Rheinmetall surpasses Volkswagen in market value as defense focus grows

The market value of arms manufacturer Rheinmetall surpassed that of automotive giant Volkswagen Group on Thursday, marking a significant shift in Germany’s economy from automotive to defense.

As of 4:00 PM yesterday, Rheinmetall’s market value was 55.7 billion euros, while Volkswagen’s stood at 54.4 billion euros.

Since US President Donald Trump took office in January, Rheinmetall’s value, along with that of many other major European defense companies, has more than tripled. Meanwhile, US-based competitors have seen their stock prices fall due to concerns that Trump’s unpredictable policies might harm American arms exports.

VW and Rheinmetall are moving in different directions. The arms manufacturer is benefiting from the increase in defense spending in Europe, which is rearming on the grounds of deterring Russia, supporting Ukraine, and ensuring its security, due to fears that Trump will withdraw from the Continent. Volkswagen, on the other hand, is struggling with challenges caused by problems in China, Trump’s tariffs, and the turbulent transition to electric vehicles.

Automobiles powered Germany’s post-World War II recovery, making it the economic powerhouse of the EU and allowing defense to take a back seat, especially after the end of the Cold War.

Rheinmetall CEO Armin Papperger stated on Wednesday, while announcing the company’s record earnings, “A period of rearmament has begun in Europe that will demand a lot from all of us. This also brings us, as Rheinmetall, growth prospects for the coming years that we have never experienced before.”

As a sign of the transition process, Volkswagen plans to end production at its Osnabrück plant, and Papperger said on Wednesday that the factory would be “very suitable” as a potential tank factory.

“One thing is clear: before building a new tank factory in Germany, we will definitely look at this,” Papperger said.

In the months preceding the early election in Germany in February, the problems of the automotive sector occupied the public agenda, while security concerns are shifting attention and funding towards defense.

Friedrich Merz, who is expected to be Germany’s new chancellor, wants to exempt defense spending from the restrictions of the country’s debt brake.

Explaining the strategic change, Merz said, “Given the threats to our freedom and peace on our continent, what is necessary must now also apply to our defense.”

VW Group CEO Oliver Blume also acknowledged this change during Tuesday’s balance sheet briefing. “We need to invest more to be safe again,” Blume said.

The VW official added that no private meeting had yet taken place, but the company was ready to advise other manufacturers on defense production, a role it has played before.

VW produced armored vehicles for the Nazis in World War II. Its truck transport subsidiary, MAN Truck & Bus, is affiliated with Rheinmetall through a joint venture to produce logistics vehicles for the army.