Volkswagen AG: Interim Report January-June 2004

WOLFSBURG, Germany--July 23, 2004--

- First-half sales revenue up 7.3 % on previous year

- Operating profit before special items down 19.8 % against previous year at 979 million EUR due to continuing difficult market conditions and unfavourable exchange rates; second quarter strong improvement on first

- Operating profit after special items down 30.3 % against prior year at 851 million EUR

- Net cash flow in the Automotive Division well above previous year, at a positive 270 million EUR

- Investments in tangible assets in the Automotive Division 15.3 % below level in first half of 2003

- ForMotion program to improve Group earnings capability delivers first results totalling over 400 million EUR

- Product initiative successful:

- Golf the clear leader in its segment; Touran at the top of its class

- New Skoda Octavia, Audi A6, SEAT Altea and Caddy Life launched

- Positive trend in Financial Services Division sustained

- Joint venture to acquire LeasePlan Corporation agreed

January - June                             2004    2003    +/-    (%)
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Volkswagen Group:

Deliveries to customers    '000 units     2,516   2,473     +     1.7
Vehicle sales              '000 units     2,646   2,514     +     5.2
Production                 '000 units     2,670   2,572     +     3.8

Sales revenue              million EUR   45,940  42,831     +     7.3
Operating profit
 before special items      million EUR      979   1,220     -    19.8
Special items              million EUR      128       -             x
Operating profit
 after special items       million EUR      851   1,220     -    30.3
Profit before tax          million EUR      639   1,010     -    36.8
Profit after tax           million EUR      383     596     -    35.7

Automotive Division:

Cash flows from operating
 activities                million EUR    3,765   2,874     +    31.0
Cash flows from investing
 activities                million EUR    3,495   3,937     -    11.2

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The first six months of 2004 were marked in particular by sluggish automobile demand in key markets and by the still unfavourable exchange rate situation. The high price of oil, and the resulting increase in fuel prices, also had a negative impact on consumer confidence.

Despite these difficult conditions, we will continue to pursue our global model initiative in order to establish a leadership position in the key vehicle segments. The latest market launches - of the Skoda Octavia, the Audi A6, the SEAT Altea and the Caddy Life - represent major steps towards that goal.

It is likely that the trend in the automotive business will again fall short of any substantial improvement through the second half of 2004, mainly because of ongoing weak demand in key markets, unfavourable exchange rates, and the current high price of oil. Moreover we expect that there will be no let up in competitive pressure in key car markets, such as the USA, Europe and China. We therefore forecast that growth in deliveries to customers in the second half of 2004 will be similar to that in the first half of the year. Consequently, our expected sales volume for the year as a whole, though up on the previous year, will fall well short of our original expectation. Moreover, Volkswagen's model initiative will entail a number of important new start-ups and product changes. All this, along with the aforementioned start-ups, has the result that available production capacity cannot be adequately utilized.

With ForMotion the Group has launched a global program aimed at substantially cutting costs, reducing the investment ratio and improving sales performance. The program's first-half contribution to earnings totalling over 400 million EUR will rise to well over 1 billion EUR over the full year. The upfront expenditures and special product measures, as well as structural and process changes, associated with ForMotion will, however, impact negatively on earnings. These elements are recognized separately in the income statement under "Special items".

Under the unfavourable conditions outlined above, 2004 operating profit before special items could amount to only 1.9 billion EUR instead of the original 2.5 billion EUR target. We expect that the special items will total around 400 million EUR.

Wolfsburg, July 23, 2004

Volkswagen AG

The Board of Management

(The full interim report is available at "www.volkswagen-ir.de".)