neration (benefits received) pursuant to German Corporate
components, dependent among other things on the financial Governance Code (DCGK)” reflect the amounts paid out in
performance of the Company, serve to ensure the long-term the fiscal year in question.
impact of performance incentives.
The figures shown in the tables “Board of Management remu-
Pursuant to the Supervisory Board resolution of November 24, neration (benefits granted) pursuant to German Corporate
2016, there is a cap on both total remuneration and its varia- Governance Code (DCGK)” are based on a mean probability
ble components. scenario.
/// FIXED REMUNERATION If extraordinary factors arise, the Supervisory Board may
The fixed (non-performance-related) remuneration comprises decide to impose a cap on the variable remuneration compo-
fixed remuneration and fringe benefits. In addition to the nents.
basic remuneration, the fixed remuneration includes varying
levels of remuneration for appointments at Audi Group com- //// BONUS SYSTEM
panies, subsidiaries and participations. The fringe benefits The business performance bonus rewards the positive busi-
constitute remuneration in kind. These include in particular ness development of the Audi Group. Basically, the amount
the provision of operating resources, such as company cars, of the bonus is based on the results achieved, on the Com-
as well as payment of insurance premiums. Taxes due on this pany’s economic situation and on the personal performance
remuneration in kind are paid by AUDI AG in accordance with of the individual member of the Board of Management.
Company guidelines. Operating profit, in the form of a two-year average, is used
as the calculation basis. The system is regularly reviewed by
the Supervisory Board and adjusted where necessary.
158
REMUNERATION REPORT // CORPORATE GOVERNANCE REPORT
//// LONG TERM INCENTIVE (LTI) successful. If the return on sales does not exceed a threshold
At Audi, the level of the LTI is determined by attainment of of 1.5 percent, the return index will equal zero. Consequently,
the strategic goals of the Volkswagen Group. The relevant the overall index for the fiscal year in question will then also
target areas for the 2018 remuneration year are: be zero.
> Leader in customer satisfaction, measured using the /// OTHER AGREEMENTS
customer satisfaction index, Contracts with members of the Board of Management include
> Leading employer, measured using the employee index, an entitlement to continued payment of the standard remu-
> Rise in sales, measured using the growth index, and neration for a period of six to twelve months in the event of
> Rise in return, measured using the return index. sickness, but not beyond the term of the employment con-
tract. In the event of disability, members are entitled to
The customer satisfaction index is calculated based on indi- retirement pay.
cators of our customers’ overall satisfaction with the dealers
supplying the products, with new vehicles and with the service In addition, contracts with members of the Board of Manage-
establishments, based on the most recent workshop visit in ment include an entitlement to a 60 percent widow’s pension,
each case. The employee index is calculated on the basis of a 15 percent half orphan’s pension and a 30 percent full
such indicators as “employment” and “productivity,” as well orphan’s pension based on retirement pay.
as the participation rate and results of employee surveys.
The growth index is calculated from the indicators “deliveries /// OUTLOOK
to customers” and “market share.” The return index is deter- The Supervisory Board of AUDI AG considers a multi-year
mined from the development in the return on sales and the measurement basis for Board of Management remuneration,
dividend per ordinary share. which is essentially a forward-looking approach, to be sensi-
ble. It has therefore resolved an adjustment to the remunera-
The calculated indices for customer satisfaction, employees tion system in line with the recommendations of the current
and the sales situation are added together and the total is German Corporate Governance Code, which is to be imple-
then multiplied by the return index. This method ensures mented in 2019.
that the LTI is only paid out if the Group has been financially
/ BOARD OF MANAGEMENT REMUNERATION FOR 2018 PURSUANT TO GERMAN COMMERCIAL CODE (HGB)
EUR 2018 2017
Non- Performance- Total Total

performance- related remuneration remuneration
related remuneration 1) 2)
remuneration
Abraham Schot 1,206,615 1,849,700 3,056,315 886,835

Rupert Stadler (until Oct. 2, 2018) 3) 372,822 892,792 1,265,614 2,765,000
Wendelin Göbel 606,104 1,849,700 2,455,804 892,226
Peter Kössler 665,717 1,849,700 2,515,417 890,726
Dr. Bernd Martens 770,847 1,849,700 2,620,547 2,533,820
Dr.-Ing. Peter Mertens (until Oct. 31, 2018) 4) 520,685 1,541,417 2,062,102 7,807,686
Hans-Joachim Rothenpieler (since Nov. 1, 2018) 89,745 261,750 351,495 –
Alexander Seitz 601,268 1,849,700 2,450,968 1,205,759
Members of the Board of Management who left in the previous year – – – 7,409,333
Total 4,833,803 11,944,459 16,778,262 24,391,385
1) Corresponds to the amounts set aside in the fiscal year. The Supervisory Board determines the amount of the payment.
2) In addition, provision shortfalls/surpluses result in a total expense in 2018 of EUR 1,236,000 (provision shortfalls for Rupert Stadler of EUR 1,066,000, Dr. Bernd Martens of
EUR 226,500, Dr.-Ing. Peter Mertens of EUR 104,700; provision surpluses for Wendelin Göbel, Peter Kössler, Abraham Schot, Alexander Seitz EUR 40,300 each).
3) The remuneration of Rupert Stadler is determined according to the VW Group system, based on his activities as Group CEO of Volkswagen AG, and rebilled pro rata to AUDI AG.
This approach may produce temporal and material discrepancies.
4) To compensate for lost entitlements resulting from the change in employer, Dr.-Ing. Peter Mertens received EUR 6.0 million in the previous year.
159
/ BOARD OF MANAGEMENT REMUNERATION

(BENEFITS RECEIVED) PURSUANT TO GERMAN
CORPORATE GOVERNANCE CODE (DCGK)
The figures for the variable remuneration shown here as
benefits received reflect the amounts paid out in the
respective fiscal year.
EUR Abraham Schot

Chairman of the Board of Management 1)
2018 2017
Fixed remuneration 1,146,667 180,000

Fringe benefits 59,948 12,835
Total 1,206,615 192,835
One-year variable remuneration 265,000 –
Multi-year variable remuneration 388,700 –
Business performance bonus (two-year period) 180,200 –
LTI (four-year period) 208,500 –
Total 1,860,315 192,835
Pension expense 599,629 85,314
Total remuneration 2,459,944 278,149
1) Until Jun. 18, 2018, Member of the Board of Management for Marketing and Sales; from Jun. 19, 2018, to Dec. 31, 2018, Member of the Board of Management for Marketing and Sales
and interim Chairman of the Board of Management; since Jan. 1, 2019, Chairman of the Board of Management and interim Member of the Board of Management for Marketing and Sales
EUR Rupert Stadler 1)

Left: October 2, 2018
2018 2017
Fixed remuneration 3) 372,822 810,000

Fringe benefits – –
Total 372,822 810,000
One-year variable remuneration 1,296,784 974,431
Multi-year variable remuneration 1,724,216 1,203,069
Business performance bonus (two-year period) 869,354 560,706
LTI (four-year period) 854,862 642,363
Total 3,393,822 2,987,500
Pension expense 4) – –
Total remuneration 3,393,822 2,987,500
2) Inactive from Jun. 19, 2018, until Oct. 2, 2018
3) In the 2018 fiscal year, the fixed remuneration was paid out up until Jun. 18, 2018.
4) Volkswagen AG granted the pension commitment to Rupert Stadler.
160
EUR Wendelin Göbel

Human Resources and Organization
2018 2017
Fixed remuneration 546,667 180,000

Total 606,104 198,226
Total 1,259,804 198,226
EUR Peter Kössler

Production and Logistics
2018 2017

Total 665,717 196,726
Total 1,319,417 196,726
EUR Dr. Bernd Martens

Procurement and IT
2018 2017

Total 770,847 613,820
One-year variable remuneration 980,500 980,000
Multi-year variable remuneration 1,166,000 1,171,300
Business performance bonus (two-year period) 540,600 545,900
LTI (four-year period) 625,400 625,400
Total 2,917,347 2,765,120
161
EUR Dr.-Ing. Peter Mertens

Technical Development
2018 2017
Fixed remuneration 1) 463,334 6,360,000

Total 520,685 6,418,686
Total 2,014,385 6,418,686
EUR Hans-Joachim Rothenpieler

Joined: November 1, 2018
2018 2017
Fixed remuneration 80,000 –

Fringe benefits 9,745 –
Total 89,745 –
One-year variable remuneration – –
Multi-year variable remuneration – –
Business performance bonus (two-year period) – –
LTI (four-year period) – –
Total 89,745 –
Pension expense 69,025 –
Total remuneration 158,770 –
EUR Alexander Seitz

Finance, China, Compliance and Integrity
2018 2017

Total 601,268 511,759
Total 1,254,968 511,759
162
/ BOARD OF MANAGEMENT REMUNERATION

(BENEFITS GRANTED) PURSUANT TO GERMAN
CORPORATE GOVERNANCE CODE (DCGK)
The figures for the variable remuneration shown here as
benefits granted are based on a mean probability scenario.
EUR Abraham Schot

2018 2018 (minimum) 2018 (maximum) 2017
Fixed remuneration 1,160,000 1,160,000 1,160,000 186,667

Fringe benefits 59,948 59,948 59,948 12,835
Total 1,219,948 1,219,948 1,219,948 199,502
One-year variable remuneration 265,000 – 1,060,000 –
Multi-year variable remuneration 388,700 – 2,120,000 –
Business performance bonus (two-year period) 180,200 – 1,060,000 –
LTI (four-year period) 208,500 – 1,060,000 –
Total 1,873,648 1,219,948 4,399,948 199,502
Pension expense 599,629 599,629 599,629 85,314
Total remuneration 2,473,277 1,819,577 4,999,577 284,816
1) Until Jun. 18, 2018, Member of the Board of Management for Marketing and Sales; from Jun. 19, 2018, to Dec. 31, 2018, Member of the Board of Management for Marketing and Sales
and interim Chairman of the Board of Management; since Jan. 1, 2019, Chairman of the Board of Management and interim Member of the Board of Management for Marketing and Sales
EUR Rupert Stadler 1)

2018 2018 (minimum) 2018 (maximum) 2017
Fixed remuneration 3) 372,822 372,822 372,822 810,000

Fringe benefits – – – –
Total 372,822 372,822 372,822 810,000
One-year variable remuneration 974,431 – 1,590,000 883,315
Multi-year variable remuneration 1,203,069 – 3,180,000 1,374,045
Business performance bonus (two-year period) 560,706 – 1,590,000 637,950
LTI (four-year period) 642,363 – 1,590,000 736,095
Total 2,550,322 372,822 5,142,822 3,067,360
Pension expense 4) – – – –
Total remuneration 2,550,322 372,822 5,142,822 3,067,360
2) Inactive from Jun. 19, 2018, until Oct. 2, 2018
3) In the 2018 fiscal year, the fixed remuneration was paid out up until Jun. 18, 2018.
163
EUR Wendelin Göbel

Human Resources and Organization
2018 2018 (minimum) 2018 (maximum) 2017
Fixed remuneration 560,000 560,000 560,000 186,667

Fringe benefits 59,437 59,437 59,437 18,226
Total 619,437 619,437 619,437 204,893
Total 1,273,137 619,437 3,799,437 204,893
Pension expense 248,346 248,346 248,346 162,954
Total remuneration 1,521,483 867,783 4,047,783 367,847
EUR Peter Kössler

2018 2018 (minimum) 2018 (maximum) 2017

Fringe benefits 119,050 119,050 119,050 16,726
Total 679,050 679,050 679,050 203,393
Total 1,332,750 679,050 3,859,050 203,393
Pension expense 221,521 221,521 221,521 96,721
Total remuneration 1,554,271 900,571 4,080,571 300,114
EUR Dr. Bernd Martens

Procurement and IT
2018 2018 (minimum) 2018 (maximum) 2017

Fringe benefits 210,847 210,847 210,847 53,820
Total 770,847 770,847 770,847 613,820
One-year variable remuneration 980,500 – 1,060,000 980,000
Multi-year variable remuneration 1,166,000 – 2,120,000 1,171,300
Business performance bonus (two-year period) 540,600 – 1,060,000 545,900
LTI (four-year period) 625,400 – 1,060,000 625,400
Total 2,917,347 770,847 3,950,847 2,765,120
Pension expense 334,546 334,546 334,546 353,368
Total remuneration 3,251,893 1,105,393 4,285,393 3,118,488
164
EUR Dr.-Ing. Peter Mertens

2018 2018 (minimum) 2018 (maximum) 2017
Fixed remuneration 1) 466,667 466,667 466,667 6,373,334

Fringe benefits 57,351 57,351 57,351 58,686
Total 524,018 524,018 524,018 6,432,020
One-year variable remuneration 618,300 – 883,334 –
Business performance bonus (two-year period) 458,400 – 883,334 –
LTI (four-year period) 417,000 – 883,334 –
Total 2) 2,017,718 524,018 3,174,020 6,432,020
Pension expense 861,169 861,169 861,169 928,370
Total remuneration 2,878,887 1,385,187 4,035,189 7,360,390
2) Includes a top-up amount on minimum remuneration of EUR 1.87 million in the previous year
EUR Hans-Joachim Rothenpieler

Joined: November 1, 2018
2018 2018 (minimum) 2018 (maximum) 2017
Fixed remuneration 83,335 83,335 83,335 –

Fringe benefits 9,745 9,745 9,745 –
Total 93,080 93,080 93,080 –
One-year variable remuneration – – 150,000 –
Multi-year variable remuneration – – 300,000 –
Business performance bonus (two-year period) – – 150,000 –
LTI (four-year period) – – 150,000 –
Total 93,080 93,080 543,080 –
Pension expense 69,025 69,025 69,025 –
Total remuneration 162,105 162,105 612,105 –
EUR Alexander Seitz

2018 2018 (minimum) 2018 (maximum) 2017

Fringe benefits 54,601 54,601 54,601 331,759
Total 614,601 614,601 614,601 518,426
Total 1,268,301 614,601 3,794,601 518,426
Pension expense 415,113 415,113 415,113 156,668
Total remuneration 1,683,414 1,029,714 4,209,714 675,094
165
/ BENEFITS PAID UPON REGULAR TERMINATION OF The measurement of pension obligations also includes other
EMPLOYMENT benefits such as surviving dependents’ pensions and the pro-
In the event of regular termination of their employment, the vision of company cars. The pension obligations measured in
members of the Board of Management are granted retire- accordance with the requirements of German commercial
ment pay including a survivor’s pension as well as the use of law came to EUR 31,228 (22,080) thousand; the amount of
company cars for the period in which they receive retirement EUR 9,944 (16,259) thousand, including transfers, was allo-
pay. The benefits granted are paid out or provided from the cated to the provision in the year under review in accordance
age of 63. Contracts from October 2015 fundamentally spec- with the requirements of German commercial law. Current
ify that these benefits will begin at the age of 65. pension payments are increased in line with the index-linking
of the highest collectively agreed salary, provided that the
Retirement pay is calculated as a percentage of the basic re- application of Section 16 of the German Act on the Improve-
muneration. The individual percentage increases by a speci- ment of Company Pension Provision (BetrAVG) does not lead
fied percentage with every year of service and may be up to to a higher increase.
50 percent of the agreed monthly basic remuneration at the
time of termination of employment. Former members of the Board of Management and their sur-
viving dependents received EUR 21,440 (10,914) thousand in
The pension obligations in accordance with IAS 19 for the past year. For this group of individuals there were pension
members of the active Board of Management amounted to obligations amounting to EUR 100,629 (99,642) thousand
EUR 40,417 (32,951) thousand on December 31, 2018; the measured in accordance with IAS 19 or EUR 83,462 (75,551)
amount of EUR 8,612 (23,040) thousand including actuarial thousand in accordance with the requirements of German
effects in accordance with IAS 19 and transfers was allocated commercial law.
to the provision in the year under review.
// BOARD OF MANAGEMENT PENSIONS IN 2018 (IFRS)
EUR 2018 2017
Pension Present values as Pension Present values as

expense of December 31 expense of December 31
Abraham Schot 599,629 4,347,545 85,314 3,859,969

Rupert Stadler (until Oct. 2, 2018) 1) – – – –
Wendelin Göbel 248,346 8,037,574 162,954 7,933,714
Peter Kössler 221,521 7,532,556 96,721 7,448,299
Dr. Bernd Martens 334,546 7,324,169 353,368 7,154,405
Dr.-Ing. Peter Mertens (until Oct. 31, 2018) 2) 861,169 – 928,370 1,146,784
Hans-Joachim Rothenpieler (since Nov. 1, 2018) 2) 69,025 7,386,338 – –
Alexander Seitz 415,113 5,788,540 156,668 5,407,965
Members of the Board of Management who left in the previous year – – 817,768 –
Total 2,749,349 40,416,722 2,601,163 32,951,136

2) Pension expense in 2018 is reported on a pro rata basis.
166
// BOARD OF MANAGEMENT PENSIONS IN 2018 (GERMAN COMMERCIAL CODE [HGB])
EUR 2018 2017
Service Present values as Service Present values as

costs of December 31 costs of December 31
Abraham Schot 322,855 3,331,889 792,714 2,599,681

Rupert Stadler (until Oct. 2, 2018) 1) – – – –
Wendelin Göbel 58,849 6,081,993 – 816,915 5,233,316
Peter Kössler 22,917 5,969,060 1,034,706 5,260,022
Dr. Bernd Martens 109,457 5,413,389 13,611 4,561,203
Dr.-Ing. Peter Mertens (until Oct. 31, 2018) 2) – 51,606 – 530,946 796,419
Hans-Joachim Rothenpieler (since Nov. 1, 2018) 2) – 19,513 6,002,912 – –
Alexander Seitz 245,628 4,428,616 150,821 3,629,830
Members of the Board of Management who left in the previous year – – – 563,373 –
Total 688,587 31,227,859 1,142,510 22,080,471

2) Service costs in 2018 are reported on a pro rata basis.
/ BENEFITS PAID UPON EARLY TERMINATION OF This includes the amounts agreed with Rupert Stadler and
EMPLOYMENT Dr.-Ing. Peter Mertens in connection with their departure
If the activity is ended with good cause for which the member from the Board of Management.
of the Board of Management is not responsible, entitlement
shall be limited to a maximum of two years’ annual remuner- Rupert Stadler was allocated remuneration that can be bro-
ation (settlement cap). ken down into a non-performance-related component in the
amount of EUR 3,228 thousand and a performance-related
In the event that the employment is ended with good cause component in the amount of EUR 3,692 thousand. Payment
for which the member of the Board of Management is re- of the above amounts to Mr. Stadler is subject to the course
sponsible, no termination payment is made to the Board of and outcome of the criminal proceedings. Volkswagen AG
Management member. and AUDI AG essentially have joint and several liability for
the amounts allocated.
In the event of premature termination of their employment,
the members of the Board of Management are also granted Dr.-Ing. Peter Mertens was granted non-performance-
retirement pay with a survivor’s pension as well as the use of related remuneration in the amount of EUR 2,673 thousand
company cars for the period in which they receive retirement and performance-related remuneration in the amount of
pay. EUR 1,640 thousand for the period November 1, 2018, to
October 31, 2019.
Former members of the Board of Management and their surviv-
ing dependents were allocated EUR 11,233 (24,262) thousand.
167
/ REMUNERATION OF THE SUPERVISORY BOARD payment made for the 2018 fiscal year in accordance with
The remuneration paid to the Supervisory Board is composed of the applicable provision in the Articles of Incorporation and
fixed and variable components in accordance with Section 16 Bylaws.
of the Articles of Incorporation and Bylaws of AUDI AG.
Pursuant to Section 314, Para. 1, No. 6a) of the German The actual payment of individual parts of the total remuner-
Commercial Code (HGB), the remuneration amounts to ation, which will only be determined upon finalization of the
EUR 1,594 (1,207) thousand. The remuneration comprises compensatory payment, will be made in the 2019 fiscal year
EUR 290 (237) thousand in fixed and EUR 1,304 (970) pursuant to Section 16 of the Articles of Incorporation and
thousand in variable components. The level of the variable Bylaws.
remuneration components is based on the compensatory
EUR Fixed Variable Total 2018
Dr.-Ing. Herbert Diess Chairman (since May 8, 2018) 1)

(since May 7, 2018) – – – Shareholder representative
Matthias Müller Chairman 1)
(resigned with effect from Apr. 13, 2018) – – – Shareholder representative
Vice Chairman 1) (since May 9, 2018)
Peter Mosch 2) 21,900 105,689 127,589 Employee representative
Vice Chairman 1) 3)
Berthold Huber 2) 3) 7,450 41,567 49,017 Employee representative
Mag. Josef Ahorner 16,900 76,689 93,589 Shareholder representative 4)
Senator h. c. Helmut Aurenz 3) 4,225 20,783 25,008 Shareholder representative
Rita Beck 2) 14,500 58,000 72,500 Employee representative
Dr. rer. pol. h. c. Francisco Javier Garcia Sanz
(resigned with effect from Apr. 12, 2018) – – – Shareholder representative
Marianne Heiß
(since May 7, 2018) 10,350 37,700 48,050 Shareholder representative
Johann Horn 2) 16,400 76,689 93,089 Employee representative 4)
Gunnar Kilian
(since May 9, 2018) – – – Shareholder representative
Rolf Klotz 2) 17,500 87,000 104,500 Employee representative 5)
Dr. Julia Kuhn-Piëch 13,500 58,000 71,500 Shareholder representative
Petra Otte 2)
(since May 9, 2018) 9,800 37,378 47,178 Employee representative
Dr. jur. Hans Michel Piëch 19,000 87,000 106,000 Shareholder representative 1)
Dipl.-Wirtsch.-Ing. Hans Dieter Pötsch 23,500 116,000 139,500 Shareholder representative 6)
Dr. jur. Ferdinand Oliver Porsche 18,500 87,000 105,500 Shareholder representative 5)
Dr. rer. comm. Wolfgang Porsche 13,500 58,000 71,500 Shareholder representative
Rainer Schirmer 2)
(since May 9, 2018) 13,200 56,067 69,267 Employee representative 4)
Jörg Schlagbauer 2) 19,000 87,000 106,000 Employee representative 5)
Irene Schulz 2) 17,400 76,689 94,089 Employee representative 7)
Helmut Späth 2) 14,500 58,000 72,500 Employee representative
Stefanie Ulrich 14,500 58,000 72,500 Employee representative
Max Wäcker 2) 3) 4,225 20,783 25,008 Employee representative
Hiltrud Dorothea Werner – – – Shareholder representative 5) 8)
Prof. Dr. rer. pol. Carl H. Hahn – – – Honorary Chairman
Total 289,850 1,304,034 1,593,884
1) Member of the Presiding Committee and the Negotiating Committee

2) The employee representatives have stated that their remuneration as Supervisory Board members shall be paid to the Hans Böckler Foundation, in accordance with the guidelines of the
German Confederation of Trade Unions.
3) Until the close of the Annual General Meeting on May 9, 2018
4) Member of the Diesel Committee (since May 9, 2018)
5) Member of the Audit Committee
6) Chairman of the Audit Committee
7) Member of the Presiding Committee, Negotiating Committee and Audit Committee (since May 9, 2018)
8) Chairwoman of the Diesel Committee (since May 9, 2018)
168
MEMBERS OF THE BOARD OF MANAGEMENT AND THEIR MANDATES // CORPORATE GOVERNANCE REPORT
MEMBERS OF THE BOARD OF MANAGEMENT AND THEIR MANDATES

Status of all data: December 31, 2018, or the date on which the member left the Board of Management
Abraham Schot (57) Resigned from the Board of Management at the close of
Chairman of the Board of Management 1), since January 1, 2019 October 2, 2018:
Marketing and Sales 2) Rupert Stadler (55)
Member of the Board of Management of Volkswagen AG, Chairman of the Board of Management 3),
“Premium” brand group, since January 1, 2019 “Premium” brand group 3)
Mandates (on October 2, 2018):
Wendelin Göbel (55)  FC Bayern München AG, Munich (Vice Chairman)
Human Resources and Organization  Porsche Holding Gesellschaft m.b.H., Salzburg, Austria
Mandates:
 Lebenshilfe Werkstätten der Region 10 GmbH, Resigned from the Board of Management at the close of
Ingolstadt October 31, 2018:
 Volkswagen Pension Trust e.V., Wolfsburg Dr.-Ing. Peter Mertens (57)
Peter Kössler (59)
Mandates:
 ERC Ingolstadt Eishockeyclub GmbH, Ingolstadt
 Volkswagen Group Services GmbH, Wolfsburg
Dr. Bernd Martens (52)

Procurement and IT
Hans-Joachim Rothenpieler (61)

Technical Development, since November 1, 2018
Alexander Seitz (56)

1) interim from June 19, 2018, to December 31, 2018

2) interim since January 1, 2019
3) inactive from June 19, 2018, to October 2, 2018
In connection with their duties of Group steering and governance within the Audi Group, the
members of the Board of Management hold further supervisory board seats at Group
companies and material participations.
 Membership of statutorily constituted domestic supervisory boards

 Membership of comparable domestic and foreign regulatory bodies
169
CORPORATE GOVERNANCE REPORT // MEMBERS OF THE SUPERVISORY BOARD AND THEIR MANDATES
MEMBERS OF THE SUPERVISORY BOARD AND THEIR MANDATES

Status of all data: December 31, 2018, or the date on which the member left the Supervisory Board
Dr.-Ing. Herbert Diess (60) 1), since May 7, 2018 Johann Horn (60)
Chairman District Manager of IG Metall Bayern, Munich
Chairman of the Board of Management of Volkswagen AG, Mandates:
Wolfsburg  EDAG Engineering GmbH, Wiesbaden
Chairman of the Brand Board of Management of Volkswagen  EDAG Engineering Holding GmbH, Munich
Passenger Cars;
“Volume” brand group; China, since January 11, 2019 Gunnar Kilian (43) 1), since May 9, 2018
Mandates: Member of the Board of Management of Volkswagen AG,
 FC Bayern München AG, Munich Wolfsburg
 Infineon Technologies AG, Neubiberg Mandat:
 Wolfsburg AG, Wolfsburg
Peter Mosch (46) 1)
Vice Chairman Rolf Klotz (60)
Chairman of the General Works Council of AUDI AG, Chairman of the Works Council of AUDI AG,
Ingolstadt Neckarsulm plant
Mandates:
 Audi Pensionskasse – Altersversorgung der Dr. Julia Kuhn-Piëch (37)
AUTO UNION GmbH, VVaG, Ingolstadt Property Manager, Salzburg, Austria
 Volkswagen AG, Wolfsburg Mandates:
 MAN SE, Munich
Mag. Josef Ahorner (58)  MAN Truck & Bus AG, Munich
Businessman, Vienna, Austria  Audi Stiftung für Umwelt GmbH, Ingolstadt
Mandates:
 Porsche Automobil Holding SE, Stuttgart Petra Otte (45), since May 9, 2018
 Automobili Lamborghini S.p.A., Sant’Agata Bolognese, Trade union secretary/press spokeswoman of IG Metall
Italy Baden-Württemberg, Stuttgart
 EMARSYS eMarketing Systems AG, Vienna, Austria Mandates:
(Chairman)  Aesculap AG, Tuttlingen
 Heidelberger Druckmaschinen AG, Wiesloch
Rita Beck (48)
Vice Chairwoman of the Works Council of AUDI AG,
Ingolstadt plant
Marianne Heiß (46), since May 7, 2018

Chief Financial Officer of BBDO Group Germany GmbH,
Düsseldorf
Mandates:
 Porsche Automobil Holding SE, Stuttgart
 Volkswagen AG, Wolfsburg
1) In connection with their duties of Group steering and governance within the
Volkswagen Group, this member of the Supervisory Board holds further supervisory
board seats at Group companies and material participations.

170
MEMBERS OF THE SUPERVISORY BOARD AND THEIR MANDATES // CORPORATE GOVERNANCE REPORT
Dr. jur. Hans Michel Piëch (76) Dr. jur. Ferdinand Oliver Porsche (57)
Attorney, Vienna, Austria Member of the Board of Management of Familie Porsche AG
Mandates: Beteiligungsgesellschaft, Salzburg, Austria
 Dr. Ing. h.c. F. Porsche AG, Stuttgart Mandates:
 Porsche Automobil Holding SE, Stuttgart  Dr. Ing. h.c. F. Porsche AG, Stuttgart
(Vice Chairman)  Porsche Automobil Holding SE, Stuttgart
 Volkswagen AG, Wolfsburg  TRATON AG, Munich
 Porsche Cars Great Britain Ltd., Reading,  Volkswagen AG, Wolfsburg
United Kingdom  Porsche Holding Gesellschaft m.b.H., Salzburg, Austria
 Porsche Cars North America Inc., Atlanta, USA  Porsche Lizenz- und Handelsgesellschaft mbH &
 Porsche Holding Gesellschaft m.b.H., Salzburg, Austria Co. KG, Ludwigsburg
 Porsche Ibérica S.A., Madrid, Spain
 Porsche Italia S.p.A., Padua, Italy Dr. rer. comm. Wolfgang Porsche (75)
 Schmittenhöhebahn AG, Zell am See, Austria Chairman of the Supervisory Board of Porsche Automobil
 Volksoper Wien GmbH, Vienna, Austria Holding SE, Stuttgart
Chairman of the Supervisory Board of Dr. Ing. h. c. F.
Dipl.-Wirtsch.-Ing. Hans Dieter Pötsch (67) Porsche AG, Stuttgart
Chairman of the Supervisory Board of Volkswagen AG, Mandates:
Wolfsburg  Dr. Ing. h.c. F. Porsche AG, Stuttgart (Chairman)
Chairman of the Board of Management and Chief Financial  Porsche Automobil Holding SE, Stuttgart (Chairman)
Officer of Porsche Automobil Holding SE, Stuttgart  Volkswagen AG, Wolfsburg
Mandates:  Familie Porsche AG Beteiligungsgesellschaft, Salzburg,
 Autostadt GmbH, Wolfsburg Austria (Chairman)
 Bertelsmann Management SE, Gütersloh  Porsche Cars Great Britain Ltd., Reading,
 Bertelsmann SE & Co. KGaA, Gütersloh United Kingdom
 Dr. Ing. h.c. F. Porsche AG, Stuttgart  Porsche Cars North America Inc., Atlanta, USA
 TRATON AG, Munich (Chairman)  Porsche Holding Gesellschaft m.b.H., Salzburg, Austria
 Volkswagen AG, Wolfsburg (Chairman)  Porsche Ibérica S.A., Madrid, Spain
 Wolfsburg AG, Wolfsburg  Porsche Italia S.p.A., Padua, Italy
 Porsche Austria Gesellschaft m.b.H., Salzburg, Austria  Schmittenhöhebahn AG, Zell am See, Austria
(Chairman)
 Porsche Holding Gesellschaft m.b.H., Salzburg, Austria Rainer Schirmer (52), since May 9, 2018
(Chairman) Vice Chairman of the Works Council of AUDI AG,
 Porsche Retail GmbH, Salzburg, Austria (Chairman) Neckarsulm plant
 VfL Wolfsburg-Fußball GmbH, Wolfsburg Mandate:
(Vice Chairman)  Audi BKK, Ingolstadt

171
CORPORATE GOVERNANCE REPORT // MEMBERS OF THE SUPERVISORY BOARD AND THEIR MANDATES
Jörg Schlagbauer (41) Resigned from the Supervisory Board with effect from
Vice Chairman of the Works Council of AUDI AG, April 12, 2018:
Ingolstadt plant Dr. rer. pol. h. c. Francisco Javier Garcia Sanz (61) 1) 2)
Mandates: Member of the Board of Management of Volkswagen AG,
 Audi BKK, Ingolstadt (alternating Chairman) Wolfsburg
 BKK Landesverband Bayern, Munich (Vice Chairman) Mandates (on April 12, 2018):
 Sparkasse Ingolstadt Eichstätt, Ingolstadt  Hochtief AG, Essen
 CriteriaCaixa Holding S.A., Barcelona, Spain
Irene Schulz (54)
Executive Member of the Managing Board of the IG Metall Resigned from the Supervisory Board with effect from
trade union, Frankfurt am Main April 13, 2018:
Mandates: Matthias Müller (65) 2)
 Osram Licht AG, Munich Chairman
 Osram GmbH, Munich Member of the Board of Management of Porsche Automobil
Holding SE, Stuttgart
Helmut Späth (62)
Member of the Works Council of AUDI AG, Ingolstadt plant Resigned from the Supervisory Board at the close of the
Mandates: Annual General Meeting on May 9, 2018:
 Audi BKK, Ingolstadt Senator h. c. Helmut Aurenz (81) 2)
 Volkswagen Pension Trust e.V., Wolfsburg Owner of the ASB Group, Stuttgart
Mandate (on May 9, 2018):
Stefanie Ulrich (53)  Automobili Lamborghini S.p.A., Sant’Agata Bolognese,
Personnel Management Neckarsulm, Neckarsulm plant Italy
Mandates:
 Agentur für Arbeit, Heilbronn Berthold Huber (68) 2)
 Audi BKK, Ingolstadt Vice Chairman
Hiltrud Dorothea Werner (52) 1) Max Wäcker (64) 2)

Member of the Board of Management of Volkswagen AG, Mandate (on May 9, 2018):
Wolfsburg  Audi BKK, Ingolstadt
1) In connection with their duties of Group steering and governance within the
Volkswagen Group, this member of the Supervisory Board holds further supervisory
board seats at Group companies and material participations.
2) Status of all data: date on which the member left the Supervisory Board.

172
173 Consolidated
Financial
Statements
of the Audi Group for the fiscal year
from January 1 to December 31, 2018
INCOME STATEMENT OF 18 / Deferred tax assets // 221
THE AUDI GROUP // 174 19 / Other financial assets // 221
STATEMENT OF COMPREHENSIVE 20 / Other receivables // 222
INCOME OF THE AUDI GROUP // 175 21 / Inventories // 222
BAL ANCE SHEET OF 22 / Trade receivables // 222
THE AUDI GROUP // 176 23 / Effective income tax assets // 223
CASH FLOW STATEMENT OF 24 / Securities, cash and cash equivalents // 223
THE AUDI GROUP // 177 25 / A
vailable-for-sale assets and
STATEMENT OF CHANGES IN liabilities classified as held for sale // 223
Consolidated Financial Statements

EQUIT Y OF THE AUDI GROUP // 178 26 / Equity // 223
NOTES TO THE CONSOLIDATED 27 / Financial liabilities // 225
FINANCIAL STATEMENTS // 180 28 / Deferred tax liabilities // 225
29 / Other financial liabilities // 225
DEVELOPMENT OF FIXED ASSETS 30 / Other liabilities // 225
IN THE 2018 FISCAL YEAR // 180 31 / Provisions for pensions // 226
DEVELOPMENT OF FIXED ASSETS 32 / Effective income tax obligations // 230
IN THE 2017 FISCAL YEAR // 182 33 / Other provisions // 230
GENER AL INFORMATION // 184 34 / Trade payables // 231
RECOGNITION AND
ME A SUREMENT PR INCIPLES // 199 ADDITIONAL DISCLOSURES // 232
35 / Capital management // 232
NOTES TO THE INCOME STATEMENT // 209 36 / Additional disclosures on financial
1 / Revenue // 209 instruments in the Balance Sheet // 233
2 / Cost of goods sold // 209 37 / Management of financial risks // 239
3 / Distribution costs // 209 38 / Cash Flow Statement // 249
4 / Administrative expenses // 209 39 / Contingent liabilities // 250
5 / Other operating income // 209 40 / Litigation // 250
6 / Other operating expenses // 210 41 / Change of control agreements // 251
7 / Results from investments accounted 42 / Other financial obligations // 251
for using the equity method // 210 43 / Discontinued operations // 252
8 / Net interest result // 210 44 / Cost of materials // 252
9 / Other financial result // 211 45 / Personnel costs // 252
10 / Income tax expense // 211 46 / Total average number of employees
11 / Profit transfer to Volkswagen AG // 213 for the year // 252
12 / Earnings per share // 213 47 / Remuneration based on performance
13 / A dditional disclosures on financial shares (share-based payment) // 252
instruments in the Income Statement // 213 48 / Related party disclosures // 253
49 / Auditor’s fees // 255
NOTES TO THE BAL ANCE SHEET // 217 50 / Segment reporting // 256
14 / Intangible assets // 217 51 / German Corporate Governance Code // 259
15 / Property, plant and equipment // 217
16 / L easing and rental assets and Events occurring subsequent to
investment property // 218 the balance sheet date // 259
17 / I nvestments accounted for using Material Group companies // 260
the equity method // 219
INCOME STATEMENT OF THE AUDI GROUP
INCOME STATEMENT OF THE AUDI GROUP
EUR million Notes 2018 2017 1)
Revenue 1 59,248 59,789

Cost of goods sold 2 – 50,117 – 50,076
Gross profit 9,131 9,713
Distribution costs 3 – 4,155 – 4,925

Administrative expenses 4 – 696 – 682
Other operating income 5 1,862 2,822
Other operating expenses 6 – 2,613 – 2,257
Result from investments accounted for using the

equity method 7 261 526
Interest income 8 233 86
Interest expenses 8 – 115 – 125
Other financial result 9 452 – 441

Income tax expense 10 – 898 – 1,285
Profit after tax 3,463 3,432

of which profit share of non-controlling interests 82 – 77
of which profit share of AUDI AG shareholders 3,382 3,509
Appropriation of profit share due to AUDI AG shareholders

Profit transfer to Volkswagen AG 11 – 1,096 – 2,406
Transfer to retained earnings 2,286 1,103
EUR Notes 2018 2017 1)
Earnings per share 12 78.64 81.60

Diluted earnings per share 12 78.64 81.60
1) The prior year has been adjusted (see disclosures on IFRS 9 and IFRS 15).
174
STATEMENT OF COMPREHENSIVE INCOME OF THE AUDI GROUP
STATEMENT OF COMPREHENSIVE INCOME

OF THE AUDI GROUP
EUR million 2018 2017 1)
Profit after tax 3,463 3,432
Pension plan remeasurements recognized in other comprehensive income

Pension plan remeasurements recognized in other comprehensive income before tax 31 164
Deferred taxes relating to pension plan remeasurements recognized in other
comprehensive income – 17 – 29
Pension plan remeasurements recognized in other comprehensive income after tax 14 135
Fair value measurement of securities (equity instruments) that will not be
reclassified subsequently to profit or loss after tax – 7
Share of other comprehensive income of equity-accounted investments
that will not be reclassified subsequently to profit or loss after tax 0 0
Items that will not be reclassified to profit/loss after tax 14 143
Currency translation differences

Gains/losses from currency translation recognized in other comprehensive income 75 – 298
Currency translation differences before tax 75 – 298
Deferred taxes on currency translation differences – –
Currency translation differences after tax 75 – 298
Hedging transactions
Fair value changes of cash flow hedges recognized in other comprehensive income – 482 2,323
Fair value changes of cash flow hedges transferred to profit or loss – 481 – 111
Cash flow hedges before tax – 963 2,212
Deferred taxes on cash flow hedges 289 – 662
Cash flow hedges after tax – 674 1,551
Costs of hedging relationships recognized in other comprehensive income – 227 24

Costs of hedging relationships transferred to profit or loss – 96 –
Costs of hedging relationships before tax – 323 24
Deferred taxes on costs of hedging relationships 96 –7
Costs of hedging relationships after tax – 227 17
Share of other comprehensive income of equity-accounted investments

that will be reclassified subsequently to profit or loss after tax – 41 – 47
Items that will be reclassified subsequently to profit/loss after tax – 866 1,223
Other comprehensive income before tax – 1,221 2,063

Deferred taxes relating to other comprehensive income 368 – 697
Other comprehensive income after tax 2) – 852 1,365
Total comprehensive income 2,611 4,797

of which profit share of AUDI AG shareholders 2,512 4,947
of which profit share of non-controlling interests 99 – 149
1) The prior year has been adjusted (see disclosures on IFRS 9).
2) A share of EUR 17 (–73) million of other profit after tax from currency translation differences with no effect on profit or loss is attributable to non-controlling interests.
175
BALANCE SHEET OF THE AUDI GROUP
BALANCE SHEET OF THE AUDI GROUP
ASSETS in EUR million Notes Dec. 31, 2018 Dec. 31, 2017
Intangible assets 14 7,585 6,785

Property, plant and equipment 15 14,293 13,660
Leasing and rental assets 16 11 6
Investment property 16 332 346
Investments accounted for using the equity method 17 1,627 1,224
Other participations 357 359
Deferred tax assets 18 2,319 2,003
Other financial assets 19 5,742 4,940
Other receivables 20 128 145
Non-current assets 32,393 29,469
Inventories 21 9,406 7,893

Trade receivables 22 5,800 5,533
Effective income tax assets 23 51 22
Other financial assets 19 1,999 1,947
Other receivables 20 914 1,176
Securities 24 5,726 6,002
Cash funds 24 9,309 11,273
Current assets 33,205 33,846
Available-for-sale assets 25 – 365
Total assets 65,598 63,680
EQUITY AND LIABILITIES in EUR million Notes Dec. 31, 2018 Dec. 31, 2017
Subscribed capital 26 110 110

Capital reserve 26 12,175 12,175
Retained earnings 1) 26 16,219 13,970
Other reserves 1) 26 569 1,430
AUDI AG shareholders’ interest 29,073 27,685
Non-controlling interests 26 625 487
Equity 29,698 28,171
Financial liabilities 27 319 328

Other financial liabilities 29 463 448
Other liabilities 30 1,224 1,205
Provisions for pensions 31 5,194 5,135
Other provisions 33 6,288 6,193
Effective income tax obligations 32 792 775
Deferred tax liabilities 28 270 217
Non-current liabilities 14,549 14,301
Financial liabilities 27 108 319

Trade payables 34 8,565 7,313
Other financial liabilities 29 4,067 4,928
Other liabilities 30 2,634 2,508
Other provisions 33 5,593 5,550
Effective income tax obligations 32 383 590
Current liabilities 21,351 21,208
Liabilities 35,900 35,509
Total equity and liabilities 65,598 63,680

176
CASH FLOW STATEMENT OF THE AUDI GROUP
CASH FLOW STATEMENT OF THE AUDI GROUP
Profit before profit transfer and income taxes 4,361 4,717

Income tax payments – 978 – 1,146
Amortization of and impairment losses (reversals) on capitalized development costs 856 1,025
Depreciation and amortization of and impairment losses (reversals) on property, plant and equipment,
leasing and rental assets, investment property and other intangible assets 2,931 2,555
Depreciation of and impairment losses (reversals) on financial investments 62 13
Result from the disposal of assets – 163 – 25
Result from investments accounted for using the equity method – 97 – 155
Change in inventories – 1,416 – 967
Change in receivables – 268 – 448
Change in liabilities 1,618 643
Change in provisions 75 – 343
Change in leasing and rental assets –7 –5
Other non-cash income and expenses 40 310
Cash flow from operating activities 7,013 6,173
Additions to capitalized development costs – 1,593 – 1,243

Investments in property, plant and equipment, investment property and other intangible assets – 3,493 – 3,872
Acquisition of subsidiaries and changes in capital – 50 – 77
Acquisition of investments in associates and other participations and changes in capital – 398 – 15
Sale of subsidiaries, investments in associates, other participations and changes in capital 2) 585 5
Other cash changes 79 64
Change in investments in securities 184 – 39
Change in fixed deposits and loans extended 2) – 2,481 – 320
Cash flow from investing activities – 7,169 – 5,498
Capital contributions 43 459

Transfer of profit – 2,406 – 918
Change in financial liabilities – 192 – 56
Leasing payments made – 10 –9
Cash flow from financing activities – 2,564 – 524
Change in cash and cash equivalents due to changes in exchange rates 16 – 292
Change in cash and cash equivalents – 2,705 – 140
Cash and cash equivalents at beginning of period 11,255 11,395
Cash and cash equivalents at end of period 8,550 11,255
2) In the 2017 fiscal year, the shares of Volkswagen International Belgium S.A., Brussels (Belgium), were sold at a price of EUR 3,278 million. A long-term interest-only loan for the same
amount was also granted. Consequently, the transaction was not included in the Cash Flow Statement.
Cash funds 8,550 11,255

Fixed deposits, securities and loans extended 12,319 10,180
Gross liquidity 20,869 21,435
Credit outstanding – 427 – 647
Net liquidity 20,442 20,788
The Cash Flow Statement is explained in Note 38 in the Notes to the Consolidated Financial Statements.
177
STATEMENT OF CHANGES IN EQUITY OF THE AUDI GROUP
STATEMENT OF CHANGES IN EQUITY

OF THE AUDI GROUP
EUR million Subscribed capital Capital reserve Retained earnings
Statutory
reserve and
other retained
earnings
Unadjusted position as of Jan. 1, 2017 110 11,716 12,731

Changes in accounting policy to reflect IFRS 9 – – 2
Position as of Jan. 1, 2017 110 11,716 12,732
Profit after tax 1) – – 3,509
Other comprehensive income after tax 1) – – 135
Total comprehensive income – – 3,644
Capital increase – 459 –
Profit transfer to Volkswagen AG – – – 2,406
Miscellaneous changes – – –
Position as of Dec. 31, 2017 110 12,175 13,970
Unadjusted position as of Jan. 1, 2018 110 12,175 14,015

Changes in accounting policy to reflect IFRS 9 and IFRS 15 – – – 96
Position as of Jan. 1, 2018 110 12,175 13,919
Profit after tax – – 3,382
Other comprehensive income after tax – – 14
Total comprehensive income – – 3,395
Capital increase – – –
Profit transfer to Volkswagen AG – – – 1,096
Miscellaneous changes – – –
Position as of Dec. 31, 2018 110 12,175 16,219
Equity is explained in Note 26 in the Notes to the Consolidated Financial Statements.
178
STATEMENT OF CHANGES IN EQUITY OF THE AUDI GROUP
Other reserves Equity
Reserve for Hedging transactions Equity and Investments AUDI AG Non-controlling Total
currency debt accounted for shareholders’ interests
translation instruments using the interest
differences equity method
Reserve for Costs of

cash flow hedging
hedges relationships
222 – 192 – – 30 128 24,685 636 25,321

– – –2 – – – – –
222 – 192 –2 – 30 128 24,685 636 25,321
– – – – – 3,509 – 77 3,432
– 225 1,551 17 7 – 47 1,438 – 73 1,365
– 225 1,551 17 7 – 47 4,947 – 149 4,797
– – – – – 459 – 459
– – – – – – 2,406 – – 2,406
– – – – – – – –
–3 1,359 15 – 23 81 27,685 487 28,171
–3 1,329 – – 23 81 27,685 487 28,171

– 30 15 23 – – 28 –3 – 31
–3 1,359 15 – 81 27,657 483 28,140
– – – – – 3,382 82 3,463
58 – 674 – 227 – – 41 – 870 17 – 852
58 – 674 – 227 – – 41 2,512 99 2,611
– – – – – – 43 43
– – – – – – 1,096 – – 1,096
– – – – – – – –
55 685 – 211 – 41 29,073 625 29,698
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // DEVELOPMENT OF FIXED ASSETS IN THE 2018 FISCAL YEAR
NOTES TO THE CONSOLIDATED FINANCIAL

STATEMENTS
DEVELOPMENT OF FIXED ASSETS IN THE 2018 FISCAL YEAR

EUR million Gross carrying amounts
Costs Adjust- Changes in Currency Addi- Changes from Trans- Dis- Costs
ments to scope of changes tions investments fers posals
reflect consoli- accounted
IFRS 9 dated for using the
companies equity method
Jan. 1, 2018 Dec. 31, 2018
Concessions, industrial property

rights and similar rights and
assets as well as licenses and
customer bases 1,305 – – 0 207 – 13 19 1,507
Brand names 459 – – – – – – – 459
Goodwill 378 – – – – – – – 378
Capitalized development costs,
products currently under
development 2,057 – – – 927 – – 1,660 – 1,325
products currently in use 6,627 – – – 666 – 1,660 1,141 7,812
Payments on account for
intangible assets 9 – – 0 9 – –9 0 10
Intangible assets 10,836 – – 0 1,810 – 5 1,160 11,490
Land, land rights and buildings,

including buildings on
third-party land 8,307 – 128 31 127 – 177 33 8,737
Plant and machinery 8,206 – – 15 125 – 530 264 8,611
Other plant and office equipment 18,650 – 0 38 1,490 – 1,108 429 20,857
Payments on account and assets
under construction 2,269 – 3 0 1,536 – – 1,820 24 1,964
Property, plant and equipment 37,432 – 131 83 3,277 – –4 751 40,168
Leasing and rental assets 7 – – – 7 – – 0 14
Investment property 425 – – 5 0 – 0 11 419
Investments accounted for

using the equity method 1,224 3 – –6 390 99 – 83 1,627
Other participations 392 – –1 0 67 – – 7 451
Fixed assets 50,316 3 130 81 5,552 99 0 2,012 54,168
180
DEVELOPMENT OF FIXED ASSETS IN THE 2018 FISCAL YEAR // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Adjustments Carrying amounts
Cumulative Changes in Currency Additions to Impair- Trans- Dis- Reversal of Cumulative

depreciation scope of changes cumulative ment fers posals impairment depreciation
and consolidated amortization losses losses and
amortization companies amortization
Jan. 1, 2018 Dec. 31, 2018 Dec. 31, 2018 Dec. 31, 2017
983 – 0 140 16 0 18 – 1,120 386 322

49 – – 2 – – – – 51 408 410
– – – – – – – – – 378 378
14 – – – – – 14 – – – 1,325 2,043
3,005 – – 856 – 14 1,141 – 2,734 5,077 3,623
– – – – – – – – – 10 9
4,051 – 0 998 16 0 1,159 – 3,906 7,585 6,785
3,361 3 4 265 – 0 24 – 3,609 5,128 4,946

5,687 – 0 607 7 43 253 4 6,086 2,525 2,519
14,723 0 14 1,681 106 – 43 397 – 16,083 4,774 3,927
1 – 0 – 95 – – – 96 1,867 2,268
23,771 3 17 2,553 208 0 674 4 25,874 14,293 13,660
1 – – 2 – – 0 – 3 11 6
79 – 1 14 – – 7 – 87 332 346
– – – – – – – – – 1,627 1,224
32 – – – 62 – – – 94 357 359
27,935 3 18 3,567 286 – 1,841 4 29,964 24,204 22,381
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // DEVELOPMENT OF FIXED ASSETS IN THE 2017 FISCAL YEAR
DEVELOPMENT OF FIXED ASSETS IN THE 2017 FISCAL YEAR

EUR million Gross carrying amounts
Costs Changes in Currency Addi- Changes from Trans- Dis- Available- Costs
scope of changes tions investments fers posals for-sale
consoli- accounted assets
dated for using the
companies equity method
Jan. 1, 2017 Dec. 31, 2017

rights and similar rights and
customer bases 1,255 – –3 142 – 6 94 – 1,305
Brand names 459 – – – – – – – 459
Goodwill 378 – – – – – – – 378
products currently under
development 1,615 – – 1,055 – – 613 – – 2,057
products currently in use 6,565 – – 188 – 613 739 – 6,627
Payments on account for
intangible assets 4 – 0 7 – –2 – – 9
Intangible assets 10,276 – –3 1,392 – 4 833 – 10,836
Land, land rights and buildings,

including buildings on
third-party land 7,974 – – 84 197 – 232 12 – 8,307
Plant and machinery 7,969 – – 76 300 – 179 165 – 8,206
Other plant and office equipment 17,651 – – 118 1,268 – 201 352 – 18,650
Payments on account and assets
under construction 927 – –1 1,967 – – 615 8 – 2,269
Property, plant and equipment 34,520 – – 279 3,732 – –4 537 – 37,432
Leasing and rental assets 3 – – 5 – – – – 7
Investment property 444 – – 13 14 – – 19 – 425
Investments accounted for

using the equity method 4,763 – – 46 – 153 – 3,282 365 1,224
Other participations 299 – – 92 – – – – 392
Fixed assets 50,304 – – 340 5,235 153 – 4,671 365 50,316
182
DEVELOPMENT OF FIXED ASSETS IN THE 2017 FISCAL YEAR // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Adjustments Carrying amounts
Cumulative Changes in Currency Additions to Impair- Trans- Dis- Reversal of Cumulative

depreciation scope of changes cumulative ment fers posals impairment depreciation
and consolidated amortization losses losses and
amortization companies amortization
Jan. 1, 2017 Dec. 31, 2017 Dec. 31, 2017 Dec. 31, 2016
946 – –2 133 – 0 94 – 983 322 309

47 – – 2 – – – – 49 410 412
– – – – – – – – – 378 378
– – – – 14 – – – 14 2,043 1,615
2,733 – – 949 61 – 739 – 3,005 3,623 3,832
– – – – – – – – – 9 4
3,726 – –2 1,085 76 0 833 – 4,051 6,785 6,550
3,118 – –7 253 – 0 4 – 3,361 4,946 4,855

5,242 – – 20 597 27 0 158 1 5,687 2,519 2,727
13,569 – – 31 1,406 121 0 342 – 14,723 3,927 4,082
– – 0 – 1 – – – 1 2,268 927
21,929 – – 58 2,256 149 0 504 1 23,771 13,660 12,591
0 – – 1 – – – – 1 6 3
80 – –3 14 – – 12 – 79 346 364
– – – – – – – – – 1,224 4,763
19 – – – 13 – – – 32 359 280
25,754 – – 63 3,357 238 – 1,349 1 27,935 22,381 24,551
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // GENERAL INFORMATION
GENERAL INFORMATION
AUDI AG has the legal form of a German stock corporation All requirements that must be applied under German com-
(Aktiengesellschaft). Its registered office is at Auto-Union- mercial law are additionally observed in preparing the
Straße 1, Ingolstadt, and the Company is recorded in the Consolidated Financial Statements. Moreover, the require-
Commercial Register of Ingolstadt under HR B 1. ments of the German Corporate Governance Code have been
adhered to.
Around 99.64 percent of the subscribed capital of AUDI AG is
held by Volkswagen AG, Wolfsburg, with which a control and The Board of Management prepared the Consolidated
profit transfer agreement exists. The Consolidated Financial Financial Statements on February 20, 2019. This date marks
Statements of AUDI AG are included in the Consolidated the end of the adjusting events period.
Financial Statements of Volkswagen AG, which are held on
file at the Local Court of Braunschweig. The purpose of the // EFFECTS OF NEW OR REVISED STANDARDS
Company is the development, production and sale of motor The Audi Group has implemented all of the accounting
vehicles, other vehicles and engines of all kinds, together standards whose application became mandatory with effect
with their accessories, as well as machinery, tools and other from the 2018 fiscal year. Since January 1, 2018, there have
technical articles. been changes to IAS 40 (Investment Property) that apply
and which clarify when a property falls under the scope of
/ ACCOUNTING PRINCIPLES IAS 40.
AUDI AG prepares its Consolidated Financial Statements in
accordance with the International Financial Reporting In addition, changes to IFRS 1 and IAS 28 are to be applied,
Standards (IFRS) and the interpretations of the International which the IASB has implemented as part of improvements to
Financial Reporting Standards Interpretations Committee International Financial Reporting Standards (Annual Improve-
(IFRS IC). All pronouncements of the International Accounting ment Project 2016). In IFRS 1 (First-time Adoption of IFRS),
Standards Board (IASB) whose application is mandatory in short-term relief for first-time users of the IFRS was removed.
the European Union (EU) have been observed. The prior-year In IAS 28 (Investments in Associates), clarifications were
figures have been calculated according to the same principles. made for investment companies.
The Income Statement is prepared in accordance with the Furthermore, IFRS 2 (Share-based Payment) was changed.
cost of sales method. These changes contain clarifications of classification and
measurement of business transactions with share-based
AUDI AG prepares its Consolidated Financial Statements in payment transactions.
euros (EUR). All figures have been rounded in accordance
with standard commercial practice, with the result that In addition, changes to IFRS 4 (Insurance Contracts) also
minor discrepancies may occur when adding these amounts. apply that limit the effects resulting from the different dates
of first-time adoption of IFRS 9 and IFRS 17.
The Consolidated Financial Statements provide a true and
fair view of the net worth, financial position and financial Furthermore, IFRIC 22 (Foreign Currency Transactions and
performance of the Audi Group. Advance Consideration) has applied since January 1, 2018,
and clarifies which exchange rates are to be used for foreign
The requirements of Section 315e of the German currency transactions for advance payments.
Commercial Code (HGB) regarding the preparation of
Consolidated Financial Statements in accordance with IFRS, None of the above-described changes, or any of the other
as endorsed by the EU, are met. changes to the IFRS, have a material impact on the net
worth, financial position, financial performance or on the
cash flow of the Audi Group.
184
GENERAL INFORMATION // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
/// IFRS 9 – FINANCIAL INSTRUMENTS Moreover, reclassification practice has changed under IFRS 9.
IFRS 9 revises the accounting rules for the classification and Fluctuations in value of the forward element of hedging
measurement of financial assets and for hedge accounting. instruments and fluctuations in value in connection with the
residual value hedging model are no longer reported in the
The classification and measurement of financial assets are financial result, but rather in operating profit. Depending on
based on the business model in which an asset is held and market developments, the aforementioned effects can be
on cash flow characteristics. Financial assets, at initial recog- expected to have a greater impact on operating profit.
nition, are either measured “at amortized cost,” “at fair value Within operating profit, amounts from currency hedging
through other comprehensive income” (FVOCI), or “at fair instruments reclassified from equity are accounted for in
value through profit or loss” (FVPL). The classification and revenue. The prior-year figures have been adjusted due to the
measurement of financial liabilities under IFRS 9 is largely retrospective application of the provisions governing the
unchanged compared with the accounting rules of IAS 39. designation of options. The effect on profit after tax in the
2017 fiscal year amounts to EUR – 47 million. Since the new
The model for calculating impairments and recognizing loss rules for hedging relationships involving forward exchange
allowances has changed from an incurred loss model to an contracts are applied prospectively, there are no first-time
expected loss model. This amended measurement method adoption effects in relation to these hedging relationships.
has led to an increase in loss allowances. The increase in loss The new rules also provide for considerably more
allowances is partly attributable to the requirement to comprehensive disclosures in the Notes.
recognize loss allowances for performing loans for the first
12 months. Furthermore, the increase results from the The following explanations and tables present the material
requirement to report loss allowances based on the overall impact of the new accounting requirements under IFRS 9 on
expected residual term for financial assets with a signify- the classification and measurement of financial assets and
cantly increased default risk. The first-time adoption effect with regard to hedge accounting.
was reported in equity, taking into account deferred taxes
and with no effect on profit or loss. As of December 31, 2017, no financial assets were recorded
in the Balance Sheet that according to IAS 39 were measured
With regard to hedge accounting according to IFRS 9, the at amortized cost and according to IFRS 9 are now measured
implementation of new complex reporting and measurement at fair value.
methods was required. In addition, the designation options
have been expanded. The quantitative limits for the effec-
tiveness test no longer apply.
185
//// ADJUSTMENT OF BALANCE SHEET VALUES EFFECTIVE JANUARY 1, 2018, AS A RESULT OF IFRS 9
ASSETS in EUR million Dec. 31, 2017 Jan. 1, 2018
Before adjustments Adjustments After adjustments
Intangible assets 6,785 – 6,785

Property, plant and equipment 13,660 – 13,660
Leasing and rental assets 6 – 6
Investment property 346 – 346
Investments accounted for using the equity method 1,224 3 1,227
Other participations 359 – 359
Deferred tax assets 2,003 21 2,025
Other financial assets 4,940 –4 4,936
Other receivables 145 – 145
Non-current assets 29,469 20 29,489
Inventories 7,893 – 7,893

Trade receivables 5,533 – 72 5,461
Effective income tax assets 22 – 22
Other financial assets 1,947 0 1,947
Other receivables 1,176 – 1,176
Securities 6,002 – 6,002
Cash funds 11,273 – 11,273
Current assets 33,846 – 73 33,774
Available-for-sale assets 365 0 365
Total assets 63,680 – 53 63,628
EQUITY AND LIABILITIES in EUR million Dec. 31, 2017 Jan. 1, 2018
Before adjustments Adjustments After adjustments
Equity 28,171 – 57 28,114
Financial liabilities 328 – 328

Other financial liabilities 448 5 453
Other liabilities 1,205 – 1,205
Provisions for pensions 5,135 – 5,135
Other provisions 6,193 – 6,193
Effective income tax obligations 775 – 775
Deferred tax liabilities 217 –1 216
Non-current liabilities 14,301 4 14,305
Financial liabilities 319 – 319

Trade payables 7,313 – 7,313
Other financial liabilities 4,928 – 4,928
Other liabilities 2,508 – 2,508
Other provisions 5,550 – 5,550
Effective income tax obligations 590 – 590
Current liabilities 21,208 – 21,208
Liabilities 35,509 4 35,513
Total equity and liabilities 63,680 – 53 63,628
186
//// RECONCILIATION OF LOSS ALLOWANCES FOR FINANCIAL ASSETS FROM IAS 39 TO IFRS 9 AS OF
JANUARY 1, 2018
EUR million From From “measured No measurement Total

“measured at fair at amortized cost” category under
value through other IAS 39 IAS 39
comprehensive
income” IAS 39
To “measured at fair value through profit

or loss” IFRS 9
Dec. 31, 2017 – – – –
Adjustments – – – –
Jan. 1, 2018 – – – –
To “measured at fair value through other
comprehensive income” IFRS 9 (equity instruments)
Dec. 31, 2017 – – – –
Jan. 1, 2018 – – – –
To “measured at fair value through other
comprehensive income” IFRS 9 (debt instruments)
Dec. 31, 2017 – – – –
Jan. 1, 2018 – – – –
To “measured at amortized cost” IFRS 9
Dec. 31, 2017 – 108 – 108
Adjustments – 76 – 76
Jan. 1, 2018 – 183 – 183
To lease receivables
Dec. 31, 2017 – – – –
Jan. 1, 2018 – – – –
To assets IFRS 15
Dec. 31, 2017 – – – –
Adjustments – – 1 1
Jan. 1, 2018 – – 1 1
To credit commitments
Dec. 31, 2017 – – – –
Jan. 1, 2018 – – 1 1
To financial guarantees
Dec. 31, 2017 – – – –
Jan. 1, 2018 – – 4 4
Total Jan. 1, 2018 – 183 6 190
187
//// RECONCILIATION OF CARRYING AMOUNTS OF FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH
PROFIT OR LOSS FROM IAS 39 TO IFRS 9
EUR million Carrying Reclassifi- Adjustments Carrying Change in

amount IAS 39 cations IFRS 9 amount IFRS 9 retained
Dec. 31, 2017 Jan. 1, 2018 earnings
Jan. 1, 2018
Financial assets measured at fair value through

profit or loss IAS 39 277 – 277 –
Additions
Available-for-sale financial assets IAS 39 6,003 – 6,003 –
Financial assets measured at amortized cost
IAS 39 – – – –
Deductions
IFRS 9 – – – –
other comprehensive income IFRS 9 – – – –
Financial assets measured at fair value
through profit or loss IFRS 9 6,280 –
The reclassification of “Available-for-sale financial assets”

amounting to EUR 6,003 million mostly affects securities.
//// RECONCILIATION OF CARRYING AMOUNTS OF FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH
OTHER COMPREHENSIVE INCOME FROM IAS 39 TO IFRS 9

Jan. 1, 2018
Available-for-sale financial assets IAS 39 6,003 – 6,003 –

Additions
IAS 39 – – – –
Deductions
IFRS 9 – – – –
profit or loss IFRS 9 – 6,003 – – 6,003 –
Financial assets measured at fair value
through other comprehensive income IFRS 9 – –
188
//// RECONCILIATION OF CARRYING AMOUNTS OF FINANCIAL ASSETS MEASURED AT AMORTIZED COST

FROM IAS 39 TO IFRS 9

Jan. 1, 2018
Financial assets measured at amortized cost IAS 39 21,798 – 77 21,721 – 77

Additions
Available-for-sale financial assets IAS 39 – – – –
Deductions
other comprehensive income IFRS 9 – – – –
profit or loss IFRS 9 – – – –
Financial assets measured at amortized cost IFRS 9 21,721 – 77
/// IFRS 15 – REVENUE FROM CONTRACTS WITH Income is now assigned to the functional area where the
CUSTOMERS provisions were originally recognized. The prior-year figures
IFRS 15 contains revised accounting rules in relation to have been adjusted accordingly. This reduced other operating
revenue recognition. Audi applies the modified retrospective income from the previous year by EUR 504 million. Cost of
transition method to the new standard. goods sold (EUR 468 million), distribution costs (EUR 33 mil-
lion) and administrative expenses (EUR 3 million) were
The changes relate to the recognition of sales-related pay- relieved as a result.
ments, which are still reported in distribution costs in the
2017 fiscal year, but will henceforth be recognized as sales In addition, with the introduction of IFRS 15, it was deter-
allowances under IFRS 15. In 2018, this will concern mined that individual sales programs in certain countries are
EUR 760 million. Moreover, income from the dissolution to be allocated to sales allowances instead of to distribution
of provisions for sales allowances are no longer recognized costs. As a consequence, the prior-year distribution costs
in other operating income, but rather within revenue. This have been adjusted by EUR 339 million. Revenue has con-
resulted in a shift of EUR 122 million in the 2018 fiscal year. tracted accordingly.
In addition, certain types of extended warranty provided as // NEW OR REVISED STANDARDS NOT APPLIED
part of the sale of a vehicle are no longer deferred under The following new or revised accounting standards already
IFRS 15 but are immediately recognized. The reduction in approved by the IASB were not applied in the Consolidated
debt with no effect on profit or loss had a positive impact on Financial Statements for the 2018 fiscal year because their
retained earnings (taking account of deferred taxes) in the application was not yet mandatory:
amount of EUR 26 million.
To facilitate presentation and comparison, an adjustment

was made to the way in which other income from the dis-
solution of provisions and accrued liabilities is recorded.
189
Standard/Interpretation Published by Mandatory Endorsed Expected impact

the IASB adoption 1) by the EU
IFRS 3 Business Combinations: Oct. 22, 2018 Jan. 1, 2020 No No material impact
Definition of a Business
IFRS 9 Financial Instruments: Oct. 12, 2017 Jan. 1, 2019 Yes None
Prepayment Features with
Negative Compensation
IFRS 10 and Consolidated Financial Statements Sep. 11, 2014 Postponed 2) – None
IAS 28 and Investments in Associates and
Joint Ventures:
Sale or Contribution of Assets
between an Investor and its
Associate or Joint Venture
IFRS 16 Leases Jan. 13, 2016 Jan. 1, 2019 Yes Detailed descriptions according
to the table
IFRS 17 Insurance Contracts May 18, 2017 Jan. 1, 2021 No None
IAS 1 and Presentation of Financial Oct. 31, 2018 Jan. 1, 2020 No No material impact
IAS 8 Statements and Accounting
Policies, Changes in Accounting
Estimates and Errors:
Definition of Materiality
IAS 19 Employee Benefits: Feb. 7, 2018 Jan. 1, 2019 No None
Plan Amendment, Curtailment or
Settlement
IAS 28 Investments in Associates: Oct. 12, 2017 Jan. 1, 2019 No None
Long-term Interests in Associates
and Joint Ventures
IFRIC 23 Uncertainty over Income Tax June 7, 2017 Jan. 1, 2019 Yes No material impact
Treatments
Improvements to International Dec. 12, 2017 Jan. 1, 2019 No No material impact
Financial Reporting Standards
2017 3)
1) Mandatory first-time adoption from the perspective of AUDI AG.

2) Decision made by the IASB on December 15, 2015, to postpone the date of first-time adoption for an indefinite period.
3) Minor changes to a number of IFRS.
/// IFRS 16 – LEASES based on the distribution of the opportunities and risks
IFRS 16 changes the rules for the accounting of leases and associated with the asset. As a lessor, the Audi Group is
replaces the previous standard IAS 17 and the associated primarily involved with cars and real estate.
interpretations. The main aim of IFRS 16 is for all leases to
be recognized on the Balance Sheet. This means that con- As of January 1, 2019, the Audi Group will for the first time
tracts of lessees are no longer classified as finance and recognize leases taking into account the modified retro-
operating leases. Instead, they must create a right of use spective transition method according to the rules of IFRS 16.
and a leasing liability in their Balance Sheet for all leases. Due to the first-time recognition of rights of use and the
The exceptions are for short-term and low-value leases. corresponding lease liabilities, the balance sheet total will
During the lease term, the right of use must be depreciated increase by 1 percent after preliminary calculations. The
and the lease liability must be adjusted using the effective increase in financial liabilities has a negative effect on the
interest method and taking the lease payments into account. net liquidity of the Audi Group. No significant effect on
The Audi Group is primarily a lessee of real estate and IT equity is expected. Unlike the previous method, which
equipment. The lessor accounting model generally corres- showed all expenses for operating leases in the operating
ponds to the current requirements of IAS 17. Lessors must in profit, according to IFRS 16 only depreciation and amortiza-
future also create a finance and operating leases classification tion will be allocated to the rights of use for operating profit.
190
The interest expenses from the accumulation of lease liabil- In addition, the Board of Management of AUDI AG has
ities will be reported under the financial result. This leads to established an internal task force, provided committees and
expectations that operating profit in the 2019 fiscal year will departments with the necessary resources and requested
improve by a small increase in the double-digit millions. With regular reports. Furthermore, in September 2015, Volks-
the changed recording of expenses from operating leases in wagen AG and AUDI AG filed a criminal complaint in
the Cash Flow Statement, there was a slight improvement in Germany against unknown persons. Volkswagen AG and
cash flow from operating activities and a corresponding AUDI AG are cooperating with all relevant authorities.
reduction of cash flow from financing activities. The new
rules also provide for considerably more comprehensive While Volkswagen AG holds internal development respon-
disclosures in the Notes. sibility for the four-cylinder diesel engines within the Group,
AUDI AG is responsible for the development of the six and
/ NOTES ON THE DIESEL ISSUE eight-cylinder diesel engines, such as diesel engines of the
types V6 and V8.
// IRREGULARITIES IN NO X EMISSIONS AUDI AG has concluded an agreement with Volkswagen AG in
In September 2015, the U.S. Environmental Protection Agency the event that the U.S. authorities, U.S. courts and potential
(EPA) announced in a “Notice of Violation” that irregularities out-of-court settlements do not differentiate fully between
in relation to nitrogen oxide (NOx) emissions had been discov- the four-cylinder diesel engine issue for which Volkswagen AG
ered in emissions tests on certain vehicles with four-cylinder is accountable and V6 3.0 TDI engines that are the responsi-
diesel engines of type EA 189 made by the Volkswagen bility of AUDI AG, and that joint and several liability thus
Group. In this context, the Volkswagen Group announced that arises. Against the background of the settlement agree-
noticeable discrepancies between the figures achieved in ments reached, these costs will be passed on to AUDI AG
testing and in actual road use had been identified in around according to a causation-based allocation.
11 million vehicles worldwide with type EA 189 diesel
engines, including around 2.4 million Audi vehicles. In The members of the Board of Management of AUDI AG at
November 2015, the EPA announced in a “Notice of that time have declared that prior to their notification by
Violation” that irregularities had also been identified in the EPA in November 2015, they had no knowledge of the use of
software installed in U.S. vehicles with type V6 3.0 TDI unlawful “defeat device software” under U.S. law in the
engines. The matter affected around 113,000 vehicles in the V6 3.0 TDI engines.
United States and Canada, where the regulations on NOx Also, the publications released at the time of preparation of
limits are stricter than in other parts of the world. The the Annual and Consolidated Financial Statements as well as
California Air Resources Board (CARB) – part of the the Combined Management Report for the 2018 fiscal year,
Californian Environmental Protection Agency – announced its along with the continued investigations and interviews in
own investigations into this matter. connection with the diesel issue, did not provide the Board of
In response, a large number of court and governmental Management with any reliable findings or assessments on
proceedings were started in the United States and elsewhere the matter that would lead to a different evaluation of the
in the world. We have since succeeded in making substantial associated risks.
progress and ending a great number of these proceedings. Besides, there are no reliable findings or facts available to
the incumbent Board of Management of AUDI AG suggesting
// COMPREHENSIVE INVESTIGATIONS LAUNCHED that the Annual and Consolidated Financial Statements as
BY VOLKSWAGEN AND AUDI well as the Combined Management Report for the
After the first “Notice of Violation” was issued, Volkswagen 2018 fiscal year and previous years were materially incorrect.
and Audi immediately initiated their own internal as well as However, if new findings should come to light that indicate
external investigations; both have since been concluded for that individual members of the Board of Management at that
the most part. Extensive inquiries were also conducted at time were aware of the diesel issue earlier, this could poten-
AUDI AG in relation to the potential use of unlawful “defeat tially have an effect on the Annual and Consolidated
devices” under U.S. law in the type V6 3.0 TDI diesel engines Financial Statements as well as on the Combined Manage-
and concluded for the most part. ment Report for the 2018 fiscal year and previous years.
191
// PRODUCT-RELATED LAWSUITS WORLDWIDE Volkswagen AG and other Volkswagen Group companies are
In principle, it is possible that customers in the affected facing litigation in the USA/Canada on a number of different
markets will file civil lawsuits or that importers and dealers fronts relating to the matters described in the EPA’s “Notices
will assert recourse claims against Volkswagen AG and other of Violation.” In that respect, investigations by various U.S.
Volkswagen Group companies, including AUDI AG. Besides and Canadian regulatory and government authorities are
individual lawsuits, various forms of collective actions (i.e. ongoing, particularly in areas relating to securities, financing
assertion of individual claims by plaintiffs acting jointly or as and tax. Additionally, in the USA and Canada, certain putative
representatives of a class) are available in various juris- class actions by customers, investors, salespersons and dealers
dictions. Furthermore, in a number of markets it is possible as well as individual customers’ lawsuits and state or munici-
for consumer and/or environmental organizations to bring pal claims have been filed in various courts, including state
suit to enforce alleged rights to injunctive relief, declaratory and provincial courts.
judgment, or damages. A large number of these putative class action lawsuits have
been filed in U.S. federal courts and consolidated for pretrial
In the context of the diesel issue, various class action coordination purposes in the federal multidistrict litigation
proceedings as well as individual lawsuits are currently proceeding in the State of California.
pending against Volkswagen AG and other Volkswagen Group
companies, including AUDI AG. Work in respect of the legal In the USA Volkswagen AG and certain affiliates, including
proceedings that are still pending in the USA and the rest of AUDI AG, reached settlement agreements (including various
the world is ongoing, still requires considerable efforts and consent decrees) with the U.S. Department of Justice (DOJ),
will continue for some time. Volkswagen AG and AUDI AG are the EPA, the State of California, the CARB, the California
being advised by a number of external law firms in this Attorney General, the U.S. Federal Trade Commission, and
connection. private plaintiffs represented by a Plaintiffs' Steering Com-
mittee in a multidistrict litigation in California. These settle-
// AGREEMENTS AND PROCEEDINGS IN THE ment agreements resolved certain civil claims made in rela-
USA/CANADA tion to affected diesel vehicles in the United States.
In the USA and Canada three generations of certain vehicles Volkswagen AG also entered into agreements to resolve U.S.
with 2.0 TDI engines and two generations of certain vehicles federal criminal liability and certain civil penalties and claims
with the type V6 3.0 TDI engines are affected, which come to relating to the diesel issue. As part of its plea agreement,
a total of approximately 700,000 vehicles. Due to NOx limits Volkswagen AG agreed to plead guilty to three felony counts
that are considerably stricter than in the EU and the rest of under United States law – including conspiracy to commit
the world, it is a greater technical challenge here to retrofit fraud, obstruction of justice and using false statements to
the vehicles so that the emission standards defined in the import cars into the United States – and has been sentenced
settlement agreements for these vehicles can be achieved. to three years’ probation.
Following the publication of the EPA’s “Notices of Violation,” Additionally Volkswagen and Audi have reached separate
Volkswagen AG and other Volkswagen Group companies, agreements with the attorneys general of 49 states, the
including AUDI AG, have been the subject of intense scrutiny, District of Columbia and Puerto Rico to resolve their existing
ongoing investigations (civil and criminal) and civil litigation. or potential consumer protection and unfair trade practices
Volkswagen AG and other Volkswagen Group companies, claims in connection with both 2.0 TDI and V6 3.0 TDI
including AUDI AG, have received subpoenas and inquiries vehicles in the USA. New Mexico still has consumer protection
from state attorneys general and other governmental claims outstanding. Volkswagen and Audi have also reached
authorities. separate agreements with the attorneys general of thirteen
U.S. states (California, Connecticut, Delaware, Maine,
192
Maryland, Massachusetts, New Jersey, New York, Oregon, On December 21, 2017, Volkswagen announced an agree-
Pennsylvania, Rhode Island, Vermont and Washington) to ment in principle on a proposed consumer settlement in
resolve their existing or potential future claims for civil penal- Canada involving V6 3.0 TDI vehicles that was approved by
ties and injunctive relief for alleged violations of environ- the courts in Ontario and Quebec in April 2018. In Canada, a
mental laws. The attorneys general of eight other U.S. states criminal enforcement-related investigation related to 2.0
(Alabama, Illinois, Montana, New Hampshire, New Mexico, and 3.0 diesel vehicles by the federal environmental regu-
Ohio, Tennessee and Texas) and some municipalities have suits lator is ongoing, and a quasi-criminal enforcement-related
pending in state and federal courts against Volkswagen AG, offense has been charged by the Ontario provincial environ-
Volkswagen Group of America, Inc. and certain affiliates, mental regulator related to 2.0 diesel vehicles. Class action
including AUDI AG, alleging violations of environmental and joinder lawsuits have also been filed in Canada, including
laws. The environmental claims of eight states – Alabama, alleged consumer protection, securities and environmental
Illinois, Minnesota, Missouri, Ohio, Tennessee, Texas and claims asserting damages among other things.
Wyoming – as well as Hillsborough County (Florida), Salt
Lake County (Utah), and two Texas counties have been // CONSULTATION WITH GOVERNMENT AGENCIES
dismissed in full or in part by trial or appellate courts as ON TECHNICAL MEASURES WORLDWIDE
preempted by federal law. Alabama, Illinois, Ohio, Tennessee, In agreement with the respective responsible authorities,
Hillsborough County and Salt Lake County have appealed or the Volkswagen Group is making technical measures avail-
may still appeal the dismissal of their claims. able worldwide for virtually all diesel vehicles with type
EA 189 engines.
In the 2018 fiscal year, the EPA and CARB issued the Within its area of responsibility, the German Federal Motor
outstanding official approvals needed for the technical Transport Authority (Kraftfahrt-Bundesamt or KBA)
solutions for the affected vehicles with 2.0 TDI and with V6 ascertained for all clusters (groups of vehicles) that imple-
3.0 TDI engines. mentation of the technical measures would not bring about
On October 31, 2018, after discussions with DOJ, EPA, and any adverse changes in fuel consumption figures, CO2
CARB, the parties agreed to modify the First and Second emission figures, engine power, maximum torque, and noise
Partial Consent Decrees to clarify that Volkswagen may emissions.
repair certain technical issues with approved emissions
modifications through an “AEM Correction” (Approved AUDI AG has worked intensively for many months to check
Emissions Modifications). all relevant diesel concepts for possible discrepancies and
retrofit potentials. The measures proposed by AUDI AG have
Since November 2016, Volkswagen has been responding to been adopted and mandated in various recall notices issued
information requests from the EPA and CARB related to by the KBA for vehicle models with V6 and V8 TDI engines.
automatic transmissions in certain vehicles with gasoline Currently, AUDI AG assumes that the total cost, including the
engines. Additionally, putative class actions filed against amount based on recalls, of the ongoing largely software-
AUDI AG and certain affiliates have been transferred to the based retrofit program that began in July 2017 will be mana-
federal multidistrict litigation proceeding in the State of geable and has recognized corresponding balance-sheet risk
California and consolidated. The lawsuits allege that provisions. The measures submitted by AUDI AG are being
defendants concealed the existence of defeat devices in Audi examined by the KBA and can only be made available to
brand vehicles with automatic transmissions. Other actions customers after corresponding approval by the KBA.
alleging similar claims are also pending in the Northern
District of California and two provincial courts in Canada.
193
The Ministry of Environment in South Korea qualified certain Volkswagen AG are met; however, no specific payment
emissions strategies in the engine control software of various obligations would result from any determinations the court
diesel vehicles with V6 or V8 TDI engines meeting the Euro 6 may make. Individual claims then have to be reduced to
emission standard as an unlawful defeat device and ordered judgment afterwards in subsequent separate proceedings.
a recall on April 4, 2018; the same applies to the Dynamic
Shift Program (DSP) in the transmission control of a number // FINANCIAL IMPACT OF THE DIESEL ISSUE
of Audi models. In connection with the diesel issue, there were special items
affecting Audi Group operating profit in the amount of
// CRIMINAL AND ADMINISTRATIVE PROCEEDINGS EUR –1,176 (–387) million in the 2018 fiscal year. These are
IN GERMANY based mainly on the legally binding administrative order
The Munich II Office of the Public Prosecutor is conducting imposing a fine on AUDI AG by the Munich II public pro-
investigations against 24 persons, including the former secutor. They also reflect spending for technical measures,
Chairman of the Board of Management of AUDI AG and customer measures as well as expenses and provisioning for
another active member of the Board of Management of legal risks.
AUDI AG. The investigations are ongoing. AUDI AG has The special items in connection with the diesel issue over
appointed two renowned major law firms to clarify the the years 2015 through 2018 came to EUR –3,423 million
matters underlying the public prosecutor’s accusations. The overall. Of this total, the balance sheet showed outstanding
Board of Management and Supervisory Board of AUDI AG are obligations or risk provisioning amounting to
being regularly updated on the current state of affairs. EUR 822 million at the end of the 2018 fiscal year.
The administrative fine order issued on October 16, 2018, by The risk provisioning made to date in the form of provisions
the Munich II Office of the Public Prosecutor terminates the for the diesel issue is based on current knowledge and
regulatory offense proceeding conducted against AUDI AG in fundamentally subject to significant evaluation risks because
this connection. The administrative fine order is based on a of the large number of still-uncertain measurement inputs.
negligent breach of the obligation to supervise occurring in Provisions deemed appropriate were created or contingent
the organizational unit “Emissions Service/Engine Type liabilities were disclosed for identifiable and measurable
Approval.” The administrative order imposes a total fine of risks. Contingent liabilities were not disclosed if they are not
EUR 800 million, consisting of a penalty payment of currently measurable. In view of the still-ongoing process of
EUR 5 million and the forfeiture of economic benefits in the clarifying the facts as well as the complexity of the individual
amount of EUR 795 million. After thorough examination, the factors involved and the ongoing consultations with the
fine has been accepted and paid in full by AUDI AG, government agencies, the provisions created for the diesel
rendering the administrative fine order legally final. The issue as well as the contingent liabilities reported and the
administrative fine order terminates the regulatory offense further latent legal risks are to some extent subject to
proceeding against AUDI AG. Further sanctions against or substantial evaluation risks. If these risks should materi-
forfeitures by AUDI AG are therefore not to be expected in alize, there could be substantial financial burdens.
Europe in connection with the unitary factual situation
underlying the administrative fine order. / CONSOLIDATED COMPANIES
In addition to AUDI AG, all of the material domestic and
In Germany, the Verbraucherzentrale Bundesverband e. V. international subsidiaries are included in the Consolidated
(Federation of Consumer Organizations) filed an action on Financial Statements in cases where AUDI AG has direct or
November 1, 2018, with the Braunschweig Higher Regional indirect decision-making power over the relevant activities,
Court for model declaratory judgment against Volks- thereby influencing its own variable returns. The inclusion in
wagen AG. The complaint is seeking a ruling that certain the group of consolidated companies begins or ends on the
preconditions for potential consumer claims against date on which the control is acquired or lost.
194
A special securities fund is also included in the Consolidated The group of consolidated companies has been extended
Financial Statements of the Audi Group. This structured since December 31, 2017, to include AUDI Immobilien
entity pursuant to IFRS 12 does not present any special risks Verwaltung GmbH, Ingolstadt, and Audi Real Estate GmbH,
or result in any particular obligations for Audi. Ingolstadt. The first-time consolidation of these two compa-
nies resulted primarily in impacts on the non-current assets
Companies in which AUDI AG does not hold any interests, of the Audi Group. There were no other changes to the group
either directly or indirectly are also included in the of consolidated companies.
Consolidated Financial Statements. Using contractual
agreements, Audi is able to stipulate financial and operating In December 2018, contracts were concluded with Volks-
policy. Because the purpose of these companies is to sell wagen AG, Wolfsburg, that allow Volkswagen AG, as of
vehicles of the Audi brand and other products, there is January 1, 2019, unrestricted permission to occupy bodies
economic benefit for Audi if these business operations are within Audi Volkswagen Korea Ltd., Seoul (Republic of
successful. Audi is thus able to exercise a controlling Korea), Audi Volkswagen Middle East FZE, Dubai (United
interest. Non-controlling interests in equity and in profit are Arab Emirates), Audi Volkswagen Taiwan Co., Ltd., Taipeh
allocated to the following companies on a 100 percent basis (Taiwan) and Volkswagen Group Italia S.p.A., Verona (Italy)
in each case. that have significant influence on financial or operating
policy. A controlling influence by AUDI AG is as such no
Company Non-controlling interests longer possible and a deconsolidation is to be performed.
Due to ongoing representation within relevant bodies and
Audi Canada Inc., Ajax (Canada) Volkswagen Group Canada, Inc.,
Ajax (Canada) material business relationships, AUDI AG still has the
Audi of America, LLC, Volkswagen Group of America, opportunity to exercise significant influence. Because
Herndon (USA) Inc., Herndon (USA)
100 percent of the shares in the sales companies will be
Automobili Lamborghini America, Volkswagen Group of America,
LLC, Herndon (USA) Inc., Herndon (USA) maintained, the equity method will be used on this basis for
financial accounting as of January 1, 2019.
Further information on non-controlling interests is provided The material companies within the Audi Group are listed
in Note 26. following the Notes.
Subsidiaries with limited business operations that are of The full list of companies in which shares are held, according
subordinate importance, both individually and in total, with to commercial law, is recorded in the Commercial Register of
regard to providing a true and fair view of the net worth, Ingolstadt under HR B 1 and is also available on the
financial position, financial performance and cash flow are Audi website at www.audi.com/subsidiaries. This list can
not consolidated. Before consolidation, these subsidiaries additionally be requested directly from AUDI AG, Financial
account for 0.6 (0.6) percent of consolidated equity, Communication/Financial Analysis, I/FU-23, Auto-Union-
– 0.2 (0.1) percent of profit after tax and 0.8 (0.8) percent of Straße 1, 85045 Ingolstadt, Germany.
the total assets of the Audi Group. Associates and joint
ventures, which, among other criteria, are of subordinate By virtue of their inclusion in the Consolidated Financial
importance in terms of Audi’s share in their equity and Statements of the Audi Group, the following companies have
earnings, are not accounted for using the equity method for fulfilled the requirements of Section 264, Para. 3 or
reasons of materiality. Section 264b of the German Commercial Code (HGB) and
make use of the exemption rule:
Subsidiaries, associates and joint ventures that are not fully > Audi Electronics Venture GmbH
consolidated or consolidated using the equity method, as > AUDI Immobilien GmbH & Co. KG
well as financial participations, are always reported at > Audi Sport GmbH
amortized cost. Where there is evidence that the fair value
is lower, this fair value is recognized.
195
// COMPOSITION OF THE AUDI GROUP

effect on earnings for the Audi Group of EUR 183 million,
Total 2018 2017 which was shown in the prior-year result from investments
accounted for using the equity method. Since a significant
AUDI AG and fully consolidated
subsidiaries/structured entities 42 40 influence continues to exist, HERE International B.V. is inclu-
of which in Germany 9 7 ded in the financial statements of There Holding B.V. as an
of which international 33 33 associated company according to the equity method. There
Non-consolidated subsidiaries 37 36
was no change in the participating interest of the Audi Group
of which in Germany 23 24
in There Holding B.V. as a result of this sale.
of which international 14 12
Investments accounted for using the
equity method (international) 4 3 In December 2017, agreements on the sale of shares in
Investments and joint ventures not
There Holding B.V. were signed with Robert Bosch Invest-
accounted for using the equity method 26 24
of which in Germany 21 19 ment Nederland B.V., Boxtel (Netherlands) and Continental
of which international 5 5 Automotive Holding Netherlands B.V., Maastricht (Nether-
109 103 lands). Under these agreements, Robert Bosch Investment
Nederland B.V. and Continental Automotive Holding Nether-
lands B.V. each acquired a 5.9 percent stake in There
// PARTICIPATIONS IN ASSOCIATED COMPANIES Holding B.V. The transactions were completed on February
AUDI AG holds shares in FAW-Volkswagen Automotive 28, 2018. The Audi Group, the BMW Group and Daimler AG
Company, Ltd., Changchun, a Chinese automotive manu- sold the equivalent number of shares. The Audi Group’s
facturer which, among other activities, produces and distri- participating interests were reduced at that time to
butes Audi brand vehicles for the Chinese market. On 29.4 percent as a result. The transactions had no material
November 6, 2018, 5 percentage points of the original effect on the financial position or financial performance.
10-percent share in FAW-Volkswagen Automotive Further details can be found in Note 25.
Company, Ltd. were sold to Volkswagen AG, Wolfsburg.
Through its representation in this company’s management In February 2018, a capital reduction was carried out at
and supervisory board, AUDI AG is still in a position to There Holding B.V. The share of this accruing to Audi was
exercise significant influence. The participating interest as of EUR 96 million.
the balance sheet date is 5 percent. Further details can be
found in Note 25. Furthermore, capital increases were made at There
Holding B.V. in June 2018 and in November 2018. Audi took
Audi also holds a stake in Volkswagen Automatic Trans- part in these. The shares accounted for using the equity
mission (Tianjin) Company Limited, Tianjin, a Chinese manu- method increased as a result by a total of EUR 62 million and
facturer of transmission systems, including for Audi models. the participating interest on the balance sheet date is
The interest in Volkswagen Automatic Transmission (Tianjin) 29.6 percent.
Company Limited declined from 43 percent to around 40 per-
cent during the fiscal year as a result of capital increases in On June 22, 2018, the Audi Group bought a one-percent
which Audi did not participate. stake in SAIC Volkswagen Automotive Company Ltd.,
Shanghai, a Chinese company that develops, manufactures
The Audi Group, BMW Group and Daimler AG each held a and distributes vehicles. Due to its right to occupy positions
33.3 percent interest in There Holding B.V., Rijswijk (Nether- in relevant company bodies that are important in terms of
lands), which was established in 2015. In December 2016, financial and operating policy, Audi is in a position to
There Holding B.V. signed an agreement on the sale of exercise significant influence. For that reason, SAIC
15 percent of the shares in HERE International B.V., Rijswijk Volkswagen Automotive Company Ltd. is recognized in the
(Netherlands) with Intel Holdings B.V., Schiphol-Rijk Consolidated Financial Statements according to the equity
(Netherlands). The transaction with Intel Holdings B.V. was method. The purchase price for the shares acquired by
completed on January 31, 2017. This resulted in a loss of Volkswagen AG, Wolfsburg, was EUR 328 million. The
control within the meaning of IFRS 10 at the There Holding process of identifying hidden reserves and expenses had
B.V. level. The deconsolidation gave rise to a proportionate not yet been concluded as of the balance sheet date.
196
Further information on the previously described associated The same recognition and measurement principles for
companies, which are recognized using the equity method, determining the pro rata equity as applied to subsidiaries
can also be found under Note 17. are, as a general rule, applied to Audi Group companies
accounted for using the equity method. This is done on the
/ CONSOLIDATION PRINCIPLES basis of the last set of audited financial statements of the
The assets and liabilities of the domestic and international company in question. Beginning from the 2018 fiscal year,
companies included in the Consolidated Financial Statements transactions under common control, which from the per-
are recognized in accordance with the standard recognition spective of the Audi Group relate to associated companies
and measurement principles of the Audi Group. and joint ventures, will no longer be accounted for using the
predecessor method, but rather the acquisition method. The
In the case of subsidiaries that are being consolidated for economic substance of such transactions is better presented
the first time, the assets and liabilities are to be measured at this way. There are no significant effects on the presentation
their fair value at the time of acquisition. Any identified of past transactions.
hidden reserves and expenses are amortized, depreciated or
reversed in accordance with the development of the corres- / FOREIGN CURRENCY TRANSLATION
ponding assets and liabilities as part of the subsequent The currency of the Audi Group is the euro (EUR). Foreign
consolidation process. Where the cost of purchase of a currency transactions in the separate financial statements of
participation exceeds the Group share in the equity of the AUDI AG and the subsidiaries are translated at the prevailing
relevant company as calculated in this manner, goodwill is exchange rate at the time of the transaction in each case.
created. This is then allocated to identifiable groups of Monetary items in foreign currencies are translated at the
assets (cash-generating units) which should benefit from the exchange rate applicable on the balance sheet date. Exchange
synergies of the acquisition. Goodwill at this level is regularly differences are recognized through the income statements of
subject to impairment testing as of the balance sheet date, the respective Group companies.
with an impairment loss being recognized if necessary.
The international companies belonging to the Audi Group are
Within the Audi Group, the predecessor method is always independent entities and prepare their financial statements
applied in relation to common control transactions. Under in their local currency. Only Audi Hungaria Zrt., Győr (Hungary),
this method, the assets and liabilities of the acquired Audi México S.A. de C.V., San José Chiapa (Mexico), and
company or business operations are measured at the gross Audi Volkswagen Middle East FZE, Dubai (United Arab
carrying amounts of the previous parent company. The Emirates), issue their annual financial statements in EUR or
predecessor method thus means that no adjustment to the USD rather than in their national currencies. The concept of
fair value of the acquired assets and liabilities is performed the “functional currency” is applied when translating
at the time of acquisition; any difference arising during financial statements prepared in a foreign currency. Assets
initial consolidation is adjusted against equity, without and liabilities are translated at the closing rate. The effects
affecting profit or loss. of foreign currency translation of equity are reported in the
reserve for currency translation differences with no effect on
Receivables and liabilities between consolidated subsidiaries profit or loss. The items in the Income Statement are
are netted, and expenses and income eliminated. Interim translated using weighted average monthly rates. Currency
profits and losses are eliminated from Group inventories and translation differences arising from the varying exchange
fixed assets. Consolidation processes affecting profit or loss rates used in the Balance Sheet and Income Statement are
are subject to deferrals of income taxes; deferred tax assets recognized in equity, without affecting profit or loss, until
and liabilities are offset where the term and tax creditor are the disposal of the subsidiary.
the same.
197
// DEVELOPMENTS OF THE EXCHANGE RATES SERVING AS THE BASIS FOR THE CURRENCY TRANSLATION
1 EUR in foreign currency Year-end exchange rate Average exchange rate
Dec. 31, 2018 Dec. 31, 2017 2018 2017
Australia AUD 1.6224 1.5329 1.5800 1.4732

Brazil BRL 4.4449 3.9707 4.3079 3.6061
United Kingdom GBP 0.8969 0.8873 0.8848 0.8768
Japan JPY 125.9100 134.8700 130.3662 126.7252
Canada CAD 1.5593 1.5026 1.5295 1.4648
Mexico MXN 22.5204 23.6142 22.7069 21.3328
Republic of Korea KRW 1,276.9000 1,278.2200 1,298.9713 1,276.8539
Switzerland CHF 1.1264 1.1694 1.1549 1.1117
Singapore SGD 1.5594 1.6014 1.5924 1.5589
Taiwan TWD 35.0260 35.5391 35.5907 34.3659
Thailand THB 37.0358 39.0553 38.1555 38.2960
USA USD 1.1453 1.1988 1.1807 1.1297
People’s Republic of China CNY 7.8773 7.8009 7.8076 7.6295
198
RECOGNITION AND MEASUREMENT PRINCIPLES // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT

PRINCIPLES
/ REVENUE AND EXPENSE RECOGNITION For construction contracts, such as toolmaking orders, the
Revenue, interest income and other operating income are proceeds are recognized according to the stage of comple-
generally recorded when the services are provided, i.e., when tion over the period of the manufacturing process. The stage
the contractual partner has acquired control of the goods or of completion is generally determined on the basis of the
the service. For new or used vehicle sales and for genuine contract costs incurred as of the balance sheet date as a
parts sales, the service is provided regularly by the company proportion of the expected total costs. If the outcome of a
with deliveries. Revenue is reported less deductions of sales construction contract cannot yet be reliably estimated, but
allowances (discounts, price reductions, customer bonuses, there is still an expectation that costs will be covered, the
rebates and financing cost subsidies). Sales allowances and revenue is recognized in the amount of the incurred contract
other variable considerations are evaluated at the Audi Group costs. If costs exceed revenue as expected, the full amount
based on both historical values and the respective current of the losses is to be immediately recognized as an expense.
circumstances. Vehicles are typically sold with terms of When doing so, the related assets are impaired and provi-
payment. A trade receivable is created between the delivery sions are recognized if necessary. Due to the fact that this is
of the vehicle and the receipt of payment. Any financing related to conditional receivables vis-à-vis the customer up
component contained in that arrangement is then only until completion, or until payment from the customer, corres-
defined if the period of time between the service and return ponding contractual assets are recorded. When the company’s
service is longer than one year and the accrued amount is service has been fully provided, a trade receivable is recorded.
significant. No significant financing components exist at the
Audi Group. Dividend earnings are recorded at the time they are legally
valid.
No revenue is initially realized from the sale of vehicles
subject to buyback agreements. The difference between the For contracts with multiple components, the transaction
selling price and the expected buyback price is recognized as price is distributed over the different service obligations of
revenue on a straight-line basis over the contractual period. the contract. Insofar as the non-vehicle services of a multi-
Until the time of the buyback, the assets for short-term component contract only represent an insignificant propor-
contract periods are included in inventories and for long- tion compared to the vehicle, the residual method is still
term contract periods in the leasing and rental assets. used. In this way, the individual valid circumstances and
framework conditions in the contract can be taken into
If services are already purchased with the vehicle and paid consideration. Compared with allocating the transaction
for in advance, a corresponding contractual liability is price based on the relative individual sale price, this process
recorded until the service is provided. That applies to leads to insignificant deviations in recognizing revenue.
services such as inspections, maintenance and certain
guarantee contracts as well as mobile online services. For Measurement of revenue is generally carried out on the basis
guarantees that are provided to all customers for a certain of the contract price. If a variable return service has been
model, provisions are typically set up according to the agreed to in a contract, the revenue will be estimated using
processes for statutory warranties. In all other cases, the the expected value method if a large number of comparable
amount paid in advance by the customer is deferred and contracts exists. In exceptional cases, the most likely amount
recorded as revenue over the guarantee period. If the service method is used. After the estimate of the expected revenue,
is provided in parallel with the customer payments, then the another check is made to establish whether uncertainties exist
revenue is realized with the associated invoice. that would necessitate a reduction of the initially recognized
revenue in order to be able to virtually eliminate the danger
of negative retroactive revenue corrections.
199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // RECOGNITION AND MEASUREMENT PRINCIPLES
At the Audi Group, there were no costs incurred for contract Depreciation, allocated to the corresponding functional
initiation or fulfillment. areas, is primarily based on the following useful lives, which
are reassessed yearly:
/ INTANGIBLE ASSETS
Intangible assets acquired for consideration are recognized Useful life
at their cost of purchase, taking into account ancillary costs

Concessions, industrial property rights and
and cost reductions, and are amortized on a scheduled similar rights and assets 2–15 years
straight-line basis over their useful life. of which software 3–5 years
of which customer base 2–8 years
Capitalized development costs 4-9 years
Concessions, rights and licenses relate to purchased software
and rights of use.
/ PROPERTY, PLANT AND EQUIPMENT
Goodwill from a business combination has an indefinite Property, plant and equipment are measured at cost of
useful life and is subject to regular impairment testing. purchase or construction, with straight-line depreciation
applied pro rata temporis over the expected useful life.
Brand names from business combinations generally have an
indefinite useful life and are therefore not amortized. An The costs of purchase include the purchase price, ancillary
indefinite useful life frequently arises from the continued costs and cost reductions.
use and maintenance of a brand. Brand names are tested
regularly for impairment. In the case of self-constructed fixed assets, the cost of
construction includes both the directly attributable material
Research costs are treated as current expenses pursuant to and labor costs as well as the indirect material and labor
IAS 38. The development expenditure for products going costs to be capitalized, including pro rata depreciation.
into series production is recognized as an intangible asset,
provided that the sale of these products is likely to bring Depreciation is generally based on the following useful lives,
economic benefit to the Audi Group. If the conditions stated which are reassessed on a yearly basis:
in IAS 38 for capitalization are not met, the costs are expen-
sed in the Income Statement in the year in which they occur. Useful life
Buildings 20–50 years

Capitalized development costs encompass all direct and Site improvements 10–20 years
indirect costs that can be directly allocated to the develop- Plant and machinery 6–12 years
ment process. They are amortized on a straight-line basis Plant and office equipment
including special tools 3–15 years
from the start of production over the anticipated model life
of the developed products.
Property, plant and equipment used on the basis of lease
agreements is capitalized in the Balance Sheet if the condi-
tions of a finance lease are met in accordance with IAS 17,
i.e. if the significant opportunities and risks which result
from the use of an asset have passed to the lessee. Capitali-
zation is performed at fair value or the lower present value
of the minimum lease payments. The straight-line depreci-
ation method is based on the shorter of economically useful
life or term of lease contract.
200
In the case of leases where not all opportunities and risks / IMPAIRMENT TESTS
associated with the leased property (operating lease) have Fixed assets are tested regularly for impairment as of the
passed to them, leasing installments and rents are expensed balance sheet date.
directly in the Income Statement.
With regard to impairment testing of goodwill and of other
/ LEASING AND RENTAL ASSETS intangible assets, the Audi Group as a general rule reports
Leased vehicles are recognized at cost of purchase or manu- the higher of value in use and fair value less costs to sell of
facturing cost in the case of operating lease agreements and the respective cash generating units (brands and/or pro-
depreciated using the straight-line method over the term of ducts). The calculation of value in use is based on current
the lease down to their estimated residual value. planning prepared by the management. This planning is
Impairments to be recognized due to the impairment test based on expectations regarding the future development of
based on IAS 36 have been taken into account through impair- the respective markets, market shares and profitability of
ment losses and adjustments of future depreciation rates. the products. The planning period covers a period of five
years. Plausible assumptions about future development are
/ INVESTMENT PROPERTY made for the subsequent years. In each case, the planning
Land or buildings held with the intention of generating rental assumptions are adjusted in line with current findings.
income are reported in the Balance Sheet at amortized cost. Appropriate assumptions about macroeconomic trends and
The amortization periods applied are, as a general rule, those historical developments are taken into account.
applied to property, plant and equipment used by the Group
itself. In the case of measurement at amortized cost, the fair Cash flows are, in principle, calculated on the basis of the
values calculated as a general rule using internal calculations expected growth rates in the sales markets concerned.
based on the discounted cash flow method are also to be Growth in the operating profit of the two cash generating
stated. These calculations are made based on the rental in- units Automotive and Motorcycles is expected up to the end
come generated from real estate and the real estate-specific of the detailed planning period. Estimated cash flow
discount rates. following onto the detailed planning period is based on an
annual growth rate of 1.0 (1.0) percent in the Automotive
/ INVESTMENTS ACCOUNTED FOR USING THE unit and 1.0 (1.0) percent in the Motorcycles unit.
EQUITY METHOD
Companies in which AUDI AG is directly or indirectly able to When testing goodwill and other intangible assets with
exercise significant influence on financial and operating indefinite and limited useful lives, primarily capitalized
policy decisions (associated companies) are accounted for development costs, in the two cash-generating units
using the equity method. This means that changes in equity Automotive and Motorcycles business for impairment, the
are reflected on a pro rata basis in the carrying amount of value in use is determined using the following weighted
the participation. The share of the profit of the associated average cost of capital (WACC) before taxes:
company is reported under the financial result.
in % 2018 2017
/ BORROWING COSTS
Automotive segment 5.5 5.8
Borrowing costs that can be allocated directly to a qualifying Motorcycles segment 5.7 6.1
asset are capitalized as part of that asset’s cost of purchase
or construction. A qualifying asset is deemed to exist if a
longer period of time (at least one year) will be required The cost of capital is calculated based on a risk-free interest
before the asset will be ready for use or sale. rate. As well as the market risk premium and borrowing
interest rate, specific peer group information for beta factors
and the debt ratio are taken into account.
201
Impairment tests are carried out for development activities, The classification and measurement of financial assets (debt
acquired property rights, and property, plant and equipment instruments) is based on the business model in which an asset
on the basis of expected product life cycles, the respective is held and on cash flow characteristics.
revenue and cost situation, current market expectations and
currency-specific factors. Financial assets measured at amortized cost (debt instru-
ments) are held as part of a business model whose objective
Impairment losses pursuant to IAS 36 are recognized where it is to recognize contractual cash flows. The cash flows of
the recoverable amount, i.e. the higher amount from either these financial assets exclusively affect repayment and
the continued use or the disposal of the asset in question, interest payments on the outstanding capital amount.
has declined below its carrying amount. If necessary, an
impairment loss resulting from this test is recognized. Financial liabilities are categorized as follows:
Sensitivity analyses have shown that, even in the case of > Financial liabilities measured at amortized cost,
differing key assumptions within a realistic framework, there > Financial liabilities measured at fair value through profit or
is no need to recognize an impairment for goodwill and other loss.
intangible assets with an indefinite useful life.
The amortized cost of a financial asset (debt instruments) or
If the reason for a previously recorded impairment loss a financial liability is the amount
ceases to exist, the asset is written up to the recoverable
amount but to no higher than the amount of the amortized > with which a financial asset or a financial liability was
cost. Any impairment of goodwill is never reversed. measured at the time of initial recognition,
> minus any repayments and
/ FINANCIAL INSTRUMENTS > any loss allowances made, depreciation and amortization
Financial instruments are contracts that create financial for impairment losses, or uncollectable debts as well as
assets for one party and, at the same time, a financial any unplanned impairment losses or uncollectable
liability or equity instrument for the other party. financial assets, and
> plus or less the cumulated distribution or any difference
Financial assets are recognized on the settlement date. between the original amount and the amount to be repaid
Initial measurement of financial assets and liabilities is at final maturity (premium or discount), that is distributed
carried out at fair value. The subsequent measurement using the effective interest method over the term of the
depends on the allocation to categories according to the financial asset or the financial liability.
provisions of IFRS 9. Financial assets are categorized as
follows: Financial assets measured at fair value through other
comprehensive income (debt instruments) are held as part of
> Financial assets measured at amortized cost, a business model that stipulates the recognition of
> Financial assets measured at fair value through other contractually agreed cash flow as well as the sale of financial
comprehensive income (debt instruments), assets.
> Financial assets measured at fair value through other
comprehensive income (equity instruments) and
> Financial assets measured at fair value through profit or
loss.
202
Financial assets (debt instruments) that cannot be allocated Financial assets and liabilities are only offset if offsetting the
to one of the aforementioned categories are measured at fair amounts is legally enforceable at the current time and if
value and changes to the Income Statement are reported there is an actual intention to offset. As a general rule, no
with an effect on profit or loss if the cash flows of the financial assets and liabilities are offset within the
financial assets do not exclusively comprise interest Audi Group due to the required conditions not being met.
payments or repayments on the outstanding capital amount, Given the general lack of any global offsetting agreements or
or they are held as part of a business model that stipulates similar arrangements, it is also not possible to carry out
the sale of financial assets. offsetting under certain conditions.
At the Audi Group, equity instruments are measured at fair Subsidiaries or associates and joint ventures that are not
value through other comprehensive income if they are not consolidated for reasons of materiality, do not fall under the
held for trading purposes. area of applicability of IFRS 9 and IFRS 7.
Other participations that are reported with their respective Receivables and liabilities connected with tax reclassification
amortized costs taking into consideration planned impair- within the Volkswagen Group are classified as financial
ment losses are measured at fair value. In general, the fair instruments as of the 2018 fiscal year and are to be
value OCI option without recycling is used for participations. recognized accordingly in the disclosures for IFRS 7.
In the case of current financial assets and liabilities, the Financial assets and liabilities include both non-derivative
amortized costs basically correspond to the nominal value or and derivative claims or commitments, as detailed below.
the repayment value.
// FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Fair value generally corresponds to the market value or MEASURED AT AMORTIZED COST
trading price. If no active market exists, fair value is deter- Financial assets and liabilities that are measured at
mined as far as possible using other observable input amortized cost primarily refer to
factors. If no such input factors are available, fair value is
determined using market pricing techniques, for example by > trade receivables and payables,
discounting future cash flows at a market interest rate or > other receivables and financial assets and liabilities,
applying established option pricing models. > financial liabilities,
> cash and cash equivalents and fixed deposits.
The fair value option of measuring financial assets and
liabilities at fair value through profit and loss is not used at Receivables and liabilities in foreign currencies are measured
the Audi Group. at the relevant year-end exchange rates.
Financial instruments are derecognized if the rights to In the case of current items, the fair values to be additionally
payments have expired or been transferred and the indicated in the Notes correspond to the amortized costs.
Audi Group has transferred substantially all opportunities For assets and liabilities with a remaining term of more than
and risks associated with their title. With regard to one year, fair values are determined by discounting future
factoring, all opportunities and risks are transferred. cash flows at market interest rate.
Derecognition only takes place if a receivable is viewed as
unrecoverable.
203
// NON-DERIVATIVE FINANCIAL INSTRUMENTS The way in which the change in the fair value of hedging
MEASURED AT FAIR VALUE instruments is accounted for is dependent on the type of
Changes in value to financial assets that are allocated at fair hedging relationship. When hedging exchange rate risks
value are reported either through other comprehensive from future cash flow hedges, the hedging instruments are
income or with effect on profit or loss in the Income measured at fair value. The designated effective share of the
Statement. hedging instrument is recognized with no effect on profit or
loss in the reserve for cash flow hedges and the non-
The category “Measured at fair value through other designated share of the hedging instrument is shown with
comprehensive income” only includes debt instruments. no effect on profit or loss in the reserve for the costs of
Changes to the fair value are reported with no effect in equity hedging relationships. Recognition through profit and loss is
taking into account deferred taxes. Lasting changes to the only carried out once the underlying transaction has been
fair value (impairment losses, foreign currency profits and realized. The ineffective portion of a cash flow hedge is
losses, and interest according to the effective interest recognized immediately through profit or loss.
method) are reported through profit or loss.
When hedging value changes for balance sheet items (fair
All financial assets that are neither recognized at amortized value hedges), both the hedging instrument and the hedge
cost nor measured at fair value through other comprehensive risk share of the underlying transaction are recognized at fair
income fall under the category “Measured at fair value value. Remeasurements of hedging transactions and
through profit and loss.” This applies to underlying transactions are reported through profit and loss.
> financial receivables as part of the “Sales” business model, Derivative financial instruments that serve to hedge against
> hedging transactions outside of hedge accounting and market risks according to commercial criteria, but do not
> financial instruments held for sale as part of the special fulfill the strict criteria of IFRS 9 with regard to applying
securities fund. hedge accounting principles, are classified in the category
“Financial assets and liabilities measured at fair value through
For equity instruments not held for trading purposes, the profit or loss” (below also as derivatives without hedging
measurement is at fair value through other comprehensive relationship). This also applies to recognizing rights to
income. No recycling takes place. purchase company shares as well as for the model for hedging
against possible losses from buyback obligations for leasing
If there is no active market for immaterial shares and the fair vehicles. In addition, derivative financial instruments or
values cannot be determined with a justifiable amount of parts of derivative financial instruments that are not classi-
effort, they are recognized according to their respective fied as hedge accounting are classified in the category
amortized costs. If there are notes regarding impairments, “Financial assets and liabilities measured at fair value through
the lower present value of the estimated future cash flow is profit and loss.” These include, for example, non-designated
recognized. forward exchange contracts for hedging revenue, commodity
futures, and forward exchange contracts for commodity
// DERIVATIVE FINANCIAL INSTRUMENTS AND futures.
HEDGE ACCOUNTING
Derivative financial instruments are used as a hedge against The results from the measurement and settlement of the
foreign exchange and commodity price risks for future cash derivatives mentioned above are always carried out in oper-
flows and for items on the Balance Sheet (so-called under- ating profit. The net income effects from fair value hedges
lying transactions). Futures, as well as options in the case of and from derivatives that are not directly connected with
foreign exchange risks, are taken out for this purpose. The business operations are recognized in the financial result.
rules for hedge accounting are applied if a clear hedging
relationship between the underlying transaction and the
hedging instrument is documented and its effectiveness
demonstrated.
204
// VALUE ADJUSTMENTS TO FINANCIAL balance sheet. In addition, deferred tax assets relating to tax
INSTRUMENTS loss carryforwards and deferred tax assets from tax relief are
Financial assets are subject to default risks that are taken also recognized if it is likely that they will be used. Deferred
into consideration in the recognition of loss allowances or, tax liabilities depict future tax charges and are generally re-
for losses already incurred, when reporting an impairment. corded for all taxable time differences between the figures
posted in the tax balance sheet and those in the Consolidated
Specifically, for financial receivables according to Group Balance Sheet.
accounting standards, loss allowances in the amount of the
expected default (expected loss) need to be recognized. The Deferrals amounting to the anticipated tax burden or tax
amount of the loss allowance is always determined based on relief in subsequent fiscal years are created on the basis of
historic default rates and in some cases also based on future- the anticipated tax rate at the time of realization. In accor-
oriented parameters such as expected default probabilities. dance with IAS 12, the tax consequences of distributions of
These loss allowances are taken into account when forming profit are never recognized until the resolution on the appro-
specific valuation allowances. Potential impairment is not priation of profits is adopted. The measurement of deferred
just assumed in the event of various circumstances such as a tax assets for tax loss carryforwards is generally based on
payment delay of a specific duration, introduction of coercive future taxable income in the context of a planning period of
measures, threat of insolvency or over-indebtedness, appli- five fiscal years. The carrying amount is reduced for deferred
cation for or opening of insolvency proceedings or failure of tax assets that are unlikely to be realized.
restructuring measures, but also for receivables that are not
yet past due. Deferred tax assets and deferred tax liabilities are netted if
the taxable entities and maturities are identical. Deferred
Credit default risks are to be considered for all financial assets taxes are reported pursuant to IAS 1 in relation to non-current
that are measured at amortized costs or as having no effect assets/liabilities.
on profit or loss at fair value with recycling, as well as for
contractual financial assets pursuant to IFRS 15 and liabili- / INVENTORIES
ties from lease contracts. Impairment requirements also Raw materials and supplies are measured at the lower of
apply for risks from off-balance-sheet, irrevocable credit average cost of purchase or net realizable value. Other
commitments and for the measurement of financial guaran- purchase-related costs and cost reductions are taken into
tees. Impairments for receivables are generally taken into account as appropriate.
consideration by recognizing loss allowances and creating
specific valuation allowances. Work and services in progress and finished goods are mea-
sured at the lower of cost of production or net realizable
/ DEFERRED TAXES value. Cost of goods sold includes direct materials and direct
Pursuant to IAS 12, deferred tax is determined according to production wages, as well as a directly attributable portion
the liability method in combination with the temporary of the necessary indirect materials and indirect labor costs,
concept. With this concept, deferred taxes are recognized for scheduled production-related depreciation, and expenses
all temporary differences arising from the different valua- attributable to the products from the scheduled amortiza-
tions of assets and liabilities in the tax balance sheet and in tion of capitalized development costs. Distribution costs,
the Consolidated Balance Sheet. Deferred tax assets relating administrative expenses and interest on borrowed capital are
to tax loss carryforwards must also be recognized. not capitalized.
Deferred tax assets include future tax relief resulting from Finished goods and products are measured at the lower of
temporary differences between the carrying amounts in the cost of purchase or net realizable value.
Consolidated Balance Sheet and the valuations in the tax
205
Provision is made for all discernible storage and inventory / AVAILABLE-FOR-SALE ASSETS
risks in the form of appropriate reductions in the carrying Assets or groups of assets are accounted for as “Available for
amounts. Individual adjustments are made on all inventories sale” in accordance with IFRS 5 if their sale is highly prob-
as soon as the probable proceeds realizable from their sale able. If this is the case, they are presented separately in the
or use are lower than the carrying amounts of the inven- Balance Sheet. The assets concerned are measured at the
tories. The net realizable value is deemed to be the estimated lower of their carrying amount and fair value less expected
proceeds of sale less the estimated costs incurred up until costs to sell. In certain cases, as with equity-method adjust-
the sale. ments, no more adjustments are made to assets as a rule.
Current leased assets comprise vehicles leased out under / PROVISIONS FOR PENSIONS
operating leases with a term of up to one year and vehicles Actuarial measurement of provisions for pensions is based
that are subject to a buyback obligation within one year on on the projected unit credit method for defined retirement
the basis of buyback agreements. These vehicles are capitali- benefit plans as specified in IAS 19. This method takes
zed at cost of goods sold and measured in accordance with account of pensions and entitlements to future pensions
the expected loss of value and likely useful life. Based on known at the balance sheet date as well as anticipated future
local factors and historical values from the marketing of pay and pension increases. The actuarial interest rate con-
used cars, updated internal and external information is tinues to be determined on the basis of profits realized on
incorporated into the measurement on an ongoing basis. the capital market for prime-rated corporate bonds. Indivi-
dual parameters used to measure provisions for pensions are
/ SECURITIES, CASH AND CASH EQUIVALENTS described in Note 31. Any effects resulting from the new
Securities held as current assets are measured at market measurement are reported in equity as retained earnings
value, i.e. at the trading price on the balance sheet date. taking account of deferred taxes and with no effect on profit
Cash and cash equivalents are stated at their nominal value. or loss.
The cash figures encompass cash and cash equivalents.
Included under cash equivalents are financial resources that / INCOME TAX OBLIGATIONS
are highly liquid with an insignificant risk of fluctuations in Income tax liabilities comprise current income tax obliga-
value. tions. Deferred taxes are reported under separate balance
sheet and income statement items. Provisions are created
The Audi Group is integrated into the financial management for potential tax risks based on the best estimate.
of the Volkswagen Group. As part of cash pooling arrange-
ments, balances are settled on a daily basis and transformed / SHARE-BASED PAYMENT
into amounts owed to or by companies of the Share-based payment consists of performance shares. The
Volkswagen Group. This increases the efficiency of both obligations arising from share-based payment are accounted
intra-Group and external transactions and also reduces for as cash-settled plans pursuant to IFRS 2. Cash-settled
transaction costs. The functionality of payment transactions payment plans are measured at fair value during their term.
is subject to regular monitoring. In addition, sufficient Fair value is determined using a recognized measurement
liquidity reserves ensure that the balances are always process. The compensation cost is part of personnel costs in
available without any limitations. The cash pool receivables the functional areas and is allocated over the vesting period.
are allocated to cash and cash equivalents on the basis of
their character as cash equivalents.
206
/ OTHER PROVISIONS / GOVERNMENT GRANTS

Pursuant to IAS 37, provisions are recognized if a current Government grants related to assets are deducted from the
obligation existing toward third parties on the basis of a past cost of purchase or cost of goods sold and thus recognized
event is likely to lead to cash outflows and where the amount through profit or loss as a reduced depreciation charge over
of the obligation can reliably be estimated. Provisions with a the life of the depreciable asset. Government grants paid to
remaining term of over one year are measured at their compensate the Group for expenses are as a general rule
discounted settlement value as of the balance sheet date. recognized through profit or loss during the period in which
Market interest rates are used as the discount rates. the corresponding expenses were incurred. If a claim to an
A nominal interest rate of 0.20 (0.08) percent was applied allocation arises retrospectively, the amount of the alloca-
within the eurozone. The settlement value also includes the tion that relates to earlier periods is recognized in income.
expected cost increases. The non-current portions of provi- Grants in the form of non-monetary assets (e.g. free use of
sions for long-service awards were discounted at 1.8 (1.6) land and premises or use of resources for free) are recog-
percent. nized at nominal amount.
Recourse entitlements in relation to provisions are reported / MANAGEMENT’S ESTIMATES AND ASSESSMENTS
separately in the Balance Sheet as receivables if it is almost To some degree, the preparation of the Consolidated
certain that compensation will be paid upon settlement of Financial Statements entails assumptions and estimates
the obligation. They are reported under miscellaneous receiv- with regard to the level and disclosure of the recognized
ables in the other receivables item in the Balance Sheet. assets and liabilities, income and expenses, and disclosures
with regard to contingent receivables and liabilities for the
Other provisions include bonus contributions relating to reporting period. The assumptions and estimates relate
partial retirement agreements that are accrued on a pro rata primarily to the following contents:
basis in accordance with the block model.
Impairment testing of non-financial assets (particularly
/ CONTINGENT LIABILITIES goodwill, brand names and capitalized development costs)
Contingent liabilities are stated in the Notes to the and of participations accounted for using the equity method
Consolidated Financial Statements (see Note 39, or at the cost of purchase requires that assumptions be
“Contingent liabilities”) if the criteria for the creation of made with regard to future cash flows during the planning
provisions are not fulfilled but it is not unlikely that there period and, where applicable, with regard to the discount
will be an outflow of financial resources. These obligations rate to be applied. Any impairment of the Audi Group’s
are only recorded as liabilities once they have become leased assets is also dependent in particular on the residual
specific, i.e., once the outflow of financial resources has value of the leased vehicles after the expiry of the lease
become probable and once the amount of the outflow can be period, as this represents a significant portion of the expec-
reliably estimated. ted incoming payment flows. Further information on impair-
ment testing and on the measurement parameters applied
/ LIABILITIES can be found in the disclosures on the recognition and
Non-current liabilities are reported in the Balance Sheet at measurement principles.
amortized cost. Any differences between the historical costs
of purchase and the repayment value are taken into account Carrying out impairment testing on financial assets requires
using the effective interest method. Liabilities from finance estimates of the scale and likelihood of occurrence of future
leases are reported in the Balance Sheet at the present value events. To the extent possible, estimates should be made
of the leasing installments. Current liabilities are recognized based on current market data as well as on rating categories
at the repayment value or settlement amounts.
207
and scoring information from historical sources. More details assumed future development of the global and industry-
on how value adjustments are determined can be found in specific environment are used as a basis for estimating
the additional Notes to the Balance Sheet pursuant to IFRS 7. expected future business development. Given that future
business development is subject to various uncertain factors,
Provisions are also recognized and measured on the basis of some of which are outside the Group’s control, the assump-
an estimate of the scale and likelihood of occurrence of tions and estimates applied continue to be subject to a high
future events and on an estimate of the discount rate of level of uncertainty. This is particularly true of short and
interest. Where possible, experiences or external expert medium-term cash flow forecasts and of the discount rates
reports are also to be used. Measurement of provisions for used in forecasts.
pensions is additionally dependent on the estimated devel-
opment of the plan assets. The assumptions on which the Developments in this environment that deviate from assump-
calculation of provisions for pensions is based are described tions and are beyond the management’s sphere of influence
in Note 31. Actuarial gains or losses are recognized in other may cause the actual amounts to differ from the estimates
comprehensive income and do not affect profit or loss. originally anticipated. If the actual development varies from
Changes to estimates relating to the amount of other the anticipated development, the premises and, if necessary,
provisions are always recognized in profit or loss. The the carrying amounts for the assets and liabilities in question
expected value approach means that subsequent allocations are adjusted accordingly.
are regularly made to provisions or unused provisions are
released. Income from dissolution is assigned to the The Audi Group anticipates a slight slowdown in global
functional area where the provision was originally economic growth in 2019. Lower growth rates than in 2018
recognized. Warranty claims resulting from sales operations are expected for both advanced and emerging economies. As
are determined on the basis of previous or estimated future before, the Asia region will deliver the highest rates of GDP
losses. An overview of other provisions is provided in growth. However, political uncertainties, a sharper than
Note 33. Details with regard to litigation are provided in expected rise in inflation or early exit from the overall expan-
Note 40. The aforementioned points also contain sionary monetary policy could additionally dampen global
information on the diesel issue. growth prospects. In addition, geopolitical tensions and
conflicts, structural weaknesses in individual countries and
Government grants are recorded based on the assessment of financial market turbulence continue to represent potential
whether there is sufficient certainty that the required condi- disruptive factors. Overall, as things currently stand, no
tions are met and the grants will actually be awarded. This major adjustment is expected in the carrying amounts of
assessment is based on the type of legal entitlement and on assets and liabilities in the Consolidated Balance Sheet in the
past experience. 2019 fiscal year.
When calculating deferred tax assets, assumptions are The management’s estimates and assessments were based
required with regard to future taxable income and the dates in particular on assumptions regarding the development of
on which the deferred tax assets are likely to be realized. the economy as a whole, the development of automotive and
motorcycle markets, and the development of the basic legal
The assumptions and estimates are based on premises that parameters. These aspects, as well as further assumptions,
reflect the facts as known at any given time. In particular, are described in detail in the report on expected
the circumstances at the time of the preparation of the developments.
Consolidated Financial Statements as well as the realistically
208
NOTES TO THE INCOME STATEMENT // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE INCOME STATEMENT

1 / REVENUE in the 2018 fiscal year can be attributed to the lower value in
use of various products in the Automotive segment, mainly
EUR million 2018 2017 1) as a result of market risks. The cost of goods sold also
includes expenses of EUR 284 (277) million in relation to the
Audi brand 37,259 40,728
Lamborghini brand 1,316 933
diesel issue.
Engines, powertrains and parts deliveries 8,326 7,607 Government grants amounting to EUR 46 (17) million were
Other automotive business 6,305 5,886 recognized in profit or loss in the 2018 fiscal year. These
Effects from hedging transactions 617 – grants are allocated to the corresponding functional areas.
Automotive 58,550 59,055
Ducati brand 595 600
3 / DISTRIBUTION COSTS
Other motorcycles business 104 134
Distribution costs of EUR 4,155 (4,925) million mainly
Motorcycles 699 734
Revenue 59,248 59,789 include labor and material costs for marketing and sales
promotion, advertising, public relations activities and out-
ward freight, as well as depreciation attributable to the sales
organization.
As well as revenue generated by the Audi and Lamborghini
brands, revenue from the Automotive segment also includes 4 / ADMINISTRATIVE EXPENSES
revenue from the other brands in the Volkswagen Group. Administrative expenses of EUR 696 (682) million include
Revenue from other automotive business operations pri- labor and material costs as well as depreciation attributable
marily includes proceeds from the sale of genuine parts. to administrative operations.
Existing contractual liabilities as of December 31, 2017, 5 / OTHER OPERATING INCOME

have led to revenue of EUR 742 million. In the 2018 fiscal
year, revenue of EUR 122 million was also realized resulting EUR million 2018 2017 1)
from contractual obligations from the previous period.

Income from the processing of
payments in foreign currency 445 389
Revenue of EUR 293 (173) million was reported from Income from currency hedging
transactions in hedge accounting 2 604
construction contracts.
Income from other hedging transactions 313 –
Income from the dissolution of loss
2 / COST OF GOODS SOLD allowances of receivables and other
assets 27 6
Amounting to EUR 50,117 (50,076) million, cost of goods
Income from rebilling 324 623
sold comprises the costs incurred in generating revenue and Income from the dissolution of
purchase costs in trading transactions. This item also provisions and deferred liabilities 73 379
Income from ancillary business 315 335
includes expenses resulting from the creation of provisions
Income from the disposal of assets 12 32
for warranty costs, for development costs that cannot be
Income from reversal of impairment
capitalized, for depreciation and impairment losses of losses of property, plant and equipment
and intangible assets 4 1
capitalized development costs, and for property, plant and
Miscellaneous operating income 347 453
equipment for manufacturing purposes. Impairment losses
Other operating income 1,862 2,822
on property, plant and equipment totaling EUR 208 (149)
million and on intangible assets totaling EUR 16 (76) million
209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // NOTES TO THE INCOME STATEMENT
Income from ancillary business includes rental income from Expenses relating to litigation risks and costs include expen-
investment property in the amount of EUR 24 (25) million. ses of EUR 890 (53) million in connection with the diesel
issue. In addition, various effects related to the diesel issue in
Income from the processing of payments in foreign currency North America amounting to EUR 2 (57) million are included
largely comprises gains resulting from exchange-rate in miscellaneous operating expenses.
movements between the dates of output and payment, as
well as exchange-rate gains resulting from measurement on Costs from other hedging transactions mainly contain
the closing date. exchange rate losses from the fair value measurement of
derivative financial instruments for currency and
Income from other hedging transactions mainly contains commodities hedging that are not designated in a hedging
exchange rate profits from fair value measurement of relationship. In the previous year, these exchange rate losses
derivative financial instruments for currency and commodi- were shown in the financial result and, from now on, will be
ties hedging that are not designated in a hedging relation- reported in operating profit under IFRS 9. The effects of the
ship. In the previous year, these exchange rate profits were reclassification of currency hedging transactions in hedge
shown in the financial result and, from now on, will be accounting are now primarily to be shown in revenue in
reported in operating profit under IFRS 9. The effects of the accordance with IFRS 9.
reclassification of currency hedging transactions in hedge
accounting are now primarily to be shown in revenue in 7 / RESULT FROM INVESTMENTS ACCOUNTED FOR
accordance with IFRS 9. USING THE EQUITY METHOD
The result from investments accounted for using the equity
6 / OTHER OPERATING EXPENSES method amounted to EUR 261 (526) million. Further infor-
mation on investments accounted for using the equity method
EUR million 2018 2017 is provided in Note 17.
Expenses from the processing of

payments in foreign currency 425 596 8 / NET INTEREST RESULT
Expenses from currency hedging
transactions in hedge accounting 6 602
Expenses from other hedging
transactions 609 –
Other interest and similar income 233 86
Loss allowances on trade receivables
including long-term manufacturing 99 – Interest income 233 86
Loss allowances on other receivables 1 112 Other interest and similar expenses – 49 – 56
Expenses from the allocation and Interest expense included in
rebilling of costs 110 103 lease payments – 19 – 19
Expenses relating to litigation Net interest on the net defined
risks and costs 982 258 benefit liability – 94 – 91
Losses on disposal of assets 15 8 Result from unwinding of
discounts on/discounting
Miscellaneous operating expenses 367 577 other non-current liabilities 48 42
Other operating expenses 2,613 2,257 Interest expenses – 115 – 125
Net interest result 118 – 39
With the introduction of IFRS 15, the expenses from loss

allowances to trade receivables including long-term
manufacturing are to be presented separately. The prior-year
amount is contained in the loss allowances on other
receivables.
210
9 / OTHER FINANCIAL RESULT 10 / INCOME TAX EXPENSE

Income tax expense includes taxes passed on by Volks-
EUR million 2018 2017 1) wagen AG, Wolfsburg, on the basis of the single-entity
relationship between the two companies for tax purposes,
Result from participations 318 55
of which income from profit
along with taxes owed by AUDI AG and its consolidated
transfer agreements 15 9 subsidiaries, as well as deferred taxes.
of which expenses from the
transfer of losses – 29 – 14
Income from compensatory payments 386 271
EUR 531 (1,113) million of the actual income tax expense
Income and expenses from securities – 159 8 was charged to Volkswagen AG.
Realized income and expenses from
loan receivables and payables in
foreign currency – 51 – 13
Income and expenses from
Actual income tax expense 793 1,468
remeasurement and impairment
of financial instruments –5 – 56 of which in Germany 570 1,152
Income and expenses from fair value of which international 222 317
changes of hedging transactions not of which income from the reversal of
included in hedge accounting – 37 – 714 tax provisions – 13 –7
Income and expenses from fair value Deferred tax expense/income 105 – 184
changes of hedging transactions
included in hedge accounting 0 9 of which in Germany 66 – 248
Other financial result 452 – 441 of which international 39 64

Income tax expense 898 1,285
of which non-periodic tax
income/expense – 114 62
The result from participations in the amount of
EUR 162 million primarily includes a share in the profits of
Volkswagen Konzernlogistik GmbH & Co. OHG, Wolfsburg, The actual taxes in Germany are calculated at a tax rate of
dividend income from the portion of FAW-Volkswagen 29.9 (29.9) percent. This represents the sum of the corpor-
Automotive Company, Ltd., Changchun (China) that was ation income tax rate of 15.0 percent, the solidarity sur-
classified as held for sale in the prior year as well as the charge of 5.5 percent and the average trade income tax rate
capital gains from the sale of these shares in the amount of for the Group. The deferred taxes for companies in Germany
EUR 154 million. Furthermore, impairment losses of are calculated at a rate of 29.8 (29.9) percent. The local
EUR 62 (13) million are included in participations in the income tax rates applied to international companies range
Automotive segment. Among other factors, these were from 0 percent to 34 percent.
attributable to the continued negative business performance
of the participations. The effects arising as a result of tax-exempt foreign revenue
and tax benefits on research and development expenditure in
Income from compensatory payments concerns a financial Hungary are reported under tax-exempt revenue in the tax
compensation agreed between AUDI AG and Volkswagen AG, reconciliation accounts.
Wolfsburg, in relation to the economic performance of the
respective brands achieved by FAW-Volkswagen Automotive The impairment testing of deferred tax assets is generally
Company, Ltd. and SAIC Volkswagen Automotive Company based on future taxable income within the context of a
Ltd., Shanghai (China). planning period of five fiscal years. The result of the
impairment test is a deferred tax expense from the
With the implementation of IFRS 9, some results from devaluation of deferred tax claims of EUR 8 (21) million and
hedging transactions have been allocated to revenue or to a deferred tax income from the reversal of impairment of
the other operating result (see disclosures on IFRS 9). deferred tax assets of EUR 5 (6) million.
211
Loss carryforwards total EUR 3,058 (3,075) million, of which offset against them. Following a loss in the current fiscal
EUR 158 (151) million may be used indefinitely, with year or in the prior year, the companies concerned are
EUR 2,900 (2,924) million that can be used within a time expecting to record a positive tax income in future.
period of 12 or 17 years. Overall, loss carryforwards in the
amount of EUR 2,109 (2,057) million were classed as Of the deferred taxes reported in the Balance Sheet, a total
unusable. In the 2018 fiscal year, the realization of tax of EUR 368 million was recorded in the current fiscal year
losses led to a reduction in current income tax expense of with a resulting increase in equity, without influencing the
EUR 16 (50) million. Deferred tax assets of EUR 257 (225) Income Statement. A total of EUR 697 million was recorded
million relating to tax loss carryforwards were not reported in the previous year with a resulting decrease in equity.
due to impairment.
The recording of actuarial gains without affecting profit or
No deferred tax claims were recorded in the Balance Sheet loss, pursuant to IAS 19, led to a decrease in equity of
for deductible temporary differences in the amount of EUR 17 (29) million in the current fiscal year from the
EUR 1 (1) million. In the current fiscal year, the measure- creation of deferred taxes. The change in deferred taxes on
ment of deferred tax assets relating to tax concessions led the effects recognized in equity for hedging transactions led
to their recognition in full in the Balance Sheet. to an increase of EUR 385 million in equity during the course
of the year. Deferred taxes amounting to EUR 669 million
Deferred tax liabilities of EUR 107 (94) million for temporary were recorded from these effects during the previous year
differences and non-distributed profits of AUDI AG sub- with a resulting decrease in equity.
sidiaries were not recorded due to the existence of control
pursuant to IAS 12.39. Deferred taxes posted directly in equity in the current fiscal
year are broken down in detail in the Statement of
Deferred taxes of EUR 6 (11) million were capitalized, with Comprehensive Income.
no deferred tax liabilities in the corresponding amount being
10.1 / DEFERRED TAX ASSETS AND LIABILITIES ON RECOGNITION AND MEASUREMENT DIFFERENCES
RELATING TO INDIVIDUAL BALANCE SHEET ITEMS AND ON TAX LOSS CARRYFORWARDS
EUR million Deferred tax assets Deferred tax liabilities
Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2017
Intangible assets 20 39 1,764 1,577

Property, plant and equipment 257 266 144 92
Long-term financial investments 0 – 39 33
Inventories 168 107 4 25
Receivables and other assets 261 251 686 903
Other current assets 205 245 1 –
Provisions for pensions 1,169 1,171 – –
Liabilities and other provisions 2,385 2,036 34 34
Impairment losses on deferred tax assets from temporary differences – 41 – 44 – –
Temporary differences after impairment 4,424 4,070 2,672 2,664
Loss carryforwards after impairment 92 101 – –
Tax credits after impairment 64 93 – –
Value before consolidation and balancing 4,579 4,264 2,672 2,664
of which non-current 2,807 2,664 2,079 2,035
Offsetting – 2,434 – 2,452 – 2,434 – 2,452
Consolidation measures 173 191 33 4
Carrying amount 2,319 2,003 270 217
212
10.2 / RECONCILIATION OF EXPECTED TO payment will be made at the Annual General Meeting of
REPORTED INCOME TAX EXPENSES Volkswagen AG on May 14, 2019.
EUR million 2018 2017 1) 13 / ADDITIONAL DISCLOSURES ON FINANCIAL

INSTRUMENTS IN THE INCOME STATEMENT
Profit before income tax 4,361 4,717
Expected income tax expense
29.9% (29.9%) 1,304 1,410 13.1 / CATEGORIES
Reconciliation: Financial instruments are categorized as follows pursuant to
Divergent foreign tax burden – 153 – 92
IFRS 7:
Tax portion for tax-exempt income – 370 – 261
Tax portion for expenses not
deductible for tax purposes 55 58 > measured at amortized cost,
Tax portion for effects from loss > measured at fair value,
carryforwards and tax credits 39 – 38
> derivative financial instruments in hedging relationships,
Tax portion for permanent
accounting differences 23 – 53 > not within the scope of IFRS 7 and
Non-periodic taxes – 114 62 > credit commitments and financial guarantees.
Effects of tax rate changes 18 206
Other tax effects 96 –7
The financial instruments that are not within the scope of
Income tax expense reported 898 1,285
IFRS 7 include shares in subsidiaries, associates and joint
Effective tax rate in % 20.6 27.2
ventures. These are not deemed to be financial instruments
for the purposes of IFRS 9.
11 / PROFIT TRANSFER TO VOLKSWAGEN AG 13.2 / NET RESULTS OF FINANCIAL INSTRUMENTS

The amount of EUR 1,096 (2,406) million will be transferred BASED ON MEASUREMENT CATEGORIES PURSUANT
to Volkswagen AG, Wolfsburg, under the profit transfer TO IFRS 9
agreement with AUDI AG.
EUR million 2018
12 / EARNINGS PER SHARE

Financial assets measured at amortized cost 180
Financial liabilities measured at amortized cost – 201
2018 2017 1)
Financial instruments measured at fair value through
profit or loss – 421
Profit share of AUDI AG shareholders
Net results of financial instruments – 443
(EUR million) 3,382 3,509
Weighted average
number of shares 43,000,000 43,000,000
Earnings per share in EUR 78.64 81.60
The “Financial assets measured at amortized cost” and
“Financial liabilities measured at amortized cost” include
income and expenses from the measurement and settlement
Basic earnings per share are calculated by dividing the share of foreign currency transactions as well as from the impair-
of profit due to AUDI AG shareholders by the weighted aver- ment model. It also includes interest income and interest
age number of shares in circulation during the fiscal year. expenses.
Diluted earnings per share are the same as basic earnings per
share, since there were no options on AUDI AG shares in The category “Financial instruments measured at fair value
existence on either December 31, 2018, or on through profit or loss” primarily comprises the results from
December 31, 2017. the settlement and measurement of derivative financial
instruments not allocated to hedge accounting, including
Free-float shareholders of AUDI AG will receive a compen- interest, currency translation results and securities
satory payment for each no-par share in lieu of a dividend for investments.
the 2018 fiscal year. The level of this payment corresponds
to the dividend that is paid on one ordinary share of Volks-
wagen AG, Wolfsburg. A decision regarding the dividend
213
Dividend income in the amount of EUR 1 million were also 13.4 / PROFITS AND LOSSES FROM THE DISPOSAL
reported in the financial result from equity instruments OF FINANCIAL ASSETS TO BE MEASURED AT
measured at fair value through other comprehensive income. AMORTIZED COST
The net results from the prior year according to the cate- EUR million 2018
gories of IAS 39 are shown in the following table:

Profits from disposals of financial assets 0
Losses from disposals of financial assets – 111
EUR million 2017
Result from disposals of financial assets – 111
Financial instruments measured at fair value through

profit or loss – 648
Loans and receivables – 317
13.5 / IMPAIRMENT LOSSES FOR FINANCIAL
Available-for-sale financial assets 76
Financial liabilities measured at amortized cost 331
ASSETS BY CATEGORY FROM IAS 39
Net results of financial instruments – 558
EUR million 2017
Explanations of individual categories can be found in the Measured at fair value 1

Measured at amortized cost 57
Annual Report 2017.
Impairment losses 58
13.3 / INTEREST INCOME AND INTEREST EXPENSES

FOR FINANCIAL INSTRUMENTS NOT MEASURED AT Detailed information about the IFRS 9 impairment model
FAIR VALUE THROUGH PROFIT OR LOSS can be found under Note 37.2, “Credit and default risks.”
EUR million 2018 13.6 / PROFITS AND LOSSES FROM HEDGING

RELATIONSHIPS
Interest income 161
Interest expenses – 56
Financial assets and liabilities measured at // DETAILS OF PROFITS AND LOSSES FROM CASH
amortized cost 104 FLOW HEDGES
Cash flow hedges are formed in order to secure against the
risks of fluctuations in future cash flows. These cash flows
Interest income from “Financial assets and liabilities mea- can result from recognized assets and liabilities or trans-
sured at amortized cost” primarily covers interest from the actions that have a high probability of occurring. The follow-
Audi Group’s cash and cash equivalents, fixed deposits and ing table shows the profits and losses from hedging relation-
loans extended. ships (cash flow hedges) after taxes.
Interest income and interest expenses from prior-year EUR million 2018
financial instruments not measured at fair value can be

Hedging of currency risk
found in the following table.
Profits and losses from fair value changes to hedging
transactions within hedge accounting
EUR million 2017 Recognized in equity – 494
Recognized in the Income Statement 0
Interest income 85 Reclassifications from the reserve for cash flow hedges in
Interest expenses – 67 the Income Statement
Interest income and interest expenses 18 due to the early termination of the hedging
relationship 0
due to the recognition of the underlying transaction – 407
214
EUR 617 million were reported in revenue from the differences in the parameters between the hedging instru-
recognition of the underlying transactions. Due to time ment and the underlying transaction. This income and these
differences between the measurement of the reserve for cash expenses are reported immediately in the financial result.
flow hedges on the respective reporting date and the time of
recognition of the underlying transaction, there are // DEVELOPING RESERVES FOR THE COSTS OF
differences between the recategorized amount in equity and HEDGING RELATIONSHIPS
the amount reported in the Income Statement. Fair value changes of non-designated components of a
derivative are typically to be reported directly in the Income
The reclassification due to changed expectations regarding Statement. An exception to this principle are the fair value
the occurrence of the underlying transaction is done through changes from non-designated fair values of options, insofar
the premature termination of hedging relationships. These as they are related to the underlying transaction. The table
are mostly generated by reducing projections for revenue below shows the development of the corresponding reserve.
hedges. The amounts to be reclassified from equity are
recorded in operating profit. EUR million Currency risk
Position as of Jan. 1, 2018 15

// DEVELOPMENT OF RESERVES FOR
Profits and losses from non-designated
CASH FLOW HEDGES fair values of options –8
As part of cash flow hedge accounting, the designated Position as of Dec. 31, 2018 7
effective shares of a hedging relationship are to be shown in

equity with no effect on profit or loss under the reserve for
cash flow hedges. All of the changes to the market value of In addition, within the Audi Group, fair value changes to non-
the designated components beyond that are reported as designated fixed-date components and cross-currency basis
ineffectiveness through profit and loss. The following table spreads for currency hedging transactions as part of cash
shows a reconciliation of the reserve. flow hedges are initially reported in equity under the re-
serves for deferred costs of hedging relationships. As such,
EUR million Currency risk changes to fair value of the non-designated components or
shares thereof are only included immediately in the Income
Position as of Jan. 1, 2018 1,359
Statement in the event of ineffectiveness. The following
Profits and losses from effective hedging
relationships – 335 table shows an overview of the changes in the other equity
Reclassification due to changed expectations reserves resulting from the aforementioned non-designated
regarding the occurrence of the underlying
transaction –1 portions.
Reclassification due to the recognition of the
underlying transaction – 338
EUR million Currency risk
Position as of Dec. 31, 2018 685
Position as of Jan. 1, 2018 –

Profits and losses from non-designated forward
The profit or loss from changes to the fair value of hedging components and foreign currency basis spreads – 151
transactions within hedge accounting corresponds to the Reclassification due to the recognition of the
underlying transaction – 69
basis for determining the ineffectiveness within the hedging
Reclassification of losses anticipated to be
relationship. Income or expenses from changes in fair value uncollectable and thus reported in other
comprehensive income 1
of hedging instruments exceeding that of changes in fair
Position as of Dec. 31, 2018 – 219
value of the underlying transactions are identified as the
ineffective portion of cash flow hedges. These ineffective
elements within the hedging relationship occur as a result of
215
// PROFITS AND LOSSES FROM HEDGE The ineffective portion of cash flow hedges relates to the
ACCOUNTING UNDER IAS 39 income or expense from changes in fair value of hedging
In the 2017 fiscal year, EUR 112 million was transferred with instruments exceeding that of changes in fair value of the
a positive effect on the result from the cash flow hedge re- underlying transaction that are shown to be within the
serve to other operating profit and EUR 1 million was trans- permitted range of 80 to 125 percent when measuring
ferred to cost of goods sold, with a negative effect on the effectiveness.
result.
The following table provides an overview of income and

expenses from hedging relationships recorded in the
financial result.
EUR million 2017
Hedging instruments fair-value-hedge 47

Underlying transactions fair value hedge – 37
Ineffectiveness –1
216
NOTES TO THE BALANCE SHEET // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE BALANCE SHEET

14 / INTANGIBLE ASSETS During the 2018 fiscal year, a total of EUR 4,178 (3,809)
million was spent on research and development. Of this
EUR million Dec. 31, 2018 Dec. 31, 2017 total, EUR 1,593 (1,243) million was capitalized.

rights and similar rights and The capitalized development costs include borrowing costs
customer bases 386 322
of EUR 17 (29) million. An average rate of borrowing costs of
Brand names 408 410 1.4 (1.5) percent was used as a basis for capitalization in the
of which Automotive 4 6 Audi Group. The capitalization ratio is 38.1 (32.6) percent.
of which Motorcycles 404 404
Goodwill 378 378
15 / PROPERTY, PLANT AND EQUIPMENT
of which Automotive 88 88
of which Motorcycles 290 290
Capitalized development costs 6,402 5,666
of which products currently Land, land rights and buildings,
under development 1,325 2,043 including buildings on
of which products currently in use 5,077 3,623 third-party land 5,128 4,946
Payments on account for Plant and machinery 2,525 2,519
intangible assets 10 9 Other plant and office equipment 4,774 3,927
Intangible assets 7,585 6,785 Payments on account and assets
under construction 1,867 2,268
Property, plant and equipment 14,293 13,660
of which finance lease 71 74
The reported goodwill retained its value during the fiscal
year. The value is also deemed retained in the event of a
variation in the growth forecast and/or discount rate of
+/– 0.5 percentage points. Land and buildings are secured with mortgages totaling
EUR 16 (16) million. Finance leases exist mainly for land and
// RESEARCH AND DEVELOPMENT EXPENDITURE buildings.
RECOGNIZED AS AN EXPENSE
The leases are based on an interest rate of up to 11.6 (11.6)
EUR million 2018 2017 percent depending on the region. Options to purchase or
extend the lease have partially been arranged.
Research expense and non-
capitalized development costs 2,585 2,565
Amortization of and impairment
losses (reversals) on capitalized
development costs 856 1,025
Research and development
expenditure 3,441 3,590
// FUTURE PAYMENTS FOR NON-CANCELABLE FINANCE LEASES
EUR million 2019 2020 to 2023 from 2024 Total
Leasing payments to be made 10 32 80 122

Interest component 7 29 12 48
Present value 3 2 68 74
217
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // NOTES TO THE BALANCE SHEET
The following table shows the comparative figures for the

2017 fiscal year:

Payments totaling EUR 189 (200) million for assets rented general rule using a discounted cash flow method and
on the basis of operating leases were recognized as an correspond to level 3 of the fair value hierarchy.
expense. Of the investment property, land and buildings totaling
EUR 211 (209) million have been leased by the Audi Group
16 / LEASING AND RENTAL ASSETS AND within the scope of finance leases. These leases are based on
INVESTMENT PROPERTY a maximum interest rate of 9.0 (9.0) percent. Options to
Leasing and rental assets, amounting to EUR 11 (6) million purchase or extend the lease have partially been arranged.
refers to vehicles which were leased out as part of an The finance lease payments due in future are listed together
operating lease agreement. with their present values under Note 16.1.
Investment property totaling EUR 332 (346) million is The investment property mentioned above is leased to third
leased out. No impairment losses were recorded for the parties by means of either operating or finance leases. The
2018 fiscal year, as was also the case in the previous year. resulting payment inflows are shown in the following Notes.
Operating costs totaling EUR 7 (6) million were incurred in Payment inflows from properties rented by the Audi Group
relation to maintenance of the investment property. by means of finance lease agreements are shown under
Note 16.1, and payment inflows from the rental of
The fair value of investment property exceeds the amortized properties that are under the legal ownership of the Audi
costs by EUR 106 (95) million. Fair values are calculated as a Group are shown under Note 16.2.
16.1 / FUTURE PAYMENTS FOR NON-CANCELABLE FINANCE LEASES

Leasing payments to be received from sub-leasing (operating lease) 23 82 262 367
Leasing payments to be received from sub-leasing (finance lease) 1 6 22 29

218

2017 fiscal year:

Leasing payments to be received from sub-leasing (operating lease) 18 73 248 338
Leasing payments to be received from sub-leasing (finance lease) 1 6 24 31

16.2 / FUTURE PAYMENT INFLOWS FOR NON-CANCELABLE OPERATING LEASES
Leasing payments to be received from non-cancelable operating leases 16 49 13 78

2017 fiscal year:
Leasing payments to be received from non-cancelable operating leases 18 56 18 93
17 / INVESTMENTS ACCOUNTED FOR USING THE full values of the (converted) financial statements. Any
EQUITY METHOD adjustments to separate financial statements made during
Financial information on the material associated companies the application of the equity method have been taken into
can be found in the following tables. The figures reflect the account accordingly.
17.1 / NOTES TO THE BALANCE SHEET
EUR million Dec. 31, 2018
FAW-Volkswagen SAIC Volkswagen There Holding B.V. Volkswagen Automatic

Automotive Company, Automotive Transmission (Tianjin)
Ltd. Company, Ltd. Company Limited
Non-current assets 10,651 8,580 1,763 1,116

Current assets 10,903 6,689 2 1,279
Non-current liabilities 1,260 1,205 – 327
Current liabilities 12,936 8,526 1 1,023
Net carrying amount 7,358 5,538 1,764 1,044
219
FAW-Volkswagen There Holding B.V. Volkswagen Automatic

Automotive Company, Transmission (Tianjin)
Ltd. Company Limited
Non-current assets 10,071 1,906 1,033

Current assets 13,018 289 827
Non-current liabilities 1,470 – 730
Current liabilities 14,768 0 543
Net carrying amount 6,851 2,195 586
17.2 / RECONCILIATION AT CARRYING AMOUNT OF PARTICIPATIONS
EUR million 2018

Ltd. Company, Ltd. 1) Company Limited
Net carrying amount as of Jan. 1 6,851 3,622 2,195 586

Profit after tax 3,665 2,058 – 351 412
Other comprehensive income after tax 115 – 143 –7 – 12
Change in capital – – – 87 61
Dividends paid – 3,273 – – –
Miscellaneous changes 0 – 14 –4
Net carrying amount as of Dec. 31 7,358 5,538 1,764 1,044
Pro rata equity 368 55 522 418
Consolidation/Other – 28 291 – –
Carrying amount of equity share 340 346 522 418
1) The reconciliation of the net carrying amount refers to the period between June 22, 2018, and December 31, 2018.
EUR million 2017
FAW-Volkswagen There Holding B.V. Volkswagen Automatic Volkswagen

Automotive Company, Transmission (Tianjin) International
Ltd. Company Limited Belgium S.A.
Net carrying amount as of Jan. 1 7,466 1,832 365 10,860

Profit after tax 3,538 362 159 77
Other comprehensive income after tax – 398 2 – 25 3
Change in capital – – 88 –
Dividends paid – 3,755 – – –
Net carrying amount as of Dec. 31 1) 6,851 2,195 586 10,939
Pro rata equity 343 646 254 3,282
Consolidation/Other – 18 – – –
Carrying amount of equity share 2) 324 646 254 3,282
1) For Volkswagen International Belgium S.A., the net carrying amount and the reconciliation of the carrying amount of the equity share as of November 30, 2017, are shown.
2) Shares of FAW-Volkswagen Automotive Company, Ltd. and There Holding B.V. were classified as available for sale under IFRS 5 (see Note 25).
220
17.3 / DISCLOSURES ON THE RESULT
EUR million 2018

Ltd. Company, Ltd. 1) Company Limited
Revenue 41,607 28,607 – 2,387

Result from continued operation 2) 3,665 2,058 – 351 412
Profit after tax 3,665 2,058 – 351 412
Other comprehensive income after tax 115 – 143 –7 – 12
Total comprehensive income 3,780 1,916 – 358 400
Dividends received 327 – – –
1) For SAIC Volkswagen Automotive Company, Ltd., the information relates to the period from June 22, 2018, to December 31, 2018.
2) No operations were discontinued in the period under review.
EUR million 2017
FAW-Volkswagen There Holding B.V. Volkswagen Automatic Volkswagen

Automotive Company, Transmission (Tianjin) International
Ltd. Company Limited Belgium S.A. 1)
Revenue 2) 40,828 71 1,790 23

Result from continued operation 3,538 – 151 159 77
Result from discontinued operation – 513 – –
Profit after tax 3,538 362 159 77
Other comprehensive income after tax – 398 2 – 25 3
Total comprehensive income 3,140 364 134 79
Dividends received 376 – – –
1) For Volkswagen International Belgium S.A., the information relates to the period from January 1, 2017, to November 30, 2017.
2) The revenue of There Holding B.V. relates to the discontinued operation.
18 / DEFERRED TAX ASSETS 19 / OTHER FINANCIAL ASSETS

The temporary differences between the tax bases and the
carrying amounts in the Consolidated Financial Statements 19.1 / NON-CURRENT OTHER FINANCIAL ASSETS
are explained under “Deferred tax” in the “Recognition and
measurement principles” and under Note 10, “Income tax EUR million Dec. 31, 2018 Dec. 31, 2017
expense.”
Positive fair values from derivative
financial instruments 427 1,172
Fixed deposits and loans extended 5,272 3,726
Receivables from finance leases 20 21
Miscellaneous financial assets 24 21
Non-current other financial assets 5,742 4,940
221
The non-current fixed deposits and loans extended accrue 20.2 / CURRENT OTHER RECEIVABLES
interest at rates of up to 4.5 (4.5) percent. Derivative
financial instruments are measured at market value. The EUR million Dec. 31, 2018 Dec. 31, 2017
total position in relation to hedging instruments is present-

Tax claims 456 496
ed under Note 37.5, “Methods of monitoring the effective- Miscellaneous receivables 458 680
ness of hedging relationships.” Non-current other receivables 914 1,176
19.2 / CURRENT OTHER FINANCIAL ASSETS

21 / INVENTORIES
Positive fair values from derivative
financial instruments 411 723
Raw materials and supplies 909 801
Fixed deposits and loans extended 561 435
Work and services in progress 942 888
Receivables from finance leases 4 4
Finished goods and products 6,468 5,104
Miscellaneous financial assets 1,023 786
Current leased assets 1,087 1,101
Current other financial assets 1,999 1,947
Inventories 9,406 7,893
19.3 / POSITIVE FAIR VALUE OF NON-CURRENT AND Inventories amounting to EUR 46,198 (45,857) million were
CURRENT DERIVATIVE FINANCIAL INSTRUMENTS recorded as cost of goods sold when the corresponding
revenue was realized. The impairment resulting from the
EUR million Dec. 31, 2018 Dec. 31, 2017 measurement of inventories on the basis of sales markets
amounted to EUR 381 (394) million. Impairment loss re-
Cash flow hedges against currency
risks from future cash flows 732 1,618 versals amounted to EUR 14 (2) million.
Other derivative financial
instruments 106 277
Of the finished goods inventory, a portion of the company car
Positive fair values of derivative
financial instruments 838 1,895 fleet valued at EUR 306 (263) million has been pledged as
collateral for commitments toward employees under the
partial retirement block model.
20 / OTHER RECEIVABLES
In addition, leased vehicles with an operating lease term of
20.1 / NON-CURRENT OTHER RECEIVABLES up to one year were reported under inventories in the amount
of EUR 1,087 (1,101) million. In the following fiscal year,
EUR million Dec. 31, 2018 Dec. 31, 2017 payments in the amount of EUR 56 (55) million are expected
from non-cancelable leases.
Tax claims 2 2
Miscellaneous receivables 127 143
Non-current other receivables 128 145 22 / TRADE RECEIVABLES
Trade receivables of EUR 5,800 (5,533) million will be real-
ized within the next twelve months. Impairment losses on
trade receivables are detailed under Note 37.2, “Credit and
default risks.”
222
The trade receivables include receivables from construction Cash funds amounting to EUR 9,309 (11,273) million
contracts accounted for using the percentage-of-completion primarily comprise credit balances with banks and affiliated
method. These correspond to the contractual assets from companies. The credit balances with banks amounting to
customer contracts and developed as follows: EUR 783 (1,177) million are held at various banks in differ-
ent currencies. Balances with affiliated companies include
EUR million 2018 daily and short-term investments with only marginal risk of
fluctuations in value and amount to EUR 8,484 (10,096)
Position as of Jan. 1 121
million.
Additions and disposals 48
Changes in scope of consolidated companies –
Changes to adjustments 0 25 / AVAILABLE-FOR-SALE ASSETS AND
Changes to measurements, estimates and contractual LIABILITIES CLASSIFIED AS HELD FOR SALE
adjustments –
Shares in FAW-Volkswagen Automotive Company, Ltd.,
Currency changes –
Changchun (China) that were classified as held for sale in the
Position as of Dec. 31 169
prior year were sold on November 6, 2018, to
Volkswagen AG, Wolfsburg.
In the prior year, the net percentage of completion receiv-
ables from construction contracts pursuant to IAS 18 com- In December 2017, contracts for the sale of a respective
prised the following: 5.9 percent of the shares in There Holding B.V., Rijswijk
(Netherlands), were signed between Audi, BMW and Daimler,
EUR million Dec. 31, 2017 of the one part, and Robert Bosch Investment Nederland
B.V., Boxtel (Netherlands), and Continental Automotive
Construction costs and proportionate contract
profit/loss of construction contracts 280 Holding Netherlands B.V., Maastricht (Netherlands), of the
Progress billings – other part. The Audi Group’s shareholding interest in There
Percentage of completion receivables, gross 280 Holding B.V. was reduced by 3.9 percentage points as a
Payments on account – 158
result of the sale. An amount of EUR 86 million was reclassi-
Percentage of completion receivables, net 123
fied in the 2017 fiscal year to available-for-sale assets based
on the carrying amount of this investment determined using
the equity method. The transactions were completed on
Other advance payments for construction contracts in the February 28, 2018.
2017 fiscal year amounting to EUR 14 million, for which no
construction costs have yet been incurred, are recognized 26 / EQUITY
under liabilities as advance payments received for orders and Information on the composition and development of equity
services. is provided on pages 178 f. in the Statement of Changes in
Equity.
23 / EFFECTIVE INCOME TAX ASSETS
Entitlements to income tax rebates, predominantly for The share capital of AUDI AG is unchanged, at
international Group companies, are reported under this item. EUR 110,080,000. Each share represents a notional share
of EUR 2.56 of the subscribed capital. This capital is divided
24 / SECURITIES, CASH AND CASH EQUIVALENTS into 43,000,000 no-par bearer shares.
Securities include fixed or variable-interest securities and
shares in equity in the amount of EUR 5,726 (6,002) million. The capital reserve contains additional payments from the
issuance of shares in the company as well as cash injections
by Volkswagen AG, Wolfsburg.
223
Retained earnings comprise accumulated gains and the Currency translation differences that do not affect profit or
remeasurements from pension plans. loss and, on a pro rata basis, cash flow hedges with no effect
on profit or loss as well as the effects from the
Other reserves include changes in value recognized with no remeasurement of pension schemes of companies valued at
effect on profit or loss relating to hedging transactions, to equity are included in the reserve for investments accounted
interests measured at equity and to currency translation for using the equity method.
differences.
The balance of EUR 2,286 (1,103) million remaining after
The opportunities and risks under forward exchange the transfer of profit to Volkswagen AG is transferred to the
contracts and foreign exchange options, and those under retained earnings.
commodity price transactions serving as hedges for future
cash flows are generally deferred in the reserve for hedging Summarized information on the individual financial
transactions with no effect on profit or loss. When the statements from the material companies in which Audi
underlying transaction is realized, the results from the holds no shares is provided in the following tables:
recognition of the hedging contracts are shown in the
operating profit.
26.1 / NOTES TO THE BALANCE SHEET
EUR million Audi of America, LLC Audi Canada Inc.
Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2017
Non-current assets 313 300 58 59

Current assets 4,587 3,936 740 501
Non-current liabilities 736 592 103 93
Current liabilities 3,656 3,264 585 363
Non-controlling interests 508 380 110 103
26.2 / DISCLOSURES ON THE RESULT AND THE CASH FLOW STATEMENT
EUR million Audi of America, LLC Audi Canada Inc.
2018 2017 2018 2017
Revenue 9,035 9,899 1,369 1,455

Profit after tax 1) 66 – 93 11 16
Other comprehensive income after tax 21 – 66 –4 –5
Total comprehensive income 87 – 159 8 10
Share of total comprehensive income of non-controlling interests 87 – 159 8 10
Cash flow from operating activities – 406 – 278 –1 – 23

Cash flow from investing activities – 431 – 221 – 206 91
of which change in fixed deposits and loans extended – 430 – 229 – 204 91
Cash flow from financing activities – 50 460 262 – 96
Change in cash and cash equivalents due to changes in exchange rates 12 – 230 –5 –9
Change in cash and cash equivalents – 874 – 269 50 – 37
1) No operations were discontinued in the period under review.
224
27 / FINANCIAL LIABILITIES 29.2 / CURRENT OTHER FINANCIAL LIABILITIES
27.1 / NON-CURRENT FINANCIAL LIABILITIES EUR million Dec. 31, 2018 Dec. 31, 2017
Negative fair values from derivative

EUR million Dec. 31, 2018 Dec. 31, 2017 financial instruments 504 300
Liability from the transfer of profit 1,096 2,406
Loans 30 35
Miscellaneous financial liabilities 2,467 2,222
Liabilities from finance leases 289 293
Current other financial liabilities 4,067 4,928
Non-current financial liabilities 319 328
29.3 / NEGATIVE FAIR VALUES OF NON-CURRENT

27.2 / CURRENT FINANCIAL LIABILITIES
AND CURRENT DERIVATIVE FINANCIAL
INSTRUMENTS
Liabilities to factoring companies – 50 EUR million Dec. 31, 2018 Dec. 31, 2017
Loans 86 248
Liabilities from finance leases 23 22 Cash flow hedges against currency
risks from future cash flows 228 129
Current financial liabilities 108 319
Other derivative financial
instruments 732 603
Negative fair values of derivative
Measurement of the non-current and current finance leases financial instruments 960 732
is based on market interest rates in each case.
28 / DEFERRED TAX LIABILITIES 30 / OTHER LIABILITIES

The temporary differences between the tax bases and the
carrying amounts in the Consolidated Financial Statements 30.1 / NON-CURRENT OTHER LIABILITIES
are explained under “Deferred tax” in the “Recognition and
measurement principles” as well as under Note 10, “Income EUR million Dec. 31, 2018 Dec. 31, 2017
tax expense.”
Payments on account for orders from
customers and for service
agreements 828 805
Pursuant to IAS 1, deferred tax liabilities are reported as
Payments on account from lease
non-current liabilities, irrespective of their maturities. agreements – 0
Liabilities from other taxes 6 3
29 / OTHER FINANCIAL LIABILITIES Social security liabilities 43 38
Liabilities from payroll accounting 96 85
Miscellaneous liabilities 252 274
29.1 / NON-CURRENT OTHER FINANCIAL
Non-current other liabilities 1,224 1,205
LIABILITIES
EUR million Dec. 31, 2018 Dec. 31, 2017 Liabilities with a time to maturity of more than five years
amount to EUR 13 (11) million.
Negative fair values from derivative
financial instruments 456 432
Miscellaneous financial liabilities 7 16
Non-current other financial
liabilities 463 448
The derivative financial instruments reported under other

financial liabilities, which largely refer to currency hedges,
are measured at fair value. The total item of currency
hedging instruments is presented under Note 37, “Manage-
ment of financial risks.”
225
30.2 / CURRENT OTHER LIABILITIES The retirement benefit systems are based predominantly on
defined benefit plans, whereby a distinction is made
EUR million Dec. 31, 2018 Dec. 31, 2017 between provision-based systems and externally funded
systems. The provisions for pensions for defined benefit
Payments on account for orders from
customers and for service plans are calculated by independent actuaries in accordance
agreements 851 742
with IAS 19 using the projected unit credit method. This
Payments on account from lease
agreements 37 36 measures future obligations on the basis of the pro-rata
Liabilities from other taxes 248 260 benefit entitlements acquired as of the balance sheet date.
Social security liabilities 138 164 The measurement takes account of actuarial assumptions
Liabilities from payroll accounting 1,177 1,227
regarding discount rates, remuneration and retirement
Miscellaneous liabilities 182 79
benefit trends and staff turnover rates. Actuarial gains and
Current other liabilities 2,634 2,508
losses result from deviations in what has actually occurred
compared with the assumptions made during the previous
year and from changes in assumptions. They are reported in
30.3 / CONTRACTUAL LIABILITIES equity with no effect on profit or loss during the period in
Payments received for orders and services are contractual which they occur as part of remeasurement, taking deferred
liabilities that developed as follows: taxes into account. These remeasurements also include the
interest income from plan assets.
EUR million 2018
The retirement benefit scheme within the Audi Group was

Position as of Jan. 1 1,405
developed into a Contractual Trust Arrangement (CTA) in
Additions and disposals 244
Germany on January 1, 2001. The trust is a contribution-
Changes to measurements, estimates and contractual based retirement benefit scheme with guarantees backed by
adjustments – Volkswagen Pension Trust e.V., Wolfsburg. An annual cost of
Currency changes 31
providing benefits, based on remuneration and status, is
Position as of Dec. 31 1,679
converted into a retirement benefits entitlement payable for
life (guarantee components) using annuity conversion
factors. The annuity conversion factors include a guaranteed
31 / PROVISIONS FOR PENSIONS rate of interest. When the benefits are due, the retirement
Provisions for pensions are created on the basis of plans to benefits components acquired annually are added together.
provide retirement, disability and surviving dependent The cost of providing benefits is invested on an ongoing basis
benefits. The benefit amounts are generally contingent on in a dedicated fund that is managed on a fiduciary basis by
the length of service and the remuneration of employees. Volkswagen Pension Trust e.V. and invested in the capital
market. If the plan assets are higher than the present value
Both defined contribution and defined benefit plans exist of the obligations calculated using the guaranteed interest
within the Audi Group for retirement benefit arrangements. rate, a surplus is allocated (surplus components).
In the case of defined contribution plans, the Company pays
contributions to public or private sector pension plans on the The pension fund model is classed as a defined benefit plan
basis of statutory or contractual requirements, or on a pursuant to IAS 19. The dedicated fund administered on a
voluntary basis. Payment of these contributions releases fiduciary basis satisfies the requirements of IAS 19 as plan
the Company from any other benefit obligations. Current assets and has therefore been offset against the obligations.
contribution payments are reported as an expense for the
year in question. In the case of the Audi Group, they totaled
EUR 418 (397) million. Of this, contributions of
EUR 387 (370) million were paid in Germany toward
statutory pension insurance.
226
31.1 / AMOUNTS RECORDED IN THE BALANCE 31.2 / PRESENT VALUE OF DEFINED BENEFIT
SHEET FOR DEFINED BENEFIT OBLIGATIONS OBLIGATIONS
EUR million Dec. 31, 2018 Dec. 31, 2017 EUR million 2018 2017
Present value of externally funded Present value as of Jan. 1 6,752 6,682

defined benefit obligations 2,863 2,615
Service costs 264 253
Fair value of plan assets 1,732 1,617
Interest expense 125 118
Funded status (balance) 1,132 998 Actuarial gains (–)/losses (+) following
Present value of defined benefit changes in demographic assumptions + 89 –1
obligations not externally funded 4,062 4,137 Actuarial gains (–)/losses (+) following
Provisions for pensions recognized changes in financial assumptions – 147 – 127
in the Balance Sheet 5,194 5,134 Actuarial gains (–)/losses (+) following
experience-based adjustments – 42 – 63
Pension payments from
company assets – 113 – 110
Pension payments from fund assets – 15 – 10
Income from settlements 0 –
Past service costs
(incl. plan curtailment) 0 –
Effects from transfers 16 14
Currency differences –4 –4
Present value as of Dec. 31 6,925 6,752
31.3 / SENSITIVITY ANALYSES
Present value of defined benefit pension obligation if Dec. 31, 2018 Dec. 31, 2017
EUR million in % EUR million in %
Discount rate + 0.5 percentage points 6,254 – 9.69% 6,090 – 9.80%

– 0.5 percentage points 7,708 11.30% 7,524 11.44%
Remuneration trend + 0.5 percentage points 6,992 0.96% 6,838 1.27%
– 0.5 percentage points 6,864 – 0.89% 6,672 – 1.18%
Retirement benefit trend + 0.5 percentage points 7,291 5.29% 7,122 5.49%
– 0.5 percentage points 6,593 – 4.80% 6,416 – 4.97%
Life expectancy + 1 year 7,134 3.02% 6,940 2.80%
A change of half a percentage point in each case in the key To investigate the sensitivity of the present value of the
actuarial assumptions used to calculate the present value of defined benefit obligation to any change in the assumed life
the defined benefit pension obligation would result in the expectancy, the expected mortality rate is reduced as part of
effects shown in the table. a comparative calculation on a scale that is roughly equiva-
lent to an increase in life expectancy of one year.
The sensitivity analyses take into account a changed assump-
tion in each case, although the other assumptions remain
unchanged compared with the original calculation, meaning
that potential correlation effects between the individual
assumptions are not taken into account.
227
31.4 / ALLOCATION OF THE PRESENT VALUE OF The average weighted term during which the Audi Group’s
DEFINED BENEFIT OBLIGATION AMONG THE PLAN defined benefit obligation will apply, based on the current
MEMBERS perspective, is 22 (22) years (Macaulay Duration).
EUR million 2018 2017 31.6 / FAIR VALUE OF PLAN ASSETS
Active beneficiary members 4,769 4,644

Members with vested entitlements who
have left the company 199 195
Plan assets as of Jan. 1 1,617 1,480
Pensioners 1,957 1,912
Interest income from plan assets 31 27
Income/expenses from plan assets not
recognized in interest income – 69 – 27
Employer contributions to the fund 161 146
31.5 / MATURITY PROFILE OF DEFINED BENEFIT Employee contributions to the fund – 0
OBLIGATION Pension payments from the fund – 15 – 10
EUR million 2018 2017 Currency differences –5 –2

Plan assets as of Dec. 31 1,731 1,617
Due within the next fiscal year 174 158
Due within two to five years 1,146 1,034
Due after more than five years 5,606 5,560
Employer contributions to the fund totaling EUR 166 (122)
million are expected for the following fiscal year.
31.7 / COMPOSITION OF PLAN ASSETS
Market price No market price Total Market price No market price Total
in an active in an active in an active in an active
market market market market
Cash and cash equivalents 130 – 130 123 – 123

Debt instruments – – – 2 – 2
Equity funds 229 – 229 225 – 225
Pension funds 1,258 110 1,367 1,153 106 1,259
Real estate funds 4 – 4 7 – 7
Plan assets 1,622 110 1,732 1,511 106 1,617
228
As well as the general market risk, the plan assets of Volks- 31.8 / AMOUNTS RECOGNIZED THROUGH PROFIT
wagen Pension Trust e.V., Wolfsburg, are mainly exposed to OR LOSS FROM BENEFIT OBLIGATIONS
interest rate and share price risks. The plan assets are largely
invested in investment funds composed of fixed interest EUR million 2018 2017
securities or shares. To cushion the market risk, the benefit

Service costs 264 253
system provides for funds to be allocated to a fluctuation Net interest expense (+) and income (–) + 94 + 91
reserve prior to each surplus allocation. Additionally, the Past service costs
investment strategy and its implementation are monitored (incl. plan curtailment) 0 –
Balance of amounts from defined
on an ongoing basis by the bodies of Volkswagen Pension benefit obligations recognized through
Trust e.V., which include representatives from AUDI AG. profit or loss 358 343
Asset liability management studies are also carried out at

regular intervals, ensuring that the investment is compatible
with the obligations in question. Net interest expense/net interest income includes the
interest expense from the defined benefit obligation and the
The present value of the obligation is subject to interest rate expected return on plan assets (net interest approach).
risk. Should the value of the plan assets fall below the pre-
sent value of the guaranteed obligation, provisions should 31.9 / DEVELOPMENT OF PROVISIONS FOR
be created in the amount of the shortfall. PENSIONS
The benefit system provides for lifelong pension payments. EUR million 2018 2017
In order to take the longevity risk into account, the most up-
Provisions for pensions as of Jan. 1 5,134 5,202
to-date generation mortality reference tables “HEUBECK- Service costs 264 253
RICHTTAFELN 2018 G” are used, as these have already Interest expense 125 118
considered the probability of greater life expectancy in the Interest income from plan assets – 31 – 27
future. As an additional measure, annual risk monitoring is Income/expenses from plan assets not
recognized in interest income 69 27
carried out by an independent actuary as part of the review
Actuarial gains (–)/losses (+) following
of the assets held by Volkswagen Pension Trust e.V. To reduce changes in demographic assumptions + 89 –1
the inflation risk presented by the adjustment of current Actuarial gains (–)/losses (+) following
changes in financial assumptions – 147 – 127
pension payments in line with the rate of inflation, a non- Actuarial gains (–)/losses (+) following
inflation linked indexing of pensions has been applied to experience-based adjustments – 42 – 63
pension obligations where legally permissible. Pension payments from

company assets – 113 – 110
Income from settlements 0 –
Employer contributions to the fund – 161 – 146
Currency differences 0 –2
Provisions for pensions as of Dec. 31 5,194 5,134
229
31.10 / ACTUARIAL PREMISES FOR THE The non-recurring transition effect from the “Reference
CALCULATION OF PENSION OBLIGATIONS Tables 2005 G” used in the prior year is shown under the
actuarial gains and losses in the changes to demographic
in % 2018 2017 assumptions. The discount rates are, as a general rule,
determined on the basis of the yields on prime-rated
Discount rate 1.97 1.87
Remuneration trend 3.67 3.67
corporate bonds. The remuneration trends encompass
Retirement benefit trend 1.46 1.46 anticipated increases in wages and salaries, which also take
Employee turnover rate 1.18 1.17 account of pay increases linked to promotion. The retirement
benefit trends either correspond to the contractually agreed
guaranteed adjustments or are based on the relevant rules
The figures shown are average figures, weighted in accor- on pension indexing. The employee turnover rates are based
dance with the present values of the defined benefit obligation. on past experience and expectations for the future.
The “Reference Tables 2018 G,” published by HEUBECK- 32 / EFFECTIVE INCOME TAX OBLIGATIONS
RICHTTAFELN-GmbH, Cologne, served as the biometric basis Effective income tax obligations consist primarily of tax
for calculation of retirement benefits. liabilities to Volkswagen AG, Wolfsburg, under allocation
plans.
33 / OTHER PROVISIONS
Total Of which due Total Of which due

within one year within one year
Obligations from sales operations 8,801 3,855 8,806 4,008

Workforce-related provisions 1,161 331 1,078 266
Provisions for legal and litigation risks 836 398 956 436
Miscellaneous provisions 1,083 1,009 903 840
Other provisions 11,881 5,593 11,743 5,550
Provisions of EUR 376 (387) million were recognized in genuine parts. Warranty claims are determined on the basis
connection with the diesel issue in the fiscal year. As of the of previous or estimated future losses. Obligations from
balance sheet date, there were provisions for this totaling sales operations also include sales measures such as rebates,
EUR 822 (931) million. The provisions for the airbag recall bonuses and similar discounts. These comprise obligations
totaled EUR 151 (211) million. In both cases, the year-on- that relate to revenue generated prior to the balance sheet
year decline is largely attributable to utilization. date but arise subsequent to that date. Furthermore, pro-
visions related to the diesel issue have been created for
Obligations from sales operations primarily comprise technical measures. Provisions for the airbag recall are also
warranty claims from the sale of vehicles, components and included in the obligations from sales operations.
230
The workforce-related provisions are recognized for such anticipated that would justify the creation of provisions. It is
purposes as partial retirement arrangements and long- considered highly improbable that the Audi Group will be the
service awards. subject of a joint liability claim with regard to the four-cylinder
TDI issue described. For this reason, no contingent liabilities
Provisions for legal and litigation risks include a range of were recognized.
court proceedings and claims primarily relating to product
liability and patent infringements. Furthermore, provisions Volkswagen AG is the subject of a claim for reimbursement
for legal risks are also included as part of the overall diesel amounting to EUR 227 (328) million as a consequence of the
issue. four-cylinder TDI issue.
Audi Group companies in several countries are involved in The other provisions include reserves for price risks of
litigation regarding the affected four-cylinder TDI engines. EUR 255 (144) million. Anticipated outflows from other
Based on the agreements in place, Volkswagen AG, provisions are 47 percent in the following year, 41 percent in
Wolfsburg, is responsible for defending these cases and the the years 2020 through 2023 and 12 percent thereafter.
ensuing consequences. As a result, no resource outflows are
// CHANGE IN OTHER PROVISIONS
EUR million Jan. 1, Currency Change in Utiliza- Dis- Addition Interest Dec. 31,
2018 1) differences scope of tion solution effect from 2018
consoli- measure-
dated ment
companies
Obligations from sales operations 8,911 46 – 3,189 360 3,423 – 30 8,801

Workforce-related provisions 1,078 0 – 215 13 317 –6 1,161
Provisions for legal and litigation risks 956 1 – 298 75 264 – 12 836
Miscellaneous provisions 903 1 – 349 81 609 0 1,083
Change in
other provisions 11,848 47 – 4,050 530 4,614 – 48 11,881
1) The opening balance has been adjusted (see disclosures on IFRS 15).
34 / TRADE PAYABLES
Trade payables totaled EUR 8,565 (7,313) million. The
customary retention of title applies to liabilities from
deliveries of goods.
231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // ADDITIONAL DISCLOSURES
ADDITIONAL DISCLOSURES
35 / CAPITAL MANAGEMENT Invested capital is calculated from the asset items on the
The primary goal of capital management within the Audi Group Balance Sheet that serve the core business purpose
is to ensure financial flexibility in order to achieve business (intangible assets, property, plant and equipment, leasing
and growth targets and to enable a continuous, steady and rental assets, investment property, inventories and
growth in the value of the company. In particular, manage- receivables) less non-interest-bearing liabilities (trade
ment is focused on achieving the minimum return demanded payables and advance payments). The average invested
by the capital market on the invested assets. capital is calculated on the basis of the assets at the
beginning and end of the fiscal year.
To ensure that resources are deployed within the Audi Group
as efficiently as possible, and to measure success, the return The return on investment is shown in the table below:
on investment (ROI) indicator is used.
The return on investment is the return on the average

Operating profit after tax 2,471 3,270
invested capital for a particular period based on the Invested assets (average) 24,829 22,659
operating profit after tax. The Audi Group has set itself a Return on investment (ROI) in % 10.0 14.4
minimum rate of return of 9 percent, applicable to both the
segments and to the individual products and product lines.
232
ADDITIONAL DISCLOSURES // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 / ADDITIONAL DISCLOSURES ON FINANCIAL INSTRUMENTS IN THE BALANCE SHEET
36.1 / CARRYING AMOUNT OF FINANCIAL INSTRUMENTS
EUR million Measured at Measured at Measured at Derivatives in Not allocated Carrying

amortized fair value fair value hedging to a category amount as
cost through through other relationships per Balance
profit or loss comprehensive Sheet as of
income Dec. 31, 2018
Other participations – – 1 – – 1
Other financial assets 5,296 48 – 379 20 5,742
Non-current financial assets 5,296 48 1 379 20 5,743
Trade receivables 5,630 1 – – 169 5,800

Effective income tax assets 2 – – – – 2
Other financial assets 1,418 225 – 352 4 1,999
Securities – 5,726 – – – 5,726
Cash funds 9,309 – – – – 9,309
Current financial assets 16,359 5,953 – 352 173 22,836
Financial assets 21,654 6,000 1 732 193 28,580
Financial liabilities 30 – – – 289 319

Other financial liabilities 7 399 – 57 – 463
Effective income tax obligations 786 – – – – 786
Non-current financial liabilities 823 399 – 57 289 1,567
Financial liabilities 86 – – – 23 108

Trade payables 8,565 – – – – 8,565
Other financial liabilities 3,563 333 – 171 – 4,067
Effective income tax obligations 277 – – – – 277
Current financial liabilities 12,491 333 – 171 23 13,018
Financial liabilities 13,314 732 – 228 311 14,585
The information contains only financial instruments and Receivables and liabilities in connection with tax reclassi-
assets or liabilities to be measured according to IFRS 9. fication are also now classified as financial instruments.
A comparison with the Balance Sheet is therefore only
possible to a limited extent. The prior-year disclosures correspond to the rules of IAS 39.
The reporting format was adjusted.
With the first-time adoption of IFRS 9 and IFRS 15, as of the
2018 fiscal year the carrying amounts of contractual
financial assets as well as the receivables and liabilities from
leases are shown in the category “Not assigned to a
category.”
233
EUR million Reconciliation of balance sheet items to classes of financial instruments
Carrying amount Measured at fair Available for sale Loans and

as per Balance value through receivables
Sheet as of profit or loss
Dec. 31, 2017
Other participations 1 – 1 –
Other financial assets 4,940 88 – 3,747
Non-current financial assets 4,941 88 1 3,747
Trade receivables 5,533 – – 5,533

Other financial assets 1,947 190 – 1,221
Securities 6,002 – 6,002 –
Cash funds 11,273 – – 11,273
Current financial assets 24,755 190 6,002 18,026
Financial assets 29,696 277 6,003 21,773
Financial liabilities 328 – – –

Other financial liabilities 448 397 – –
Non-current financial liabilities 776 397 – –
Financial liabilities 319 – – –

Trade payables 7,313 – – –
Other financial liabilities 4,928 206 – –
Current financial liabilities 12,560 206 – –
Financial liabilities 13,336 603 – –
234
Classification in measurement levels pursuant to IFRS 7
Financial liabilities No category assigned under IAS 39 Measured at fair value Measured at
measured at amortized cost
amortized cost
Derivative financial Not within Level 1 Level 2 Level 3

instruments with the scope
hedging relationships of IAS 39
– – – – – 1 –
– 1,085 21 – 1,160 13 3,768
– 1,085 21 – 1,160 13 3,768
– – – – – – 5,533
– 533 4 – 719 3 1,225
– – – 6,002 – – –
– – – – – – 11,273
– 533 4 6,002 719 3 18,030
– 1,618 25 6,002 1,879 17 21,798
35 – 293 – – – 328
16 35 – – 41 391 16
51 35 293 – 41 391 344
297 – 22 – – – 319
7,313 – – – – – 7,313
4,628 94 – – 118 182 4,628
12,238 94 22 – 118 182 12,260
12,289 129 315 – 159 573 12,604
235
36.2 / FAIR VALUE DISCLOSURES Within the Audi Group, level 3 mainly covers residual value
Measurement of financial instruments at fair value is based hedging arrangements with dealers. The input factors for
on a three-level hierarchy and on the proximity of the measuring the future development of used car prices cannot
measurement factors used for an active market. An active be observed on active markets; they are forecast by various
market is one in which homogeneous products are traded, independent institutions. The residual value hedging model
where willing buyers and sellers can be found for them at all is explained in Note 37.4, “Market risks.”
times, and where their prices are publicly available.
Furthermore, non-current commodity futures are also
Level 1 of the fair value hierarchy involves the measurement measured according to level 3, as the long-term nature of
of financial instruments, such as securities, listed on active the contracts means that the key parameters for their
markets. measurement need to be extrapolated. The extrapolation for
the different commodities is carried out on the basis of
Level 2 involves the measurement of financial instruments observable input factors, acquired via rating agencies. When
such as derivatives, where the fair value is calculated using measuring equity instruments, the respective company plans
measurement processes based on observable market data. and the company-specific discount rates are always used.
Particular use is made of exchange rates, interest rates and
commodity prices, which can be observed on the corres-
ponding markets and are acquired via ratings agencies.
// FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
Carrying amount Level 1 Level 2 Level 3
Other participations 1 – – 1
Other financial assets 427 – 425 2
Non-current financial assets measured at fair value 428 – 425 3
Trade receivables 1 – – 1
Other financial assets 578 – 576 1
Securities 5,726 5,726 – –
Current financial assets measured at fair value 6,305 5,726 576 3
Financial assets measured at fair value 6,733 5,726 1,001 5
Other financial liabilities 456 – 83 372

Non-current financial liabilities measured at fair value 456 – 83 372
Other financial liabilities 504 – 251 253

Current financial liabilities measured at fair value 504 – 251 253
Financial liabilities measured at fair value 960 – 335 625
236
// RECONCILIATION STATEMENT FOR FINANCIAL The residual value hedging model is generally allocated
INSTRUMENTS MEASURED AT FAIR VALUE to level 3. The transfer from level 3 to level 2 contains
ACCORDING TO LEVEL 3 commodity futures for whose measurement it is no longer
necessary to extrapolate the exchange rates because they
EUR million 2018 2017 can now be observed again on the active market.
Positive fair values of level 3 financial

instruments as of Jan. 1 17 16 The effects of changes in the market price of used cars
Currency changes 0 – resulting from hedging arrangements are shown in detail
Income (+) and expense (–) recognized under Note 37.4, “Market risks.”
in the operating profit –5 –
Income (+) and expense (–) recognized
in the financial result – + 17 Opportunities and risks resulting from the fair value
Income (+) and expense (–) recognized
fluctuations in derivative financial instruments measured
in other comprehensive income – 0
Additions 1 – according to level 3 are calculated within the Audi Group by
Disposals 0 – means of sensitivity analyses. In this way, the effects of
Recognitions –2 –3 changes in commodity price listings on profit after tax and
Transfer from level 3 to level 2 –6 – 14 equity are simulated. A 10 percent increase or decrease in
Positive fair values of level 3 financial
commodity prices at December 31, 2018, would positively or
instruments as of Dec. 31 5 17
Income (+) and expense (–) recognized in negatively impact profit after tax by EUR 2 (4) million. As in
the operating profit from level 3 financial the prior year, in the current year there were no effects on
instruments still held as of Dec. 31 –5 –
equity due to price changes.
Income (+) and expense (–) recognized in
the financial result from level 3 financial
instruments still held as of Dec. 31 – +17
Negative fair values of level 3 financial

instruments as of Jan. 1 573 228
Income (–) and expense (+) recognized
in the operating profit + 239 –
Income (–) and expense (+) recognized
in the financial result – + 449
Recognitions – 183 – 104
Transfer from level 3 to level 2 –4 –1
Negative fair values of level 3 financial
instruments as of Dec. 31 625 573
Income (–) and expense (+) recognized in
the operating profit from level 3 financial
instruments still held as of Dec. 31 +239 –
Income (–) and expense (+) recognized in
the financial result from level 3 financial
instruments still held as of Dec. 31 – + 449
237
// FAIR VALUES OF FINANCIAL INSTRUMENTS MEASURED AT AMORTIZED COSTS
Carrying Fair value Level 1 Level 2 Level 3

amount
Trade receivables 5,630 5,630 – 5,630 –

Effective income tax assets 2 2 – 2 –
Other financial assets 6,713 7,093 – 7,093 –
Cash funds 9,309 9,309 8,652 657 –
Fair values of financial assets measured at amortized cost 21,654 22,034 8,652 13,382 –
Trade payables 8,565 8,565 – 8,565 –

Financial liabilities 116 116 – 116 –
Other financial liabilities 3,570 3,570 – 3,570 –
Effective income tax obligations 1,063 1,063 – 1,063 –
Fair values of financial liabilities measured at amortized cost 13,314 13,314 – 13,314 –
Carrying Fair value Level 1 Level 2 Level 3

amount
Trade receivables 5,533 5,533 – 5,533 –

Other financial assets 4,992 5,050 – 5,050 –
Cash funds 11,273 11,273 11,255 18 –
Fair values of financial assets measured at amortized cost 21,798 21,856 11,255 10,601 –
Trade payables 7,313 7,313 – 7,313 –

Financial liabilities 647 693 – 693 –
Other financial liabilities 4,644 4,645 – 4,645 –
Fair values of financial liabilities measured at amortized cost 12,604 12,651 – 12,651 –
In the case of the financial instruments measured at receivables” pursuant to IAS 39 and are valued at cost of
amortized cost, the fair value levels to be quoted basically purchase. The fair value of these assets and liabilities corres-
correspond to the criteria listed under Note 36.2. The fair ponds to the carrying amount and must be allocated to
value of these financial instruments, such as receivables and level 2 of the fair value hierarchy – except for cash and cash
liabilities, is calculated by discounting using a market interest equivalents reported under this item (level 1).
rate that adequately reflects the risks and is based on matched
maturities. Within non-current assets and liabilities, there With the first-time adoption of IFRS 9, the carrying amounts
were generally no significant changes in the ratios between of lease receivables and liabilities from the category “Measured
balance sheet value and fair value. For reasons of materiality, at amortized cost” were reclassified to the category “Not
the fair value for current balance sheet items is equated with assigned to a category.” As of the balance sheet date, lease
the balance sheet value. receivables had a carrying amount of EUR 23 million. The
carrying amount corresponds to fair value (level 2). Lease
The previous year’s financial assets available for sale of liabilities have a carrying amount of EUR 311 million and a fair
EUR 40 million as well as the financial liabilities held in this value of EUR 336 million (level 2).
context of EUR 73 million were classified as “Loans and
238
37 / MANAGEMENT OF FINANCIAL RISKS The Group’s global business operations and the resulting
diversification meant that there were no major risk concen-
37.1 / HEDGING GUIDELINES AND PRINCIPLES OF trations during the past fiscal year.
FINANCIAL RISK MANAGEMENT
The principles and responsibilities involved in managing and // LOSS ALLOWANCES
controlling risks associated with financial instruments are Within the Audi Group, the expected credit loss model of
stipulated by the Board of Management in accordance with IFRS 9 is applied consistently to all financial assets and other
the Volkswagen Group guidelines and statutory parameters, risk exposures.
and are monitored by the Supervisory Board.
Consideration of the expected credit loss model from IFRS 9
Operational risk management is carried out by Group includes both the risk provisions for financial assets without
Treasury, both at AUDI AG and at Volkswagen AG, Wolfsburg. objective references to impairment losses as well as the risk
The Board of Management and Supervisory Board of AUDI AG provision for already impaired financial assets.
are regularly briefed on the current risk situation. Additionally,
the Volkswagen Executive Committee for Risk Management The financial assets in the general approach are divided into
is regularly updated on the current financial risks. three stages as well as into an additional stage for financial
assets already affected in terms of financial soundness when
they were added. Stage 1 includes financial assets that are
Read more about financial risks in the being recorded for the first time or that show no significant
Management Report on page 150 f. increase in the default risk. At this stage, expected
receivables defaults are calculated for the next 12 months.
Stage 2 comprises financial assets that show a significant
increase in the likelihood of a default, and stage 3 contains
37.2 / CREDIT AND DEFAULT RISKS financial assets that already display objective signs of a
Credit and default risks from financial assets relate to a default. In these stages, the expected receivables defaults
possible default by a contractual party and do not exceed the are calculated for the entire period. At the Audi Group, there
carrying amounts vis-à-vis the contractual party in question are no financial assets whose soundness was already in
and the irrevocable credit commitments. The maximum question at the time of their acquisition.
credit and default risk is reduced by collateral held and other
credit enhancements. The collateral held is for the most part At the Audi Group, trade receivables and contractual finan-
for financial assets in the category “Measured at amortized cial assets pursuant to IFRS 15 are determined using the
cost.” The risk from non-derivative financial instruments is simplified approach with significant financing components.
covered by loss allowances and value adjustments for loss of The same applies for receivables from operating or finance
receivables. The contractual parties for cash and capital leases that are to be recognized according to IAS 17. In the
investments as well as for currency and commodity hedging simplified approach, the expected default is calculated con-
instruments have impeccable credit standings. In addition to sistently over the entire life of the asset.
this, the risks are restricted by a limit system that is based
on the credit ratings of international rating agencies and the The following tables show the change to the loss allowances
equity base of the contractual parties. for financial assets or financial guarantees and for irrevoca-
ble credit commitments:
239
/// CHANGE TO LOSS ALLOWANCES FOR FINANCIAL ASSETS MEASURED AT AMORTIZED COST
EUR million Stage 1 Stage 2 Stage 3 Simplified Total

approach
Position as of Jan. 1, 2018 64 – – 119 183

Currency translation differences 0 – – 0 0
Changes in scope of consolidated companies 0 – – – 0
Additions 14 – – 73 87
Other changes within a stage – – – – –
Transfer in
Stage 1 – – – – –
Stage 2 – – – – –
Stage 3 0 – 80 – 80
Financial assets derecognized during the period 5 – – 19 24
Utilization – – 64 2 66
Changes to models or risk parameters – – – – –
Position as of Dec. 31, 2018 74 – 17 171 261
/// CHANGE TO LOSS ALLOWANCES FOR FINANCIAL GUARANTEES AND CREDIT COMMITMENTS
EUR million Stage 1 Stage 2 Stage 3 Total
Position as of Jan. 1, 2018 5 – – 5

Currency translation differences 0 – – 0
Changes in scope of consolidated companies – – – –
Additions 0 – – 0
Other changes within a stage – – – –
Transfer in
Stage 1 – – – –
Stage 2 – – – –
Stage 3 – – – –
Financial assets derecognized during the period – – – –
Utilization – – – –
Changes to models or risk parameters – – – –
Position as of Dec. 31, 2018 6 – – 6
240
/// CHANGE TO LOSS ALLOWANCES FOR // MAXIMUM CREDIT RISK ACCORDING TO

CONTRACTUAL FINANCIAL ASSETS AND CATEGORIES
LEASE RECEIVABLES The following table shows the maximum credit risk to which
the Audi Group is exposed as of the balance sheet date divided
EUR million Simplified into categories to which the impairment model is applied:
approach
Position as of Jan. 1, 2018 1 EUR million Dec. 31, 2018
Currency translation differences 0

Financial assets measured at amortized cost 21,654
Financial guarantees and credit commitments 392
Additions 1
Not allocated to a category 193
Other changes within a stage –
Total 22,238
Assets derecognized during the period 0
Utilization –
Changes to models or risk parameters –
Position as of Dec. 31, 2018 2 // RATING CATEGORIES
At the Audi Group, a credit assessment is carried out for any
debtor in a credit or leasing agreement. For high-volume
/// CHANGE TO VALUE ADJUSTMENTS UNDER IAS 39 business this is performed using scoring systems; rating
systems are used for corporate customers and receivables
EUR million 2017 from dealer financing. Those with receivables rated “good”
are in rating category 1. Receivables from customers whose
Position as of Jan. 1 83
Changes in scope of consolidated companies 0
credit rating is not good, but who haven’t yet had any de-
Addition 37 faults, are put in rating category 2. Rating category 3 thus
Utilization –6 shows all fully or partially defaulted receivables.
Dissolution –5
Position as of Dec. 31 108 In both of the following tables, the gross carrying amounts
of financial assets as well as the default risk positions for
financial guarantees and credit commitments according to
rating categories are presented.
/// GROSS CARRYING AMOUNTS FOR FINANCIAL ASSETS BY RATING CATEGORIES
Stage 1 Stage 2 Stage 3 Simplified Total

approach
Default risk rating category 1 (receivables not at risk of default) 16,106 – – 5,562 21,668
Default risk rating category 2 (receivables at risk of default) – – – 0 0
Default risk rating category 3 (completely or partially
defaulted receivables) – – 17 231 247
Total 16,106 – 17 5,792 21,915
241
/// DEFAULT RISK FOR FINANCIAL GUARANTEES AND CREDIT COMMITMENTS
Stage 1 Stage 2 Stage 3 Total
Default risk rating category 1 (receivables not at risk of default) 397 – – 397
Default risk rating category 2 (receivables at risk of default) – – – –
Default risk rating category 3 (completely or partially defaulted receivables) – – – –
Total 397 – – 397
// CREDIT QUALITY OF FINANCIAL ASSETS MEASURED AT AMORTIZED COST FOR THE 2017 FISCAL YEAR
EUR million Gross carrying Neither past due Past due and not Impaired
amount nor impaired impaired
Dec. 31, 2017
Trade receivables 5,581 4,910 615 56

Other receivables 5,052 4,966 26 60
of which receivables from loans 4,160 4,160 – –
of which miscellaneous receivables 892 806 26 60
10,633 9,876 641 116
All receivables that are “Neither past due nor impaired,” There are no past due financial instruments measured at fair
amounting to EUR 9,876, are allocable to risk category 1. value within the Audi Group. The fair values of these financial
Risk category 1 is the highest risk category within the instruments are determined on their market prices. In the
Volkswagen Group; it exclusively comprises “Receivables 2017 fiscal year, marketable securities measured at fair
owing from customers of high creditworthiness.” value with a cost of EUR 37 million were impaired.
// MATURITY ANALYSIS OF GROSS CARRYING AMOUNTS FOR THE 2017 FISCAL YEAR
Past due and not Past due

EUR million impaired
Dec. 31, 2017 up to 30 days between 30 and 90 more than 90 days
days
Trade receivables 615 61 265 288

Other receivables 26 9 12 5
Gross carrying amounts 641 71 277 293
The credit risk was low overall, as the vast majority of the // COLLATERAL
past due and not impaired financial assets is determined by The credit and default risk is reduced by collateral held of
purchase invoices and payment processes with customers EUR 2,198 (1,937) million. In the Audi Group, collateral is
with very high creditworthiness. above all held in relation to trade receivables which are
primarily allocated to the category of “Measured at amor-
tized cost.” Vehicles, bank guarantees and bank sureties
are the main forms of collateral provided.
242
37.3 / LIQUIDITY RISKS In some countries, such as China, the Audi Group can only
Liquidity risks arise from financial liabilities if current pay- access local currency on a cross-border basis subject to the
ment obligations can no longer be met. A liquidity forecast applicable restrictions on foreign-exchange transactions.
based on a fixed planning horizon coupled with available yet Otherwise, there are no significant restrictions affecting
unused lines of credit ensures adequate liquidity within the liquidity.
Audi Group at all times.
// MATURITY ANALYSIS OF UNDISCOUNTED CASH OUTFLOWS FROM FINANCIAL INSTRUMENTS
EUR million Total Residual contractual maturities
Dec. 31, 2018 up to 1 year between 1 and over 5 years

5 years
Financial liabilities 427 109 99 220

Trade payables 8,565 8,565 0 –
Other financial liabilities and obligations 3,570 3,563 2 5
Derivative financial instruments 27,415 15,820 11,595 –
Undiscounted cash outflows 39,977 28,058 11,695 224
EUR million Total Residual contractual maturities
Dec. 31, 2017 up to 1 year between 1 and over 5 years

5 years
Financial liabilities 647 319 108 220

Trade payables 7,313 7,313 0 –
Other financial liabilities and obligations 4,644 4,628 16 –
Derivative financial instruments 28,804 14,621 14,183 –
Undiscounted cash outflows 41,408 26,880 14,308 220
The derivatives include both cash outflows from derivative The Audi Group has provided various financial guarantees,
financial instruments with a negative fair value and cash mainly in the form of sureties. As of December 31, 2018, the
outflows from derivatives with a positive fair value for which maximum permitted use of financial guarantees amounts to
gross settlement has been agreed. Cash outflows from EUR 237 (231) million. Financial guarantees are always
derivatives concluded as part of hedging relationships are accepted as due immediately.
also taken into account.
// COLLATERAL
The cash outflows from derivatives for which a gross The Audi Group recorded financial assets as collateral for
settlement has been agreed are offset by cash inflows. These liabilities in the amount of EUR 94 (129) million. This
cash receipts are not presented in the maturity analysis. Had collateral is primarily used by contractual parties as soon as
the cash receipts also been taken into account, the cash used credit periods for secured liabilities are exceeded.
would have been significantly lower in the analysis by
maturity date. This applies equally for hedging relationships
which were concluded by offsetting transactions.
243
37.4 / MARKET RISKS For the purpose of managing currency risks, exchange rate
Given the global nature of its operations, the Audi Group is hedging in the 2018 fiscal year primarily focused on the
exposed to various market risks, which are described below. U.S. dollar, the British pound, and the Chinese renminbi.
The individual risk types and the respective risk management
measures are also described. Additionally, these risks are Currency risks pursuant to IFRS 7 arise as a result of financial
quantified by means of sensitivity analyses. instruments that are of a monetary nature and that are
denominated in a currency other than the functional
// HEDGING POLICY AND FINANCIAL DERIVATIVES currency. Exchange rate differences from the translation of
The market risks to which the Audi Group is exposed include, financial statements into the Group currency (translation
in particular, currency, fund price, commodity price and risk) are disregarded. Within the Audi Group, the principal
interest rate risks. As part of the risk management process, non-derivative financial instruments (cash, receivables,
these risks are limited by entering into hedging transactions. securities held and debt instruments held, interest-bearing
In general, all necessary hedging measures are implemented liabilities, interest-free liabilities) are either denominated
centrally by Group Treasury of Volkswagen AG, Wolfsburg, or directly in the functional currency or substantially transferred
coordinated via Group Treasury of AUDI AG. There were no to the functional currency through the use of derivatives.
risk concentrations during the past fiscal year. Above all, the generally short maturity of the instruments
also means that potential exchange rate movements have
The market risks associated with derivative and non- only a very minor impact on profit or equity.
derivative financial instruments pursuant to IFRS 7 are
calculated in the Audi Group using sensitivity analyses. Currency risks are measured using sensitivity analyses, during
Changes to the risk variables within the respective market which the impact on profit after tax and equity of hypotheti-
risks are used to calculate the impact on equity and on profit cal changes to relevant risk variables is assessed. All non-
after tax. functional currencies in which the Audi Group employs
financial instruments are fundamentally treated as relevant
/// CURRENCY RISKS risk variables.
The currency risks of the Audi Group result primarily from
global operations and investing activities. The measures The periodic effects are determined by applying the hypo-
implemented to hedge against these currency risks are thetical changes in the risk variables to the inventory of
defined at brand level in accordance with the Volkswagen financial instruments on the reporting date. It is assumed
organizational guidelines, coordinated in the Volkswagen for this purpose that the inventory on the reporting date is
Group and implemented by Group Treasury of representative of the entire year. Movements in the exchange
Volkswagen AG. rates of the underlying currencies for the hedged
underlying transactions affect the fair value of these
These risks are limited by concluding appropriate hedging hedging transactions and the cash flow hedge reserve in
transactions for matching amounts and maturities. The equity.
hedging transactions are performed centrally for the
Audi Group by Volkswagen AG on the basis of an agency /// FUND PRICE RISKS
agreement. The Audi Group additionally concludes hedging The securities fund created using surplus liquidity is exposed
transactions of its own to a limited extent, where this helps to an equity and bond price risk that may arise from fluctua-
to simplify current operations. tions in stock market prices and indices and market interest
rates. The change in bond prices resulting from a change in
The hedging transactions are effected by means of marketable market interest rates, and the measurement of currency
derivative financial instruments (forward exchange contracts risks and other interest rate risks from the securities funds,
and foreign exchange options). Contracts are concluded is quantified separately in the corresponding Notes on
exclusively with first-rate national and international banks “Currency risks” and “Interest rate risks.”
whose creditworthiness is regularly examined by leading
rating agencies and by Central Risk Management at
Volkswagen AG.
244
Risks from securities funds are generally countered by main- The Audi Group limits interest rate risks, particularly with
taining a broad mix of products, issuers and regional markets regard to the granting of loans and credit, by agreeing fixed
when making investments, as stipulated in the investment interest rates and also through interest rate hedging
guidelines. Where necessitated by the market situation, cur- instruments.
rency hedges are also used. Such measures are coordinated by
AUDI AG in agreement with Group Treasury of Volkswagen AG The risks associated with changing interest rates are presented
and implemented at operational level by the securities pursuant to IFRS 7 using sensitivity analyses. These involve
funds’ risk management teams. presenting the effects of hypothetical changes in market
interest rates as of the balance sheet date on interest pay-
Fund price risks are measured within the Audi Group in accor- ments, interest income and interest expenses, and, where
dance with IFRS 7 using sensitivity analyses. Hypothetical applicable, equity and profit after tax.
changes to risk variables as of the balance sheet date are
examined to calculate their impact on the prices of the /// RESIDUAL VALUE RISKS
financial instruments in the funds. Stock prices, exchange Residual value risks arise from hedging arrangements with
rates and interest rates are particularly relevant risk vari- dealers or partner companies according to which, in the
ables in the case of fund price risks. context of buyback obligations resulting from concluded
lease agreements, effects on profit caused by market-related
/// COMMODITY PRICE RISKS fluctuations in residual values are partly borne by the
Commodities are subject to the risk of fluctuating prices given Audi Group.
the volatile nature of the commodity markets. Commodity
futures are used to limit these risks. The hedging measures The hedging arrangements are based on residual value recom-
are coordinated regularly between AUDI AG and Volkswagen AG mendations, as published by the residual value committee
in accordance with the existing Volkswagen organizational at the time of the contract being concluded, and on current
guidelines. The hedging transactions are performed centrally dealer purchase values on the market at the time of the
for AUDI AG by Volkswagen AG on the basis of an agency residual value hedging being settled. The residual value
agreement. The results from hedging contracts are credited recommendations are based on the forecasts provided by
or debited to the Audi Group on maturity. various independent institutions using transaction prices.
Hedging relates to significant quantities of the commodities Residual value risks are also calculated using sensitivity
aluminum and copper. Contracts are concluded exclusively analyses. Hypothetical changes in the market prices of used
with first-rate national and international banks whose cars as of the balance sheet date are used to quantify the
creditworthiness is regularly examined by leading rating impact on profit after tax.
agencies and by Central Risk Management at Volkswagen AG.
// QUANTIFYING MARKET RISKS BY MEANS OF
Commodity price risks are also calculated using sensitivity SENSITIVITY ANALYSES
analyses. Hypothetical changes in listed prices are used to
quantify the impact of changes in value from hedging activities /// CURRENCY RISKS
on profit after income tax. If the functional currencies had in each case increased or
decreased in value by 10 percent compared with the other
/// INTEREST RATE RISKS currencies as of the balance sheet date, the following major
Interest rate risks stem from changes in market interest effects on the hedging provision in equity and on profit after
rates, above all for medium and long-term variable interest tax would have resulted with regard to the exchange rates
rate assets and liabilities. referred to below.
245
+10 % – 10 % +10 % – 10 %
EUR/CHF
Hedging reserve 96 – 94 79 – 78
Profit after tax 0 0 –1 0
EUR/CNY
Profit after tax –8 8 – 13 13
EUR/GBP
Profit after tax – 40 40 – 30 30
EUR/JPY
Profit after tax –1 1 – 16 16
EUR/USD
Profit after tax – 193 193 – 151 70
/// OTHER MARKET RISKS Depending on the type of risk, there are various possible risk
The measurement of other market risks pursuant to IFRS 7 is variables (primarily share prices, commodity prices, market
also carried out using sensitivity analyses within the Audi Group. interest rates and market prices of used cars).
Hypothetical changes to risk variables as of the balance
sheet date are examined to calculate their impact on the The sensitivity analyses carried out enable the following
corresponding balance sheet items and on profit after tax. other market risks to be quantified for the Audi Group:
+10 % – 10 % +10 % – 10 %
Fund price risks

Effects on profit after tax with change in share prices 1) –9 18 19 – 48
Commodity price risks
Effects on profit after tax with change in commodity prices 95 – 95 42 – 42
Residual value risks of used cars
Effects on profit after tax with change in market prices 260 – 260 258 – 258
+100 bps – 100 bps +100 bps – 100 bps
Interest rate change risks

Effects on equity with change in market interest rate –4 4 – 54 54
Effects on profit after tax with change in market interest rate 84 – 11 – 18 18
1) Effects on equity were simulated in the prior year.
37.5 / METHODS OF MONITORING THE a test in the form of the dollar offset method. In the case of
EFFECTIVENESS OF HEDGING RELATIONSHIPS the dollar offset method, the changes in value of the under-
Within the Audi Group, and with the introduction of IFRS 9, the lying transaction, expressed in monetary units, are compared
effectiveness of hedging relationships is primarily evaluated with the changes in value of the hedging transaction, expressed
prospectively using the critical terms match method. The in monetary units. For this, a comparison is made of the cumu-
retrospective evaluation of the effectiveness of hedges involves lative changes in value for the designated spot component of
246
the hedging and underlying transaction. If there is no critical

terms match, then the same approach is used for the non-
designated components.
// NOMINAL VOLUME OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR million Nominal volumes
Dec. 31, 2018 Remaining term of Remaining term of

up to 1 year between 1 and 5 years
Forward exchange contracts 21,045 11,770 9,275
Forward exchange contracts CHF 1,286 439 848
Forward exchange contracts CNY 2,561 2,097 463
Forward exchange contracts GBP 4,913 3,012 1,901
Forward exchange contracts JPY 1,553 520 1,033
Forward exchange contracts USD 8,183 3,402 4,781
Forward exchange contracts other currencies 2,549 2,300 249
Foreign exchange options 3,425 2,541 885
Forward exchange options CHF 160 – 160
Forward exchange options USD 3,266 2,541 725
Cash flow hedges 24,470 14,311 10,159
Hedging of interest risk
Interest swaps 874 874 –
Forward exchange contracts CNY 325 325 –
Forward exchange contracts HUF 572 188 384
Forward exchange contracts MXN 1,519 1,519 –
Forward exchange contracts USD 2,607 1,465 1,142
Forward exchange contracts other currencies 982 929 54
Hedging of commodity price risk
Commodity futures 1,524 599 926
Aluminum commodity futures 1,121 466 655
Copper commodity futures 305 104 201
Other commodity futures 99 29 70
Other derivatives 8,404 5,898 2,505
EUR million Nominal volumes
Dec. 31, 2017 Remaining term of Remaining term of

up to 1 year between 1 and 5 years

Foreign exchange options 4,483 1,844 2,640
Cash flow hedges 25,835 12,382 13,453
Forward exchange contracts 3,712 2,782 929
Commodity futures 490 303 187
Other derivatives 4,201 3,085 1,116
247
The nominal volumes of the presented cash flow hedges for from the reserve for cash flow hedges with an effect on the
currency risks represent the total of all buying and selling financial result.
prices on which the transactions are based. The derivatives
concluded as part of offsetting transactions which are The average hedging rates for currency hedging instruments
compensated for by the original hedging relationships are can be seen in the following table:
taken into account in the respective nominal volumes. The
respective nominal volumes would be lower if they were not 2018
taken into account.

Forward exchange contracts
EUR/CHF 1.10
In addition to derivatives used for currency, interest and EUR/CNY 8.08
commodity price hedging, as of the balance sheet date there EUR/GBP 0.84
were options and other derivatives on equity instruments EUR/JPY 123.23
with a nominal volume of EUR 3,674 million as well as EUR/USD 1.19

Foreign exchange options
derivatives for hedging credit defaults with a nominal
EUR/CHF 1.03
volume of EUR 10,891 million. The derivatives mentioned
EUR/USD 1.15
above have remaining terms of up to one year.
The derivative financial instruments used have a maximum // DISCLOSURES ON CASH FLOW HEDGES AND THE
hedging term of five years. ASSOCIATED UNDERLYING TRANSACTIONS
Hedging instruments are put in place to combat the risk of
Existing cash flow hedges in the nominal volume of fluctuating future cash flows. The following table shows the
EUR 45 (16) million were discontinued because of a nominal volumes, fair values and ineffectiveness of hedging
reduction in the projections. For the current fiscal year, as instruments created in cash flow hedges.
with the prior fiscal year, only minor amounts were taken
Nominal volumes Other financial assets Other financial Fair value change for
liabilities determining
ineffectiveness

Forward exchange contracts 21,045 700 213 991
Foreign exchange options 3,425 32 16 3
The following table shows the fair value changes in the

underlying transactions. The reserve for cash flow hedges
is also shown for comparison.
Reserve for
Fair value of the Active cash flow Discontinued cash

underlying hedges flow hedges
transaction

Designated components – 1,045 987 – 12
Non-designated components – 296 –5
Deferred taxes – 206 5
Total 485 – 12
248
38 / CASH FLOW STATEMENT In the reporting year, EUR 328 million was used for the
The Cash Flow Statement details the payment streams for purchase of shares in SAIC Volkswagen Automotive Company
both the 2018 fiscal year and the previous year, categorized Ltd., Shanghai (China).
according to cash inflows and outflows from operating activ-
ities, investing and financing activities. The effects of changes The sale of shares in subsidiaries, associated companies and
in foreign exchange rates on cash flows are presented other participations as well as changes in capital resulted in an
separately. inflow of EUR 585 (5) million. This is primarily the result of
the sale of shares in FAW-Volkswagen Automotive Company,
Cash flow from operating activities includes all cash flows in Ltd., Changchun (China) and in There Holding B.V., Rijswijk
connection with ordinary business activities and is presented (Netherlands).
using the indirect calculation method. Starting from the
profit before profit transfer and income tax, all income and Cash flow from financing activities includes cash used for the
expenses with no impact on cash flow (primarily write- transfer of profit as well as changes in financial liabilities.
downs) are excluded. That also includes inflows from capital contributions from
non-controlling interests totaling EUR 43 million.
Cash flow from operating activities in the 2018 fiscal year
included payments for interest received amounting to The changes in the balance sheet items that are presented in
EUR 121 (54) million and for interest paid amounting to the Cash Flow Statement cannot be derived directly from the
EUR 54 (63) million. Dividends and profit transfers totaling Balance Sheet because the effects of currency translation
EUR 712 (431) million were recognized. The “Income tax and of changes in the group of consolidated companies do
payments” item primarily comprises payments made to not affect cash and are therefore not included in the
Volkswagen AG on the basis of the single-entity relationship Cash Flow Statement.
for tax purposes in Germany, as well as payments to foreign
tax authorities. // RECONCILIATION OF CASH AND CASH
EQUIVALENTS
The item “Other non-cash income and expenses” primarily
includes non-cash income and expenses from the measure- EUR million Dec. 31, 2018 Dec. 31, 2017
ment of derivative financial instruments and securities.

Cash funds as per Balance Sheet 9,309 11,273
Currently due fixed deposits with an
Cash flow from investing activities includes capitalized devel- investment period > 3 months – 759 – 18
opment costs as well as additions to property, plant and Cash and cash equivalents as per
Cash Flow Statement (bank assets
equipment, investment property, other intangible assets, and cash deposits with maturities
of no more than three months) 8,550 11,255
long-term financial investments and non-current loans. The
proceeds from the disposal of assets, the proceeds from the
disposal of participations, and the change in securities and Only the short-term fixed deposits whose original invest-
fixed deposits are similarly reported in cash flow from ment term is no more than three months are included in
investing activities. the cash and cash equivalents in accordance with the
Cash Flow Statement. Cash and cash equivalents include
The acquisition of investments in subsidiaries, and changes EUR 7,716 (10,055) million relating to the cash pooling
in capital at non-consolidated subsidiaries resulted in a total arrangements with the Volkswagen Group.
outflow of EUR 50 (77) million. The acquisition of investments
in associated companies and other participations and changes Some of the fixed deposits and loans extended included in
in capital resulted in an outflow of EUR 398 (15) million. gross liquidity have been entered into with related parties.
249
The allocation of the change in financial liabilities to cash

and non-cash items is shown in the table below:
EUR million Non-cash transactions
Position as of Cash changes Exchange rate Remeasure- Position as of

Jan. 1, 2018 movements ments Dec. 31, 2018
Lease liabilities 315 – 10 5 0 311

Other credit outstanding 332 – 198 25 – 43 116
Credit outstanding 647 – 208 30 – 42 427
Other financial assets and liabilities –7 6 0 – –
Financial assets and liabilities in financing activities 641 – 201 30 – 42 427
39 / CONTINGENT LIABILITIES
In view of the still unfinished process of clarifying the facts
EUR million Dec. 31, 2018 Dec. 31, 2017 as well as the complexity of the individual factors involved
and the ongoing consultations with government agencies,
Contingent liabilities from sureties 6 6
Other contingent liabilities 69 43
the provisions created for the diesel issue and the further
Contingent liabilities 74 49 latent legal risks are to some extent subject to substantial
estimation risks. Some of these cases mentioned above are
still at a very early stage. In a number of instances, the basis
Contingent liabilities are unrecognized contingencies whose for claims is yet to be specified by the plaintiffs and/or there
amount corresponds to the likely utilization as of the balance is insufficient information about the number of plaintiffs or
sheet date. Financial guarantees as defined under IFRS 7 are amounts claimed. It is therefore not yet possible to quantify
reported under Note 37.3, “Liquidity risks.” the potential financial impact. For information regarding
possible financial burden arising from the diesel issue, please
Like many other car manufacturers, the Audi Group cannot refer to the disclosures under “Notes on the diesel issue” in
sidestep the risks in connection with potentially defective the general information in the Notes to the Consolidated
airbags. It is therefore still not possible to rule out further Financial Statements.
recalls. Further information on the situation pursuant to
IAS 37.86 is currently not available due to ongoing technical No information was provided pursuant to IAS 37.92 regard-
investigations and cooperation with the authorities. ing estimates of the financial impact or regarding uncertain-
ties related to the amount of or due date of contingent
As expanded on under Note 33, “Other provisions,” there are liabilities connected with the anti-trust investigations of the
no contingent liabilities in connection with the four-cylinder European Commission.
diesel engines.
40 / LITIGATION
In the 2018 fiscal year, the Audi Group made substantial Companies included in the Audi Group become involved in
progress with regard to the diesel issue in terms of approvals legal disputes and official proceedings in the course of their
for technical measures as well as with regard to proceedings operating activities. Such legal disputes and procedures are
concluded and agreements reached with various authorities particularly likely to occur in relation to suppliers, dealers,
and interest groups. Despite the progress in dealing with the customers or employees. They may result in payment or
diesel issue, there is still ongoing litigation in the form of other obligations for the companies involved. Particularly in
class and individual actions as well as other proceedings. cases where U.S. customers assert claims relating to vehicle
faults, whether individually or in the form of class actions,
250
very expensive measures may be required and may necessitate With regard to their respective participations in
the payment of significant amounts in compensation or penalty There Holding B.V., the Audi Group, the BMW Group and
payments. U.S. patent infringements are also associated with Daimler AG have contractually agreed that in the event of a
similar risks. Other provisions take account of such risks to change of control at one of the contractual parties, that party
the extent that an outflow of resources is likely to occur in the shall be obliged to offer its shares in There Holding B.V. to
future and can be reliably estimated. Legal disputes frequently the other shareholders for purchase. In the case of AUDI AG,
involve complex legal issues. Consequently, assumptions a change of control occurs if a person acquires or loses
must be made regarding the likelihood of an outflow of control over AUDI AG, wherein control is defined as (i)
resources, the amount of any such outflow and the duration holding or having control over more than 50 percent of
of the case. This means that the recognition and measure- the voting rights, (ii) the scope for controlling more than
ment of provisions to cover legal risks involve a degree of 50 percent of the voting rights that can be exercised at
uncertainty. Annual General Meetings on all or virtually all matters, or
(iii) the right to determine the majority of the members of
For information regarding the legal risks arising from the the Board of Management or Supervisory Board. Further-
diesel issue, please refer to the disclosures under “Notes on more, a change of control occurs if competitors of the
the diesel issue” in the general information in the Notes to HERE Group or certain potential competitors of the HERE
the Consolidated Financial Statements. Group from the technology industry acquire at least
25 percent of AUDI AG. If none of the other shareholders
There are no further ongoing or prospective legal or arbitra- takes on these shares, the other shareholders have the right
tion proceedings that could have a significant influence on to resolve the dissolution of There Holding B.V.
the economic position.
The other significant contractual agreements between the
41 / CHANGE OF CONTROL AGREEMENTS Audi Group and third parties do not contain any change of
Change of control clauses are contractual agreements between control clauses in the event of a change in the ownership
a company and third parties to provide for legal succession structure of AUDI AG or its subsidiaries.
should there be a direct or indirect change in the ownership
structure of any party to the contract.
42 / OTHER FINANCIAL OBLIGATIONS
EUR million Due date Dec. 31, 2018 Due date Dec. 31, 2017
Within 1 to 5 years Over 5 years Total Over 1 year Total

1 year
Purchase orders for property, plant and equipment 1,777 619 – 2,396 693 3,015
Purchase orders for intangible assets 163 6 – 169 14 165
Purchase orders for services 400 29 28 458 48 455
Obligations from rental and lease agreements 165 279 422 866 351 503
Miscellaneous financial obligations 566 248 55 870 272 746
Other financial obligations 3,070 1,182 506 4,758 1,379 4,883
Supply contracts are in place for series production material. Other financial obligations from rental and leasing contracts
Binding orders are placed and contracts are activated for are offset by expected income from sub-leases of
the material as such material is needed on the basis of the EUR 9 (7) million.
specified production and sales schedule.
251
43 / DISCONTINUED OPERATIONS Board of Management, with effect from January 1, 2019.

There are no plans to discontinue or cease business Approval of the change to the new remuneration system is
operations as defined by IFRS 5. still forthcoming. The new remuneration system of the
Board of Management comprises non-performance related
44 / COST OF MATERIALS and performance-related components. The performance-
related component consists of a performance-related annual
EUR million 2018 2017 bonus with a one-year assessment period and a long-term
incentive in the form of a performance share plan with a
Expenses for raw materials and supplies,
as well as purchased goods 36,985 36,387 forward-looking three-year term (share-based payment).
Expenses for purchased services 4,038 3,983 Since the end of 2018, members of top management are now
Cost of materials 41,023 40,370 also beneficiaries of the performance share plan. They will be
granted performance shares for the first time in 2019 for
the performance period 2019 to 2021. The way the
45 / PERSONNEL COSTS performance shares are granted to them works identically to
the performance shares granted to members of the
EUR million 2018 2017 Board of Management.
Wages and salaries 6,061 5,958

Social insurance and expenses
Each performance period of the performance share plan has
for retirement benefits and a term of three years. At the time the long-term incentive is
support payments 1,275 1,261
granted, the annual target amount under the long-term
of which relating to retirement
benefit plans 315 292 incentive is converted, on the basis of the initial reference
of which defined contribution price of Volkswagen’s preferred shares, into performance
pension plans 418 397
shares and then allocated to the respective member of the
Personnel costs 7,336 7,219
Board of Management as a pure calculation position. After
the end of the three-year term of the performance share
46 / TOTAL AVERAGE NUMBER OF EMPLOYEES FOR plan, a cash settlement is made. The final number of perfor-
THE YEAR mance shares is calculated from the number of performance

shares conditionally granted at the beginning of the plan
2018 2017 multiplied by the average earnings-per-share-goal achieved
over the performance period. The payment amount corre-
Domestic companies 1) 59,754 59,448
sponds to the number of issued performance shares multi-
International companies 28,702 27,904
plied by the closing reference price at the end of the three-
Employees 88,456 87,352
year period plus a dividend equivalent for the relevant term.
Apprentices 2,582 2,618
Employees of Audi Group companies 91,038 89,970 The payout amount under the performance share plan is
Staff employed from other limited to 200 percent of the target amount. If 100 percent
Volkswagen Group companies not
of the targets agreed in each case are achieved, then the
belonging to the Audi Group 439 432
Workforce Audi Group 91,477 90,402
target amount is EUR 11 million for the members of the
1) Of these, 1,732 (1,304) employees were in the passive stage of their partial
Board of Management.
retirement.
The total of the target amounts for members of top man-

agement for the performance period 2019 to 2021 is
47 / REMUNERATION BASED ON PERFORMANCE EUR 12 million.
SHARES (SHARE-BASED PAYMENT)
At the end of 2018, the Supervisory Board of AUDI AG The personnel costs for members of both groups total
resolved to adjust the remuneration system of the EUR 1 million.
252
48 / RELATED PARTY DISCLOSURES 48.1 / BUSINESS RELATIONS WITH

Related parties as defined in IAS 24 are: VOLKSWAGEN AG AND WITH OTHER SUBSIDIARIES
AND PARTICIPATIONS NOT BELONGING TO THE
> the parent company, Volkswagen AG, Wolfsburg, and its AUDI GROUP
subsidiaries and material participations outside the Audi
Group, EUR million 2018 2017 1)
> other parties (individuals and companies) that could be

Goods and services supplied to
influenced by the reporting entity or that could influence Volkswagen AG 6,544 7,521
the reporting entity, such as the members of the Volkswagen AG subsidiaries and other
Board of Management and Supervisory Board of AUDI AG, participations not belonging to the
Audi Group 15,252 16,167
> the members of the Board of Management and Goods and services received from
Supervisory Board of Volkswagen AG, Volkswagen AG 7,144 6,900
> associated companies and their subsidiaries, Volkswagen AG subsidiaries and other
participations not belonging to the
> non-consolidated subsidiaries. Audi Group 8,661 8,194
Receivables from
At 52.2 percent, Porsche Automobil Holding SE, Stuttgart, Volkswagen AG 7,595 6,781
held the majority of the voting rights in Volkswagen AG as of Volkswagen AG subsidiaries and other
participations not belonging to the
the balance sheet date. The creation of rights of appointment Audi Group 2,769 2,855
for the State of Lower Saxony was resolved at the Extraordinary Obligations to
General Meeting of Volkswagen AG on December 3, 2009. As Volkswagen AG 4,224 5,400

Volkswagen AG subsidiaries and
a result, Porsche Automobil Holding SE can no longer appoint participations not belonging to the
the majority of the members of the Supervisory Board of Audi Group 8,789 5,842
Contingent liabilities to
Volkswagen AG for as long as the State of Lower Saxony holds
Volkswagen AG – –
at least 15 percent of Volkswagen AG’s ordinary shares.
However, Porsche Automobil Holding SE has the power to participations not belonging to the
Audi Group 94 95
participate in the operating policy decisions of the Volkswagen
Collateral posted with
Group and is therefore also classified as a related party.
Volkswagen AG – –
All business transactions with related parties have been con- participations not belonging to the
Audi Group 93 123
ducted on the basis of international comparable uncontrolled
price methods pursuant to IAS 24, according to the terms
that customarily apply to outside third parties. The goods
and services procured from related parties primarily include Receivables include loans of EUR 5,330 (3,489) million to
supplies for production and supplies of genuine parts, as Volkswagen AG, Wolfsburg, and EUR 399 (400) million to
well as development, transportation, financial and distribu- subsidiaries and participations that do not belong to the
tion services, and, to a lesser extent, design and other services. Audi Group.
The volume of business transacted for related parties mainly
comprises sales of new and used cars, powertrains and As of December 31, 2018, sales of receivables to subsidiaries
components, and allocation of cash and cash equivalents in of Volkswagen AG that do not belong to the Audi Group
the form of loans, fixed deposits and overnight deposits. amounted to EUR 2,061 (1,417) million.
The cash funds of the Audi Group are in large part held by Receivables from other subsidiaries and participations of
or invested in the Volkswagen Group. All transactions are Volkswagen AG not belonging to the Audi Group were impaired
processed under market conditions. by the amount of EUR 1 (2) million. Trade receivables do not
contain cash and cash equivalents invested within the frame-
work of cash pooling. In addition, loss allowances for
receivables from Volkswagen AG as well as from subsidiaries
253
and participations of Volkswagen AG not belonging to the associated companies” under the Notes on the Consolidated
Audi Group were recognized in the amount of EUR 83 million Financial Statement.
in the year under review, based on the expected credit loss
model of IFRS 9. The possibility of a claim arising from contingencies is not
anticipated.
In the 2018 fiscal year, equity investments in associated
companies of Volkswagen AG were both bought and sold. There were limited business relations with Porsche
For more information, see the section “Participations in Automobil Holding SE during the past fiscal year.
48.2 / BUSINESS RELATIONS WITH SUBSIDIARIES AND ASSOCIATED COMPANIES OF THE AUDI GROUP
EUR million Goods and services Goods and services

supplied received
2018 2017 2018 2017
Associates and joint ventures 9,484 8,175 388 452

Non-consolidated subsidiaries 69 70 190 170
EUR million Receivables from Obligations to
Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2017
Associates and joint ventures 998 1,022 775 766

Non-consolidated subsidiaries 136 309 154 132
As of December 31, 2018, there were sureties totaling not contain cash and cash equivalents invested within the
EUR 152 (136) million in favor of associated companies, framework of cash pooling.
joint ventures and non-consolidated subsidiaries. The
possibility of a claim arising from contingencies is not 48.3 / BUSINESS RELATIONS WITH AND PAYMENTS
anticipated. Irrevocable credit commitments to non- TO MEMBERS OF THE BOARD OF MANAGEMENT
consolidated subsidiaries, associated companies and joint AND SUPERVISORY BOARD
ventures total EUR 93 (65) million. Members of the Boards of Management or Supervisory Boards
of Volkswagen AG, Wolfsburg, and AUDI AG also belong to
For the 2018 fiscal year, receivables from associated the supervisory or management boards of other companies
companies were impaired in the amount of EUR 35 (37) with which the Audi Group maintains business relations. All
million, and receivables from non-consolidated subsidiaries transactions with such companies and persons are similarly
were derecognized in the amount of EUR 64 million (prior year conducted according to the terms that customarily apply to
none). In addition, loss allowances for receivables from the outside third parties. In this connection, goods and services
above-mentioned related parties were recognized in the amounting to a total value of EUR 366 (302) thousand were
amount of EUR 43 million in the year under review, based on provided to the German State of Lower Saxony and to com-
the expected credit loss model of IFRS 9. panies in which the State of Lower Saxony holds a majority
stake, and goods and services amounting to a total value
Obligations towards associates and joint ventures as well as of EUR 24 (18) thousand were received from them. As of
non-consolidated subsidiaries include future obligations December 31, 2018, liabilities to the State of Lower Saxony
from existing contractual relationships. Trade receivables do resulting from the buyback of vehicles amounted to
254
EUR 74 (73) thousand. No receivables were recorded for both payment).” The remuneration system, as well as the details
the 2018 fiscal year and the previous year. of the remuneration paid to the members of the Board of
Management and Supervisory Board of AUDI AG, broken
A list of the supervisory board mandates of members of the down by individual member and by component, and the
Board of Management and Supervisory Board of AUDI AG is information on the pension arrangements for members of
presented in the 2018 Annual Financial Report of AUDI AG. the Board of Management, broken down by individual
member, pursuant to Section 314, Para. 1, No. 6a),
The service relationships with the members of the Boards of Sentence 5 ff. of the German Commercial Code (HGB) and
Management and Supervisory Boards of Volkswagen AG and the German Corporate Governance Code (DCGK) is presented
AUDI AG were conducted at arm’s length. As in the previous in the remuneration report which forms part of the
year, the volume of transactions was low. Overall, services in Combined Management Report of the Audi Group and
the amount of EUR 56 (12) thousand were rendered to this AUDI AG.
group of individuals during the fiscal year. In addition, there
were only minimal receivables (prior year none) with respect
to the Board of Management and the Supervisory Board of Read more about the remuneration report in the
Volkswagen AG or AUDI AG. There were also no obligations in Management Report on pages 157 ff.
the current fiscal year or in the prior year.
The following payments were also granted for members of

the Board of Management and Supervisory Board of AUDI AG 49 / AUDITOR’S FEES
in the course of their positions on executive bodies.
EUR thousand 2018 2017
EUR thousand 2018 2017

Auditing of the financial statements 1,481 1,105
Short-term benefits 19,608 24,372 Other assurance services 103 142
Post-employment benefits 2,749 2,601 Tax consultancy services 188 39
Termination benefits 6,001 24,262 Other services 546 100
Benefits, total 28,358 51,235 Auditor’s fees 2,318 1,386
Obligations towards members of the Board of Management Based on the requirements of commercial law, the auditor’s
and Supervisory Board of AUDI AG in connection with short- fees include auditing of the Consolidated Financial Statements
term benefits amount to EUR 13,457 (14,774) thousand. and auditing of the annual financial statements of consoli-
Pension obligations also exist in the amount of EUR 40,417 dated companies.
(32,951) thousand. Termination benefits of EUR 5,153 (23,542)
thousand were recognized as a result of the expiry of contracts The auditor’s fees in 2018 were attributable to the audit of
of members of the Board of Management. the Consolidated Financial Statements and the review of the
Interim Consolidated Financial Statements of AUDI AG, as
The employee representatives employed at AUDI AG on the well as to the audit of the annual financial statements of
Supervisory Board continue to receive their salary in accor- Group companies, and the reviews of the quarterly financial
dance with their employment contract. This is based on the statements of AUDI AG. The extent of other assurance and
provisions of the German Works Constitution Act and corre- tax advisory services performed by the auditor was insignifi-
sponds to an appropriate remuneration for the function or cant. Other services performed by the auditor during the
activity exercised in the Company. This similarly applies to reporting year notably relate to consulting services in the
representatives of executive staff. areas of IT and process optimization as well as to the provision
of training.
Share-based payment is referred to in Note 47,
“Remuneration based on performance shares (share-based
255
50 / SEGMENT REPORTING Ducati brand motorcycles, including the accessories and

The segmentation of business activities is based on the spare parts business.
internal management and reporting of the Company
pursuant to IFRS 8. The decision-making body for both As a general rule, segment reporting is based on the same
segments with regard to the allocation of resources and the reporting, recognition and measurement principles as applied
valuation of profitability is the full Board of Management. to the Consolidated Financial Statements. Business relations
between the companies of the segments in the Audi Group
Segment reporting is based on the economic activities of the are generally based on the same prices as those agreed with
Audi Group and is divided into the two segments of Automotive third parties. Consolidation between the segments is carried
and Motorcycles. Whilst the Motorcycles segment does not out in the “Reconciliation” column. Investments in property,
meet the quantitative thresholds set out in IFRS 8, it is plant and equipment, investment property and intangible
reported here as a segment in its own right for information assets (including capitalized development costs) are reported
purposes. excluding investments in the context of the finance lease.
The central key performance indicators used to manage the
The activities of the Automotive segment encompass the Automotive and Motorcycles segments include the operating
development, production, assembly and distribution of vehicles profit and the operating return on sales.
of the Audi and Lamborghini brands, and the distribution of
vehicles of other Volkswagen Group brands as well as the Internal reporting corresponds to external IFRS reporting.
accompanying accessories and spare parts business. The full Board of Management regularly monitors, among
others, the following financial and economic key figures:
The activities of the Motorcycles segment include the
development, production, assembly and distribution of
50.1 / REPORTING SEGMENTS
EUR million 2018
Automotive Motorcycles Reconciliation Audi Group
Revenue with third parties 58,550 699 – 59,248

Revenue with other segments – 0 0 –
Revenue 58,550 699 0 59,248
Depreciation and amortization – 3,486 – 81 – – 3,567
Impairment losses – 286 – – – 286
Reversal of impairment losses 4 – – 4
Segment profit (operating profit) 3,505 25 –1 3,529
Result from investments accounted for using the equity method 261 – – 261
Net interest result and other financial result 570 0 – 570
Investments accounted for using the equity method 1,627 – – 1,627
Investments in property, plant and equipment, investment property and
intangible assets 5,018 69 – 5,087
256
EUR million 2017 1)
Automotive Motorcycles Reconciliation Audi Group
Revenue with third parties 59,055 734 – 59,789

Revenue with other segments – 2 –2 –
Revenue 59,055 736 –2 59,789
Depreciation and amortization – 3,284 – 72 – – 3,357
Impairment losses – 238 – – – 238
Reversal of impairment losses 1 – – 1
Segment profit (operating profit) 4,643 28 – 4,671
Result from investments accounted for using the equity method 526 – – 526
Net interest result and other financial result – 480 0 – – 480
Investments accounted for using the equity method 1,224 – – 1,224
Investments in property, plant and equipment, investment property and
intangible assets 5,047 69 – 5,116
1) The figures have been adjusted (see disclosures on IFRS 9 and IFRS 15).
The Motorcycles segment reported an operating return on 50.2 / RECONCILIATION STATEMENT

sales of 3.6 (3.8) percent, taking into account additional
depreciation and amortization due to the remeasurement of EUR million 2018 2017 1)
assets and liabilities as part of the purchase price allocation

Segment revenue 59,249 59,791
in the amount of EUR 23 million. Adjusted to take account of Consolidation 0 –2
these effects, the operating profit totaled EUR 49 (51) million Group revenue 59,248 59,789
and the operating return on sales 7.0 (7.0) percent. The
Automotive segment recorded an operating return on sales Segment profit (operating profit) 3,530 4,671
of 6.0 (7.9) percent. Consolidation –1 –

The operating return on sales of the Audi Group totaled
Group profit before tax 4,361 4,717
6.0 (7.8) percent.
1) The prior year has been adjusted (see disclosures on IFRS 9 and IFRS 15).
50.3 / BY REGION
EUR million 2018
Germany Rest of Asia-Pacific North South Africa Effects from Total

Europe America America hedging
transactions
Revenue 11,870 19,931 14,915 11,140 486 289 617 59,248

Property, plant and
equipment, intangible
assets, leasing and
rental assets and
investment property 15,544 5,087 159 1,429 1 – – 22,220
257
EUR million 2017 1)
Germany Rest of Asia-Pacific North South Africa Effects from Total

Europe America America hedging
transactions
Revenue 12,744 20,776 13,424 11,870 620 355 – 59,789

Property, plant and
equipment, intangible
assets, leasing and
rental assets and
investment property 13,017 5,607 168 2,002 4 – – 20,798
1) The figures have been adjusted (see disclosures on IFRS 15).
Revenue is allocated to the regions on the basis of the An explanation of the different types of revenue is provided
registered office of the external customers. under Note 1, “Revenue.” The Automotive segment, together
with Volkswagen AG, Wolfsburg, its subsidiaries that are not
The Audi Group primarily generates revenue from the sale of part of the Audi Group and two associated companies, has
cars. In addition to the Audi brand, the Automotive segment key accounts with which there exists a relationship of
also comprises sales of vehicles of the Lamborghini brand and dependence.
of other brands of the Volkswagen Group. Ducati
motorcycles and accessories are sold in the Motorcycles
segment.
50.4 / REVENUE BY SEGMENT
Audi brand 37,259 40,728

Lamborghini brand 1,316 933
Engines, powertrains and parts deliveries 8,326 7,607
Other automotive business 6,305 5,886
Effects from hedging transactions 617 –
Automotive segment 58,550 59,055
Ducati brand 595 600
Other motorcycles business 104 136
Motorcycles segment 699 736
Reconciliation 0 –2
Revenue 59,248 59,789
258
ADDITIONAL DISCLOSURES, EVENTS OCCURRING SUBSEQUENT TO THE BALANCE SHEET DATE // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
50.5 / REVENUE WITH KEY ACCOUNTS
2018 2017
EUR million in % EUR million in %
Volkswagen AG 5,695 10 5,667 9

Volkswagen AG subsidiaries not belonging to the Audi Group 14,801 25 15,678 26
Two associated companies 9,000 15 7,989 13
51 / GERMAN CORPORATE GOVERNANCE CODE

The Board of Management and Supervisory Board of AUDI AG Read more online about the submitted declaration
submitted the declaration pursuant to Section 161 of the pursuant to Section 161 of the German Stock
German Stock Corporation Act (AktG) relating to the German Corporation Act (AktG) relating to the German
Corporate Governance Code on November 29, 2018, and Corporate Governance Code at
subsequently made it permanently accessible on the www.audi.com/cgc-declaration.
Audi website at www.audi.com/cgc-declaration.
EVENTS OCCURRING SUBSEQUENT

TO THE BALANCE SHEET DATE
There were no events after December 31, 2018, subject to a

reporting obligation in accordance with IAS 10.
259
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS // MATERIAL GROUP COMPANIES
MATERIAL GROUP COMPANIES

Name and registered office Capital share in %
Fully consolidated companies

Germany
AUDI AG, Ingolstadt
Audi Electronics Venture GmbH, Gaimersheim 100.0
AUDI Immobilien GmbH & Co. KG, Ingolstadt 100.0
AUDI Immobilien Verwaltung GmbH, Ingolstadt 100.0
Audi Real Estate GmbH, Ingolstadt 100.0
Audi Sport GmbH, Neckarsulm 100.0
Ducati Motor Deutschland GmbH, Cologne 100.0
PSW automotive engineering GmbH, Gaimersheim 100.0
UI-S 5-Fonds, Frankfurt am Main 1) 100.0
International
Audi Australia Pty. Ltd., Zetland 100.0
Audi Australia Retail Operations Pty. Ltd., Zetland 100.0
Audi Brussels S.A./N.V., Brussels 100.0
Audi Brussels Property S.A./N.V., Brussels 100.0
Audi (China) Enterprise Management Co., Ltd., Beijing 100.0
Audi do Brasil Indústria e Comércio de Veiculos Ltda., São Paulo 100.0
Audi Hungaria Zrt., Győr 100.0
Audi Japan K.K., Tokyo 100.0
Audi Japan Sales K.K., Tokyo 100.0
Audi Luxemburg S.A., Strassen 100.0
Audi México S.A. de C.V., San José Chiapa 100.0
Audi Singapore Pte. Ltd., Singapore 100.0
Audi Tooling Barcelona S.L., Martorell 100.0
Audi Volkswagen Korea Ltd., Seoul 100.0
Audi Volkswagen Middle East FZE, Dubai 100.0
Audi Volkswagen Taiwan Co., Ltd., Taipei 100.0
Automobili Lamborghini S.p.A., Sant’Agata Bolognese 100.0
Ducati Motor Holding S.p.A., Bologna 100.0
Ducati do Brasil Indústria e Comércio de Motocicletas Ltda., São Paulo 100.0
Ducati Japan K.K., Tokyo 100.0
Ducati Motors de Mexico S. de R.L. de C.V., Mexico City 100.0
Ducati Motor (Thailand) Co. Ltd., Amphur Pluakdaeng 100.0
Ducati North America, Inc., Mountain View / CA 100.0
Ducati North Europe B.V., Zoeterwoude 100.0
Ducati (Schweiz) AG, Feusisberg 100.0
Ducati U.K. Ltd., Towcester 100.0
Ducati West Europe S.A.S., Colombes 100.0
Italdesign Giugiaro S.p.A., Moncalieri 100.0
Officine del Futuro S.p.A., Sant’Agata Bolognese 100.0
Volkswagen Group Italia S.p.A., Verona 100.0
Audi Canada Inc., Ajax / ON 2) –
Audi of America, LLC, Herndon / VA 2) –
Automobili Lamborghini America, LLC, Herndon / VA 2) –
Companies accounted for using the equity method

International
Volkswagen Automatic Transmission (Tianjin) Co., Ltd., Tianjin 40.1
There Holding B.V., Rijswijk 29.6
FAW-Volkswagen Automotive Co., Ltd., Changchun 5.0
SAIC Volkswagen Automotive Co., Ltd., Shanghai 1.0
1) This is a structured entity pursuant to IFRS 10 and IFRS 12.

2) AUDI AG exercises control pursuant to IFRS 10.B38.
260
RESPONSIBILITY STATEMENT
RESPONSIBILITY STATEMENT
“RESPONSIBILITY STATEMENT
To the best of our knowledge, and in accordance with the and AUDI AG includes a fair review of the development and
applicable reporting principles, the Consolidated Financial performance of the business and the position of the Audi
Statements give a true and fair view of the net worth, finan- Group and AUDI AG, together with a description of the prin-
cial position and financial performance of the Audi Group, cipal opportunities and risks associated with the expected
and the Combined Management Report of the Audi Group development of the Audi Group and AUDI AG.”
Ingolstadt, February 20, 2019
The Board of Management
Abraham Schot
Wendelin Göbel Peter Kössler Dr. Bernd Martens
Hans-Joachim Rothenpieler Alexander Seitz
261
INDEPENDENT AUDITOR’S REPORT

To AUDI Aktiengesellschaft, Ingolstadt
/ REPORT ON THE AUDIT OF THE CONSOLIDATED report listed in the “Other Information” section of our
FINANCIAL STATEMENTS AND OF THE GROUP auditor’s report.
MANAGEMENT REPORT
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare
// AUDIT OPINIONS that our audit has not led to any reservations relating to the
We have audited the consolidated financial statements of legal compliance of the consolidated financial statements
AUDI Aktiengesellschaft, Ingolstadt, and its subsidiaries (the and of the group management report.
Group), which comprise the consolidated statement of finan-
cial position as at 31 December 2018, and the consolidated // BASIS FOR THE AUDIT OPINIONS
statement of comprehensive income, consolidated statement We conducted our audit of the consolidated financial state-
of profit or loss, consolidated statement of changes in equity ments and of the group management report in accordance
and consolidated statement of cash flows for the financial with § 317 HGB and the EU Audit Regulation (No. 537/2014,
year from 1 January to 31 December 2018 and notes to the referred to subsequently as “EU Audit Regulation”) in
consolidated financial statements, including a summary of compliance with German Generally Accepted Standards for
significant accounting policies. In addition, we have audited Financial Statement Audits promulgated by the Institut der
the group management report of AUDI Aktiengesellschaft, Wirtschaftsprüfer [Institute of Public Auditors in Germany]
which is combined with the Company’s management report, (IDW). Our responsibilities under those requirements and
for the financial year from 1 January to 31 December 2018. principles are further described in the “Auditor’s Responsibil-
In accordance with the German legal requirements, we have ities for the Audit of the Consolidated Financial Statements
not audited the content of those parts of the group manage- and of the Group Management Report” section of our auditor’s
ment report listed in the “Other Information” section of our report. We are independent of the group entities in accor-
auditor’s report. dance with the requirements of European law and German
commercial and professional law, and we have fulfilled our
In our opinion, on the basis of the knowledge obtained in the other German professional responsibilities in accordance
audit, with these requirements. In addition, in accordance with
> the accompanying consolidated financial statements comply, Article 10 (2) point (f) of the EU Audit Regulation, we declare
in all material respects, with the IFRSs as adopted by the that we have not provided non-audit services prohibited under
EU, and the additional requirements of German commer- Article 5 (1) of the EU Audit Regulation. We believe that the
cial law pursuant to § [Article] 315e Abs. [paragraph] 1 audit evidence we have obtained is sufficient and appropriate
HGB [Handelsgesetzbuch: German Commercial Code] and, to provide a basis for our audit opinions on the consolidated
in compliance with these requirements, give a true and fair financial statements and on the group management report.
view of the assets, liabilities, and financial position of the
Group as at 31 December 2018, and of its financial perfor- // EMPHASIS OF MATTER – DIESEL ISSUE
mance for the financial year from 1 January to We draw attention to the information provided and statements
31 December 2018, and made in section “Notes on the diesel issue” of the notes to
> the accompanying group management report as a whole the consolidated financial statements and in sections “Diesel
provides an appropriate view of the Group’s position. In all issue” and “Legal risks” of the group management report
material respects, this group management report is con- with regard to the diesel issue including information about
sistent with the consolidated financial statements, com- the underlying causes, the non-involvement of members of
plies with German legal requirements and appropriately the board of management as well as the impact on these fi-
presents the opportunities and risks of future development. nancial statements.
Our audit opinion on the group management report does not
cover the content of those parts of the group management
262
Based on the results of the various measures taken to inves- Our presentation of these key audit matters has been struc-
tigate the issue presented so far, which underlie the consoli- tured in each case as follows:
dated financial statements and the group management report,
there is still no evidence that members of the Company’s ① Matter and issue
Board of Management were aware of the deliberate manipu- ② Audit approach and findings
lation of engine management software until notified by the ③ Reference to further information
US Environmental Protection Agency (EPA) in fall 2015.
Nevertheless, should as a result of the ongoing investigation Hereinafter we present the key audit matters:
new solid knowledge be obtained showing that members of
the Board of Management were informed earlier about the ❶ Accounting treatment of risk provisions for the
diesel issue, this could eventually have an impact on the con- diesel issue
solidated financial statements and on the group management
report for financial year 2018 and prior years. ① Companies of the Audi Group are involved in investiga-
tions by government authorities in numerous countries
The provisions for warranties and legal risks recorded so far (in particular in Europe, the United States and Canada)
are based on the presented state of knowledge. Due to the with respect to irregularities in the exhaust gas emis-
variety of the necessary technical solutions as well as the sions from diesel engines in certain vehicles of the
inevitable uncertainties associated with the current and ex- Audi Group. For the affected vehicles, partly different
pected litigation it cannot be excluded that a future assess- measures are being implemented in various countries.
ment of the risks may be different. These include hardware and/or software solutions, vehi-
cle repurchases or the early termination of leases and, in
Our opinions on the consolidated financial statements and some cases, cash payments to vehicle owners. Further-
on the group management report are not modified in respect more, payments are being made as a result of criminal
of this matter. proceedings and civil law settlements with various
parties. In addition, there are civil lawsuits pending from
// KEY AUDIT MATTERS IN THE AUDIT OF THE customers and dealers. Further direct and indirect effects
CONSOLIDATED FINANCIAL STATEMENTS concern in particular impairment of assets and customer-
Key audit matters are those matters that, in our professional specific sales programs.
judgment, were of most significance in our audit of the con-
solidated financial statements for the financial year from The Audi Group recognizes the expenses directly related
1 January to 31 December 2018. These matters were addressed to the diesel issue in its operating income. The expenses
in the context of our audit of the consolidated financial state- incurred in financial year 2018 amount to EUR 1.2 billion
ments as a whole, and in forming our audit opinion thereon; and relate to fines (EUR 0.8 billion) as well as further re-
we do not provide a separate audit opinion on these matters. serves for technical activities, legal risks and legal fees
(EUR 0.4 billion).
In our view, the matters of most significance in our audit
were as follows: The reported provisions are exposed to considerable esti-
mation risk due to the wide-ranging investigations and
❶ Accounting treatment of risk provisions for the diesel issue proceedings that are ongoing, the complexity of the various
❷ Impairment of capitalized development costs negotiations and pending approval procedures by
❸ Completeness and measurement of provisions for authorities, and developments in market conditions. This
warranty obligations arising from sales matter was of particular significance for our audit due to
❹ Financial instruments – hedge accounting the material amounts of the provisions as well as the
scope of assumptions and discretion on the part of the
executive directors.
263
② In order to audit the recognition and measurement of ③ The Company’s disclosures on the diesel issue are contained
provisions for field activities and vehicle repurchases in the sections entitled “Diesel issue” in the notes to the
arising as a result of the diesel issue, we critically consolidated financial statements and in the section
examined the processes put in place by the companies of “Diesel issue” and “Legal risks” in the group manage-
the Audi Group to make substantive preparations to ad- ment report.
dress the diesel issue, and assessed the progress made in
implementing the technical solutions developed to ❷ Impairment of capitalized development costs
remedy it. We compared this knowledge with the tech-
nical and legal substantiations of independent experts, ① In the consolidated financial statements of AUDI AG capi-
as presented to us. We used in particular an IT data talized development costs amounting to EUR 6,402 million
analysis solution to examine the quantity structure are reported under the “Intangible assets” balance sheet
underlying the field activities and repurchases. We item. In accordance with IAS 38, research costs are
assessed the inputs used to measure the repair solu- treated as expenses incurred, while development costs for
tions and the repurchases. We used this as a basis to future series products are capitalized provided that sale
evaluate the calculation of the provisions. of these products is likely to bring an economic benefit.
Until amortization begins, developments must be tested
In order to audit the recognition and measurement of the for impairment in accordance with IAS 36 at least once a
provisions for legal risks and the disclosure of contingent year based on the cash-generating units (models) to which
liabilities for legal risks resulting from the diesel issue, they are allocated. To meet this requirement, over the
we assessed both the available official documents, as well period from capitalization until completion of develop-
as in particular the work delivered and opinions prepared ment the Company assesses whether the costs incurred
by experts commissioned by the Volkswagen Group. As are covered by future cash flows. Once amortization
part of a targeted selection of key procedures and sup- begins, an assessment must be carried out at each re-
plemented by additional samples, we inspected the cor- porting date as to whether there are indications of im-
respondence relating to the litigation and, in talks with pairment. If this is the case, an impairment test must be
officials from the affected companies and the lawyers performed and any impairment loss recognized. For im-
involved, and including our own legal experts, we dis- pairment losses recognized in prior periods, an annual
cussed the assessments made. assessment must be carried out as to whether there
are indications that the reason for the impairment has
Taking into consideration the information provided and ceased to apply.
statements made in the notes to the consolidated finan-
cial statements and in the group management report The Audi Group generally applies the present value of the
with regard to the diesel issue including information future cash flows (value in use) from the relevant cash-
about the underlying causes, the non-involvement of generating units (models) to test these intangible assets
members of the Board of Management as well as the for impairment. The value in use is determined using the
impact on these financial statements, we believe that, discounted cash flow method based on the Group’s calcu-
overall, the assumptions and inputs underlying the calculation of product results prepared by the executive direc-
lation of the risk provisions for the diesel issue are appro- tors. The discount rate used is the weighted average cost
priate to properly recognize and measure the provisions. of capital (WACC). The weighted average cost of capital
applied in the Audi Group includes the weighted average
cost of equity and debt before taxes.
264
The result of this measurement depends to a large extent ③ The Company’s disclosures on capitalized development
on the executive directors’ assessment of future cash in- costs and the associated impairment testing are con-
flows and the discount rate used, and is therefore subject tained in notes “Intangible assets” and “Impairment
to considerable uncertainty. Against this background and tests” to the consolidated financial statements.
due to the complex nature of the valuation, this matter
was of particular significance in the context of our audit. ❸ Completeness and measurement of provisions for
warranty obligations arising from sales
② As part of our audit we assessed whether, overall, the as-
sumptions underlying the measurements (particularly in ① In the consolidated financial statements of the Audi Group
the form of future cash inflows) and the discount rates EUR 8,801 million in provisions for obligations arising
used provide an appropriate basis by which to test the in- from sales are reported under the “Other provisions”
dividual cash-generating units for impairment. We based balance sheet item. These obligations primarily relate to
our assessment, among other things, on a comparison warranty claims arising from the sale of vehicles, motor-
with general and sector-specific market expectations as cycles, components and genuine parts. Warranty claims
well as management’s detailed explanations regarding are calculated on the basis of losses to date, estimated
key planning value drivers. We also evaluated that the future losses and the policy on ex gratia arrangements.
costs for Group functions were properly included in the An estimate is also made of the discount rate. In addi-
impairment tests of the respective cash-generating units. tion, assumptions must be made about the nature and
With the knowledge that even relatively small changes in extent of future warranty and ex gratia claims. These
the discount rate applied can in some cases have material assumptions are based on qualified estimates.
effects on values, we also focused our testing on the
parameters used to determine the discount rate applied, From our point of view, this matter was of particular
and evaluated the measurement model. We also assessed significance for our audit because the recognition and
the consistency of the measurement model applied and measurement of this material item is to a large extent
evaluated the mathematical accuracy of the calculations. based on estimates and assumptions made by the Com-
Furthermore, we performed our own additional sensitiv- pany’s executive directors.
ity analysis for those cash-generating units with little head-
room (present value exceeds carrying amount) in order to ② With the knowledge that estimated values result in an
gauge the impairment risk and enable us to adapt our increased risk of accounting misstatements and that the
audit procedures accordingly. With respect to completed measurement decisions made by the executive directors
development projects, we asked the executive directors have a direct and significant effect on consolidated net
about whether or not there were indications of impairment profit/loss, we assessed the appropriateness of the carry-
or that reasons for impairment had ceased to apply, and ing amounts, including by comparing these figures with
critically examined these assumptions based on our historical data and using the measurement bases pre-
knowledge of the Group’s legal and economic environ- sented to us. Furthermore, we assessed that the interest
ment. In the case of impairment losses or a reversal of rates with matching terms were properly derived from
impairment losses, we assessed that these were properly market data. We evaluated the entire calculations (in-
assigned to the assets allocated to the cash-generating cluding discounting) for the provisions using the appli-
unit. cable measurement inputs and assessed the planned
timetable for utilizing the provisions.
In our view, the measurement inputs and assumptions
used by the executive directors, and the measurement
model, were properly derived for the purposes of con-
ducting impairment tests.
265
In doing so, we were able to satisfy ourselves that the no effect on income before income taxes as the effective
estimates applied and the assumptions made by the ex- portion of fair value changes.
ecutive directors were sufficiently documented and sup-
ported to justify the recognition and measurement of the At the time of transitioning from hedge accounting under
provisions for warranty obligations arising from sales. IAS 39 to IFRS 9 at the beginning of the financial year, the
Audi Group exercised as far as possible the option of imple-
③ The Company’s disclosures on other provisions are con- menting the transition prospectively, without restating
tained in notes “Other provisions” to the consolidated prior-period figures. For currency options, the transition
financial statements. was carried out retrospectively with restating prior-period
figures, as required by the standard. Changes in the fair
❹ Financial instruments – hedge accounting value of currency options recognized in the income state-
ment in the prior period were reclassified retrospectively to
① The companies of the Audi Group use a variety of deriva- the costs of hedging relationships with no effect on in-
tive financial instruments to hedge in particular against come. From our point of view these matters were of partic-
currency and commodity price risks arising from their ular significance for our audit due to the high complexity
ordinary business activities. The executive directors’ and number of transactions as well as the extensive ac-
hedging policy is documented in corresponding internal counting and disclosure requirements of IFRS 9 and IFRS 7.
guidelines and serves as the basis for these transactions.
Currency risk arises primarily from sales and procurement ② As a part of our audit we assessed, with the assistance of
transactions and financing denominated in foreign cur- our internal specialists, the changes to processes and
rencies. The means of limiting this risk include entering systems in connection with the introduction if IFRS 9,
into currency forwards and currency options. among other things. A particular focus was placed on as-
sessing how the effects from transition and the changes
Derivatives are measured at fair value as of the balance to prior-period figures in relation to the introduction of
sheet date. The positive fair values of all of the derivatives IFRS 9 were determined. Both the treasury management
used for hedging purposes amount to EUR 838 million as system and the corresponding adjustments in the consol-
of the balance sheet date, while the negative fair values idation system were subject to separate examinations. In
amount to EUR 960 million. Insofar the financial instru- addition, we assessed the contractual and financial pa-
ments used by the Audi Group are effective hedges of rameters and evaluated the accounting treatment, in-
future cash flows in the context of hedging pursuant to cluding the effects on equity and profit or loss, of the
the requirements of IFRS 9, the effective portion of the various hedging relationships. Together with our special-
changes in fair value is recognized in other comprehen- ists, we also evaluated the Company’s internal control
sive income over the duration of the hedging relation- system with regard to derivative financial instruments,
ships until the maturity of the hedged cash flows (cash including the internal activities to monitor compliance
flows hedges). Changes in the value of derivative finan- with the hedging policy. In addition, the fair value meas-
cial instruments caused by changes in the spot price are urement of financial instruments and the methods of cal-
shown under the cash flow hedge reserve, as usual. culation employed on the basis of market data were as-
Changes in the value of hedging instruments caused by sessed. We evaluated the internal control system in order
changes in forward rates, and in the case of options to assess completeness. With regard to the expected
caused by changes in fair value respectively, and changes cash flows and the assessment of the effectiveness of
in the value of the so called cross-currency basis spread hedges, we essentially conducted a retrospective assess-
are shown under the line item “costs of hedging relation- ment of past hedging levels.
ships,” which was newly introduced under IFRS 9. As of
the balance sheet date, a cumulative EUR 976 million In doing so, we were able to satisfy ourselves that the
was recognized in equity (cash flow hedge reserve) with estimates and assumptions made by the executive direc-
tors were substantiated and sufficiently documented.
266
③ The Company’s disclosures on hedge accounting are con- have determined necessary to enable the preparation of con-
tained in notes “recognition and measurement principles solidated financial statements that are free from material
– financial instruments,” “other financial assets,” “other misstatement, whether due to fraud or error.
financial liabilities” and in the notes to the consolidated
financial statements. In preparing the consolidated financial statements, the execu-
tive directors are responsible for assessing the Group’s ability
// OTHER INFORMATION to continue as a going concern. They also have the responsi-
The executive directors are responsible for the other infor- bility for disclosing, as applicable, matters related to
mation. The other information comprises the following non- continuation as a going concern. In addition, they are respon-
audited parts of the group management report, which we sible for financial reporting based on the going concern basis
obtained prior of the date of our auditor’s report: of accounting unless there is an intention to liquidate the
Group or to cease operations, or there is no realistic alterna-
> the statement on corporate governance pursuant to § 289f tive but to do so.
HGB and § 315d HGB included in section “Corporate
Governance Report” of the group management report Furthermore, the executive directors are responsible for the
> the corporate governance report pursuant to No. 3.10 of the preparation of the group management report that, as a
German Corporate Governance Code (section “Corporate whole, provides an appropriate view of the Group’s position
Governance”) and is, in all material respects, consistent with the consoli-
dated financial statements, complies with German legal re-
The annual report and the financial report are expected to be quirements, and appropriately presents the opportunities
made available to us after the date of the auditor’s report. and risks of future development. In addition, the executive
directors are responsible for such arrangements and mea-
Our audit opinions on the consolidated financial statements sures (systems) as they have considered necessary to enable
and on the group management report do not cover the other the preparation of a group management report that is in
information, and consequently we do not express an audit accordance with the applicable German legal requirements,
opinion or any other form of assurance conclusion thereon. and to be able to provide sufficient appropriate evidence for
the assertions in the group management report.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the The supervisory board is responsible for overseeing the Group’s
other information financial reporting process for the preparation of the consoli-
dated financial statements and of the group management
> is materially inconsistent with the consolidated financial report.
statements, with the group management report or our
knowledge obtained in the audit, or // AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
> otherwise appears to be materially misstated. OF THE CONSOLIDATED FINANCIAL STATEMENTS
AND OF THE GROUP MANAGEMENT REPORT
// RESPONSIBILITIES OF THE EXECUTIVE DIREC- Our objectives are to obtain reasonable assurance about
TORS AND THE SUPERVISORY BOARD FOR THE whether the consolidated financial statements as a whole
CONSOLIDATED FINANCIAL STATEMENTS AND are free from material misstatement, whether due to fraud
THE GROUP MANAGEMENT REPORT or error, and whether the group management report as a
The executive directors are responsible for the preparation whole provides an appropriate view of the Group’s position
of the consolidated financial statements that comply, in all and, in all material respects, is consistent with the consoli-
material respects, with IFRSs as adopted by the EU and the dated financial statements and the knowledge obtained in
additional requirements of German commercial law pursuant the audit, complies with the German legal requirements and
to § 315e Abs. 1 HGB and that the consolidated financial appropriately presents the opportunities and risks of future
statements, in compliance with these requirements, give a development, as well as to issue an auditor’s report that in-
true and fair view of the assets, liabilities, financial position, cludes our audit opinions on the consolidated financial state-
and financial performance of the Group. In addition the execu- ments and on the group management report.
tive directors are responsible for such internal control as they
267
Reasonable assurance is a high level of assurance, but is not > Conclude on the appropriateness of the executive directors’
a guarantee that an audit conducted in accordance with use of the going concern basis of accounting and, based on
§ 317 HGB and the EU Audit Regulation and in compliance the audit evidence obtained, whether a material uncer-
with German Generally Accepted Standards for Financial tainty exists related to events or conditions that may cast
Statement Audits promulgated by the Institut der significant doubt on the Group’s ability to continue as a
Wirtschaftsprüfer (IDW) will always detect a material mis- going concern. If we conclude that a material uncertainty
statement. Misstatements can arise from fraud or error and exists, we are required to draw attention in the auditor’s
are considered material if, individually or in the aggregate, report to the related disclosures in the consolidated finan-
they could reasonably be expected to influence the economic cial statements and in the group management report or, if
decisions of users taken on the basis of these consolidated such disclosures are inadequate, to modify our respective
financial statements and this group management report. audit opinions. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report.
We exercise professional judgment and maintain professional However, future events or conditions may cause the Group
skepticism throughout the audit. We also: to cease to be able to continue as a going concern.
> Identify and assess the risks of material misstatement of > Evaluate the overall presentation, structure and content
the consolidated financial statements and of the group of the consolidated financial statements, including the
management report, whether due to fraud or error, design disclosures, and whether the consolidated financial state-
and perform audit procedures responsive to those risks, ments present the underlying transactions and events in
and obtain audit evidence that is sufficient and appropriate a manner that the consolidated financial statements give a
to provide a basis for our audit opinions. The risk of not true and fair view of the assets, liabilities, financial posi-
detecting a material misstatement resulting from fraud is tion and financial performance of the Group in compliance
higher than for one resulting from error, as fraud may with IFRSs as adopted by the EU and the additional re-
involve collusion, forgery, intentional omissions, misrepre- quirements of German commercial law pursuant to § 315e
sentations, or the override of internal control. Abs. 1 HGB.
> Obtain an understanding of internal control relevant to > Obtain sufficient appropriate audit evidence regarding the
the audit of the consolidated financial statements and of financial information of the entities or business activities
arrangements and measures (systems) relevant to the audit within the Group to express audit opinions on the consoli-
of the group management report in order to design audit dated financial statements and on the group management
procedures that are appropriate in the circumstances, but report. We are responsible for the direction, supervision
not for the purpose of expressing an audit opinion on the and performance of the group audit. We remain solely re-
effectiveness of these systems. sponsible for our audit opinions.
> Evaluate the appropriateness of accounting policies used > Evaluate the consistency of the group management report
by the executive directors and the reasonableness of esti- with the consolidated financial statements, its conformity
mates made by the executive directors and related disclo- with German law, and the view of the Group’s position it
sures. provides.
268
> Perform audit procedures on the prospective information From the matters communicated with those charged with
presented by the executive directors in the group manage- governance, we determine those matters that were of most
ment report. On the basis of sufficient appropriate audit significance in the audit of the consolidated financial state-
evidence we evaluate, in particular, the significant assump- ments of the current period and are therefore the key audit
tions used by the executive directors as a basis for the pro- matters. We describe these matters in our auditor’s report
spective information, and evaluate the proper derivation unless law or regulation precludes public disclosure about
of the prospective information from these assumptions. the matter.
We do not express a separate audit opinion on the pro-
spective information and on the assumptions used as a / OTHER LEGAL AND REGULATORY REQUIREMENTS
basis. There is a substantial unavoidable risk that future
events will differ materially from the prospective infor- // FURTHER INFORMATION PURSUANT TO
mation. ARTICLE 10 OF THE EU AUDIT REGULATION
We were elected as group auditor by the annual general meet-
We communicate with those charged with governance regarding on 9 May 2018. We were engaged by the supervisory
ing, among other matters, the planned scope and timing of board on 9 May 2018. We have been the group auditor of the
the audit and significant audit findings, including any signifi- AUDI Aktiengesellschaft, Ingolstadt, without interruption
cant deficiencies in internal control that we identify during since the financial year 1970.
our audit.
We declare that the audit opinions expressed in this auditor’s
We also provide those charged with governance with a state- report are consistent with the additional report to the audit
ment that we have complied with the relevant independence committee pursuant to Article 11 of the EU Audit Regulation
requirements, and communicate with them all relationships (long-form audit report).
and other matters that may reasonably be thought to bear
on our independence, and where applicable, the related safe- / GERMAN PUBLIC AUDITOR RESPONSIBLE FOR
guards. THE ENGAGEMENT
The German Public Auditor responsible for the engagement is
Jürgen Schumann.
Munich, February 20, 2019
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Frank Hübner Jürgen Schumann

Wirtschaftsprüfer Wirtschaftsprüfer
(German Public Auditor) (German Public Auditor)
269
10-YEAR OVERVIEW
10-YEAR OVERVIEW
2009 2010 2011
Production
Automotive segment Cars 2) 932,260 1,150,018 1,302,981
Engines 1,384,240 1,648,193 1,884,157
Motorcycles segment Motorcycles – – –
Deliveries to customers
Automotive segment Cars 1,145,360 1,293,453 1,512,014
Audi brand 5) Cars 949,729 1,092,411 1,302,659
Lamborghini brand Cars 1,515 1,302 1,602
Other Volkswagen Group brands Cars 194,116 199,740 207,753
Motorcycles segment Motorcycles – – –
Ducati brand Motorcycles – – –
Workforce Average 58,011 59,513 62,806
From the Income Statement

Revenue EUR million 29,840 35,441 44,096
Cost of materials EUR million 18,512 21,802 28,594
Personnel costs EUR million 3,519 4,274 5,076
Personnel costs per employee 6) EUR 60,964 72,172 81,189
Depreciation and amortization EUR million 1,775 2,170 1,793
Operating profit EUR million 1,604 3,340 5,348
Profit before tax EUR million 1,928 3,634 6,041
Profit after tax EUR million 1,347 2,630 4,440
From the Balance Sheet (Dec. 31)

Non-current assets EUR million 9,637 10,584 12,209
Current assets EUR million 16,913 20,188 24,811
Equity EUR million 10,632 11,310 12,903
Liabilities EUR million 15,918 19,462 24,117
Balance sheet total EUR million 26,550 30,772 37,019
From the Cash Flow Statement

Cash flow from operating activities EUR million 4,119 5,797 6,295
Investing activities attributable to operating activities EUR million 1,798 2,260 2,905
Net cash flow EUR million 2,321 3,536 3,390
Net liquidity (Dec. 31) EUR million 10,665 13,383 15,716
Financial ratios
Operating return on sales Percent 5.4 9.4 12.1
Return on sales before tax Percent 6.5 10.3 13.7
Return on investment (ROI) Percent 11.5 24.7 35.4
Ratio of capex 11) Percent 4.2 4.1 5.1
Research and development ratio Percent 7.0 7.1 6.4
Equity ratio (Dec. 31) Percent 40.0 36.8 34.9
Audi share
Share price (year-end price) 12) EUR 501.67 635.00 549.00
Compensatory payment EUR 1.60 2.20 3.00
1) 2012: financial figures have been adjusted to take account of the revised IAS 19; 2017: financial figures have been adjusted to reflect the first-time adoption of IFRS 9 and IFRS 15
2) Since 2011, including vehicles built in China by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China)
3) The figure has been adjusted to reflect the amended counting method.
4) Since acquisition of the Ducati Group in July 2012
5) Including delivered vehicles built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China)
6) Calculated on the basis of employees of Audi Group companies
7) Taking into account special items, in particular in connection with the diesel issue
270
10-YEAR OVERVIEW
2012 1) 2013 2014 2015 2016 2017 1) 2018
1,469,205 1,608,048 1,804,624 1,828,683 3) 1,903,259 1,879,840 1,871,386

1,916,604 1,926,724 1,974,846 2,023,618 1,927,838 1,966,434 1,955,532
15,734 4) 45,018 45,339 55,551 56,978 56,743 53,320
1,634,312 1,751,007 1,933,517 2,024,881 2,088,187 2,105,084 2,081,418

1,455,123 1,575,480 1,741,129 1,803,246 1,867,738 1,878,105 1,812,485
2,083 2,121 2,530 3,245 3,457 3,815 5,750
177,106 173,406 189,858 218,390 216,992 223,164 263,183
16,786 4) 44,287 45,117 54,809 55,451 55,871 53,004
16,786 4) 44,287 45,117 54,809 55,451 55,871 53,004
67,231 71,781 77,247 82,838 87,112 90,402 91,477
48,771 49,880 53,787 58,420 59,317 59,789 59,248

30,265 32,491 36,024 37,583 40,596 40,370 41,023
5,069 5,543 6,068 6,602 6,761 7,219 7,336
75,759 77,596 78,921 80,071 77,990 80,234 80,583
1,937 2,071 2,455 2,665 3,159 3,593 3,853
5,365 5,030 5,150 4,836 7) 3,052 7) 4,671 7) 3,529 7)
7) 7) 7)
5,951 5,323 5,991 5,284 3,047 4,717 4,361 7)
4,349 4,014 4,428 4,297 7) 2,066 7) 3,432 7) 3,463 7)
18,044 19,943 22,538 25,963 28,599 29,469 32,393

22,357 25,214 28,231 30,800 32,403 33,846 33,205
15,092 18,565 19,199 21,779 25,321 28,171 29,698
25,309 26,592 31,570 34,985 35,685 35,509 35,900
40,401 45,156 50,769 56,763 61,090 63,680 65,598
6,144 6,778 7,421 7,203 7,517 6,173 7,013

6,804 8) 3,589 4,450 5,576 9) 5,423 1,861 10) 4,871
– 660 8) 3,189 2,970 1,627 9) 2,094 4,312 10) 2,141
13,396 8) 14,716 16,328 16,420 9) 17,232 20,788 10) 20,442
11.0 10.1 9.6 8.3 7) 5.1 7) 7.8 7) 6.0 7)

7) 7) 7)
12.2 10.7 11.1 9.0 5.1 7.9 7.4 7)
7) 7) 7)
30.8 26.4 23.2 19.4 10.7 14.4 10.0 7)
4.8 4.8 5.5 6.0 5.7 6.5 5.9
7.0 8.0 8.0 7.3 7.5 6.4 7.1
37.4 41.1 37.8 38.4 41.4 44.2 45.3
525.10 638.05 649.95 678.00 631.00 725.95 782.00

3.50 4.00 4.80 0.11 2.00 3.90 X 13)
8) Taking into account the acquisition of participations in Volkswagen International Belgium S.A., Brussels (Belgium), and in Ducati Motor Holding S.p.A., Bologna (Italy)
9) Taking into account the participation in There Holding B.V., Rijswijk (Netherlands), in connection with the HERE transaction
10) Taking into account the transfer of the minority interest in Volkswagen International Belgium S.A., Brussels (Belgium), to Volkswagen AG, Wolfsburg
11) Investments in property, plant and equipment, investment property and other intangible assets (without capitalized development costs) according to
Cash Flow Statement in relation to revenue
12) Year-end price of the Audi share on trading venue Xetra of the Frankfurt Stock Exchange
13) In accordance with the resolution to be passed by the Annual General Meeting of Volkswagen AG, Wolfsburg, for the 2018 fiscal year on May 14, 2019
271
Financial events 2019
March 14, 2019

Annual Press Conference
May 3, 2019
First Quarter Report
May 23, 2019

Annual General Meeting
July 26, 2019

Interim Financial Report
October 31, 2019

Third Quarter Report
Concept and design
Certification
Financial publication produced with

AUDI AG
Auto-Union-Straße 1
85045 Ingolstadt
Germany
Phone +49 841 89-0
Fax +49 841 89-32524
email [email protected]
www.audi.com
Financial Communication/
Financial Analysis
I/FU-23
email [email protected]
www.audi.com/investor-relations

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2018

Workforce Average 91,477 90,402 1.2

Revenue EUR million 59,248 59,789 –0.9

Operating return on sales before special items Percent 7.9 8.5

Ratio of capex ⁴ ) Percent 5.9 6.5

089 Combined Management Report

173 Consolidated Financial Statements

The active commitment of everyone at Audi was especially im-

The Supervisory Board is supporting the Board of Management

The Supervisory Board was newly elected in 2018.

The Supervisory Board was newly constituted last year. With

At its constituent meeting on May 9, 2018, the Supervisory

The Board of Management gave regular, up-to-date, compre-

At its four ordinary meetings in 2018, the Supervisory Board

In agreeing to the plans for human resources, financial and

The diesel issue, in particular concerning the V6 3.0 TDI en-

All Supervisory Board members were present at more than

The “Diesel” Committee oversees and supports the Board of

The “Diesel” Committee came together for four meetings in

“I am convinced of the potential of the brand

Upon the proposal of the Supervisory Board, the Annual General

The auditing firm’s representatives explained the key findings

Following examination of the audit documents received and

There have been the following changes in the composition of

With effect from June 19, 2018, Abraham Schot assumed

Rupert Stadler left the Board of Management of AUDI AG from

Hans-Joachim Rothenpieler assumed responsibility for the

With effect from Januar y 1, 2019, the Super visor y Board

The Board of Management has suitably taken account of the

Ingolstadt, February 21, 2019

Dr.-Ing. Herbert Diess

BASIS OF THE AUDI GROUP // 090 Production // 127

ECONOMIC REPORT // 098 SUSTAINABILIT Y ASPECTS // 128

FINANCIAL PERFORMANCE Report on expected developments // 135

BASIS OF THE AUDI GROUP

our brand websites www.audi.com,

Brussels/Belgium Ingolstadt/Germany Bratislava/ Győr/Hungary Sant’Agata Changchun/China

Neckarsulm/Germany São José dos Pinhais/ Manaus/Brazil Bologna/Italy Aurangabad/ Amphur

brand sales companies Volkswagen Group Italia S.p.A.,

At the same time, regulatory requirements such as WLTP and

by the end of 2022. In this way we want to safeguard our

The Audi Transformation Plan

Material, invest- Technical

Schot/ Martens/ Kössler/ Rothenpieler/ Göbel/ Seitz/ Seitz/Kössler/

Profit-oriented Optimization of Optimization of Digitalization of Implementation Optimization of

/ INTEGRITY AND COMPLIANCE ALONG WITH

Integrity, respect and values-based, compliant behavior

low of EUR 680 on October 26, 2018. An upward trend in the

other factors, the successful presentation of the Audi e-tron

pear to be recognizing the long-term opportunities that arise www.audi.com/shares.

for the Audi Group from its investments in future technologies,

DISCLOSURES REQUIRED UNDER

BUSINESS AND UNDERLYING

Economic output in the United States rose by 2.9 (2.2) percent

New registrations of vehicles in Central and Eastern Europe // COURSE OF BUSINESS

Forecast/actual comparison Audi Group 1)

Actual 2017 Forecast for 2018 Actual 2018 Evaluation 2)

RESEARCH AND DEVELOPMENT 1)