Volkswagen is in talks with Israel’s Rafael Advanced Defence Systems to convert a German car plant into a missile defence production site, signalling a potential shift in Europe’s struggling auto sector toward defence manufacturing.

The discussions centre on Volkswagen’s Osnabrueck facility (below), which employs about 2300 workers and faces an uncertain future once production of the T-Roc Cabriolet ends in 2027. According to reports, the plant could be repurposed to produce components for Israel’s Iron Dome air defence system, though Volkswagen said it is not planning to manufacture weapons directly.

The proposed deal is aimed at preserving jobs and potentially expanding employment, with workers expected to play a role in deciding whether to transition to defence-related production.

Under the plan, the factory would manufacture support systems such as launcher platforms, transport vehicles and generators, while missile production would take place elsewhere.

1

The move comes amid rising defence spending across Europe, driven by geopolitical tensions and the war in Ukraine. Germany alone has committed hundreds of billions of euros to strengthening its military capabilities, with air defence a key priority.

Rafael, a state-owned Israeli defence firm, is best known for developing the Iron Dome system, which has intercepted more than 90% of incoming rockets in combat situations.

Volkswagen has been exploring options for the Osnabrueck site, including a potential sale, as it restructures operations and adapts to slowing demand and intensifying global competition.