Germany's Largest Defense Contractor—Which Has Tripled In Value Since Trump's Election—Wants To Convert Idle VW Plants Into Tank Factories

Rheinmetall, Germany’s largest defense contractor, is looking to take over idle Volkswagen plants to expand its production capacity as Europe ramps up military spending. The company has tripled in value since Donald Trump won the U.S. presidency in November, driven by expectations of increased defense budgets among NATO members.

Rheinmetall CEO Armin Papperger confirmed the company's interest in Volkswagen's Osnabrück plant, calling it “very suitable” for defense production. “Before I’ll build a new tank factory in Germany, we'll, of course, take a look at it,” he said to journalists on March 12. However, he stressed that any acquisition depends on securing large, long-term government contracts.

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Volkswagen's Decline Creates an Opportunity

Volkswagen, once Europe's largest company by revenue, has seen its market value shrink to around $60 billion. Facing declining demand, rising costs, and intense competition from China, the automaker announced plans to halve its production capacity in Germany. The Osnabrück factory is one of three sites set to be shut down.

Volkswagen CEO Oliver Blume acknowledged the possibility of converting the plant for defense production. “We are open to sensible subsequent utilization of the two sites,” a Volkswagen spokesperson told Fortune. While no firm negotiations have been confirmed, Blume noted that military vehicle production could be a potential path forward.

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An Industry Shift From Cars to Arms

Germany’s industrial landscape is undergoing a dramatic transformation as its once-dominant automotive sector struggles and its defense industry surges. Rheinmetall has been one of the biggest winners of this shift, with its stock soaring more than tenfold since Russia invaded Ukraine in 2022.

“An era of rearmament in Europe has begun,” Papperger said, emphasizing that Rheinmetall expects continued growth. The company reported a record 61% increase in operating profits last year, reaching 1.5 billion euros (1.63 billion dollars), and is set to distribute over 350 million euros in dividends to shareholders.

Rising Demand for Tanks and Ammunition

With a record order backlog of 55 billion euros, Rheinmetall is under pressure to expand its manufacturing capacity. It currently produces weapons, tanks, and ammunition, with defense now accounting for 80% of its business.

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To meet growing demand, the company plans to add 8,000 employees over the next two years, bringing its global workforce to 40,000. While Rheinmetall has already begun converting some of its own automotive sites for military production, acquiring Volkswagen's Osnabrück plant could speed up its expansion efforts.

NATO's Warning on Sabotage

As Rheinmetall's importance grows, so does the risk of sabotage. NATO recently confirmed that a plot to assassinate Papperger was part of a broader campaign targeting Europe's defense industry. “There were other plots as well,” NATO’s Deputy Assistant Secretary General for Innovation, Hybrid, and Cyber James Appathurai told the European Parliament, citing attacks on politicians’ property, arson, and train derailments as part of the effort to destabilize European military production.

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