Germany’s defence industry surges as Rheinmetall’s market value exceeds Volkswagen’s

On March 14, German weapons manufacturer Rheinmetall surpassed the market capitalization of automotive giant Volkswagen Group, signaling a significant shift in Germany's economic focus from cars to defense. 

According to Politico's data, as of 4 p.m., March 14, Rheinmetall's market cap reached €55.7 billion, edging out Volkswagen's €54.4 billion, per Caliber.Az.

Rheinmetall's value has more than tripled since January 2017, when Donald Trump assumed the US presidency, reflecting a broader surge in European defense companies' stock values. In contrast, many US-based defense firms have seen their shares fall, amid growing concerns over the impact of Trump's unpredictable policies on American arms exports.

The trajectories of the two companies illustrate broader economic trends. While Rheinmetall has benefited from increased European defense spending — driven by the need to deter Russia, support Ukraine, and ensure regional security amid fears of US disengagement — Volkswagen has faced challenges from issues in China, Trump's tariffs, and difficulties transitioning to electric vehicles.

Historically, cars were central to Germany's post-World War II recovery, cementing its status as the EU's economic powerhouse, with defense taking a backseat, particularly after the Cold War. However, the growing emphasis on defense suggests that Germany's economy may now depend more on military manufacturing.

Rheinmetall CEO Armin Papperger commented on the shift, stating, "An era of rearmament has begun in Europe that will demand a lot from all of us. It also brings us at Rheinmetall growth prospects for the coming years that we have never experienced before." This announcement accompanied the company's record earnings.

Volkswagen, meanwhile, is planning to close its Osnabrück factory, with Papperger suggesting that the site could be repurposed for tank production. "One thing is clear: Before I build a new tank plant in Germany, we will certainly look at it," he said.

Amid these developments, the German political landscape is adjusting. Following concerns over security, German Chancellor-elect Friedrich Merz has proposed exempting defense spending from the country’s debt brake, a historic shift he had previously avoided. "In view of the threats to our freedom and peace on our continent, whatever it takes must now also apply to our defense," Merz said.

Volkswagen Group CEO Oliver Blume acknowledged the ongoing changes, stating at a March 11 earnings briefing, "We need to invest more in order to be safe again." While he noted that no specific discussions are currently underway, Blume highlighted that the company is open to advising other manufacturers on defense production, a role it has played before. Notably, Volkswagen’s trucking subsidiary, MAN Truck & Bus, is in a joint venture with Rheinmetall to produce military logistics vehicles.

By Tamilla Hasanova