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Volkswagen Ready to Enter Military Production Exploring Defense Equipment Supply.
According to information reported by The Telegraph on March 11, 2025, Volkswagen is considering entering the production of military equipment for the German army, marking a potential diversification of its activities amid Europe's rearmament efforts. This statement comes from Oliver Blume, CEO of Europe’s largest car manufacturer, who stated that the company is open to exploring new concepts but has not yet received concrete proposals from potential partners.
Volkswagen plant in Wolfsburg (Picture source: WikiCommons)
This development coincides with Germany’s efforts to strengthen its defense capabilities, driven by concerns over a possible disengagement of the United States under President Donald Trump. Uncertainty about U.S. commitments is prompting Europe to bolster its defense industry, with increased investments and industrial restructuring. Several manufacturers, including Rheinmetall and KNDS Group, have already begun converting their automotive component production facilities to manufacture military equipment in response to growing demand.
According to economic analysts, German car factories currently have surplus capacity due to a sharp decline in vehicle exports, which have halved from pre-pandemic levels. This drop is partly due to increasing competition from Chinese manufacturers, now the world’s leading car exporters, as well as a European market shifting toward electrification, which is reshaping traditional automotive production. In Germany, annual vehicle exports have fallen from 2.4 million to around 1.2 million units, forcing manufacturers to rethink their economic model.
Asked about Volkswagen’s potential involvement in military equipment production, Oliver Blume emphasized the need for increased security investments in Europe. He clarified that no concrete steps had been taken so far but did not rule out the possibility of Volkswagen playing a role in the sector. He noted that the group has extensive expertise in the automotive industry and could provide consulting and technological support if needed, without immediately committing its production facilities.
Rising demand for defense equipment has already had a significant impact on financial markets, with strong stock growth among German defense companies expanding their production capacity. Some automotive factories, initially designed for internal combustion engine production or light vehicle components, are now being converted to meet military sector needs. The industrial flexibility of these facilities could enable rapid adaptation to new defense market requirements, particularly for armored vehicles or aerospace components.
Oliver Blume’s statements come as Volkswagen reports a 15% drop in profit, totaling €19.1 billion in 2024 compared to €22.5 billion the previous year. The company is facing challenges related to its transition to electric vehicles, which requires significant investment in new technologies, as well as the impact of tariffs imposed by the Trump administration on vehicles manufactured in Canada and Mexico. To remain competitive against Chinese manufacturers, Volkswagen has launched a major restructuring plan that includes cutting 35,000 jobs, reducing costs, and optimizing production lines.
This potential diversification into the defense sector could present a strategic opportunity for the company. In addition to strengthening Germany’s and Europe’s defense capabilities, it could help Volkswagen offset losses in the traditional automotive market. However, the company remains cautious and is waiting for initiatives from the defense sector before committing further to this direction. The evolution of the geopolitical situation and the policies of European governments will be key factors in shaping this industrial strategy.