Will Volkswagen Start Manufacturing Military Equipment?

Volkswagen Group is in talks with Israel's Rafael Advanced Defence Systems to switch production from one of its manufacturing sites in Germany from cars to missile defence components, according to the Financial Times. 

This comes after the group reported a 44% drop in its profits for 2025 and initiated a plan to cut 50,000 jobs by 2030.

Oliver Blume, Volkswagen CEO, said the company was “operating in a fundamentally different environment".

Volkswagen has ruled out directly manufacturing weapons, according to Euronews Business.

Defence manufacturing

Volkswagen already manufactures parts for Rheinmetall military trucks in a joint venture called MAN, but the potential move into air defence missiles components is a new departure for the carmaker.

According to the Financial Times, the German government is actively supporting the proposal that would see Volkswagen’s Osnabrück factory make various Iron Dome parts, including the heavy-duty trucks that carry the system’s missiles as well as launchers and electricity generators. 

The Financial Times reported that the site would not produce the projectiles themselves in the proposed deal between Volkswagen and Rafael Advanced Defence Systems. 

Volkswagen's Osnabrück site

Roughly 2,300 people are employed at the Osnabrück site that produces the T-Roc Cabriolet, which is being phased out in 2027.

In 2023, Osnabrück also began supporting overflow production of the Porsche Cayman and Porsche Boxster. However questions have been raised about the future of the plant after the T-Roc Cabriolet is phased out. 

Reuters reported that Rheimentall CEO, Armin Papperger, had previously said it could take over sites from Volkswagen if conditions were right, but it also reported that the company was not negotiating with Volkswagen about its factory in Osnabrück. 

The Financial Times reported that a person familiar with the new plans to manufacture components for Israel's Iron Dome said: “The aim is to save everybody, maybe even to grow.

“The potential is so high. But it’s also an individual decision for the workers if they want to be part of the idea.”

Volkswagen's plans

After the initial report in the Financial Times, a representative from Volkswagen spoke to Euronews Business and ruled out directly producing weapons. 

Speaking to Euronews Business, Volkswagen said it is "in dialogue with various market players" as part of an "open review process" for the site once car manufacturing wraps at the site in 2027, but added "currently no concrete decisions or conclusions regarding the future direction of the site".

"The production of weapons by Volkswagen AG remains ruled out," a spokesperson said, adding that the company does not "engage in speculation regarding further plans for the Osnabrück site".

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A difficult environment

While Volkswagen is not looking at directly producing weapons, the potential move has seen the company explore other options for revenue amid geopolitical instability, a competitive environment and tariffs.

The European carmaker was impacted by US President Donald Trump's announcement of a 25% tariff on car imports from Europe and Mexico. 

Arno Antlitz, CFO & COO Volkswagen Group, said about VW’s fourth quarter results: “2025 was shaped by geopolitical tensions, tariffs and intense competitive pressure.

"In this demanding environment, we launched 30 new models, made visible progress with our restructuring, generated solid net cash flow and thus kept our net liquidity stable at a solid level.”

Volkswagen Group reported a 44% drop in its profits for 2025 and initiated a plan to cut 50,000 jobs by 2030. 

Oliver Blume, CEO of Volkswagen, said: “In 2025 we put the new strength of the Volkswagen Group on the road and kept our company firmly on track, despite increasing global headwinds.”