Volkswagen Weighs Iron Dome Role as Capacity Slashes and Earnings Slip

Volkswagen is in talks to produce Iron Dome parts at Osnabrück, cuts global capacity to 9M vehicles, and reports falling Q1 earnings; sodium-ion battery breakthrough offers a potential EV cost reduction.

Volkswagen is exploring an unusual exit ramp for its Osnabrück plant — one that leads not to another carmaker but to the defence industry. Management has confirmed talks with Israel’s Rafael, among others, about using part of the factory to manufacture components for the Iron Dome missile defence system. With production of the Porsche model and T-Roc Cabrio set to end by mid-2027 and no replacement vehicle lined up, the pivot marks a dramatic departure for Europe’s largest automaker. Works council chair Daniela Cavallo continues to reject outright plant closures, insisting on viable future concepts instead.

The Osnabrück dilemma is just one symptom of a deeper capacity crisis. Chief executive Oliver Blume, speaking at a townhall in Wolfsburg, flatly denied rumours that Volkswagen was in talks with Chinese investors about acquiring German sites. The group is, however, pressing ahead with a radical downsizing of its global production footprint — from roughly 12 million vehicles a year to around 9 million. That reduction of about 3 million units underscores the scale of the overcapacity problem Blume and his board are struggling to address.

Blume’s denial came as the group’s financial performance continued to deteriorate. Revenue in the first quarter of 2026 slipped nearly 2.5% to €75.66 billion, while earnings per share fell from €3.69 a year earlier to €2.61. The slide reflects mounting pressure in two of Volkswagen’s most important markets. In China, an intensifying price war has squeezed margins, prompting Skoda to withdraw entirely from the country. Audi, too, is losing ground: it registered around 625,000 new vehicles in the first eleven months of 2025, trailing both BMW and Mercedes-Benz. Meanwhile, in the United States, the repeal of EV subsidies has torpedoed demand for battery-powered models. Volkswagen has responded by rejigging production — partly suspending the ID.4 and leaning harder on combustion-engine models such as the Atlas.

There is, however, a silver lining on the technology side. Gotion High-Tech, Volkswagen’s largest single shareholder, has begun mass-producing its “Gnascent” sodium-ion battery series. The chemistry requires no lithium, cobalt or nickel, yet delivers an energy density of up to 261 Wh/kg and remains functional at temperatures as low as -50° Celsius. For Volkswagen, the breakthrough could shorten the road to affordable electric models, especially if it helps lower the cost of entry-level EVs.

On the trading floor, Volkswagen’s preference shares have been clawing back lost ground. The stock recently changed hands at €89.90, up 0.67% from the previous session, and crossed above its 50-day moving average of €88.25 — a short-term bullish trigger for technical traders. Still, the shares are roughly 15% to 16% lower year-to-date, and trade well below the 52-week high of €108.30 set in December 2025.

Analyst sentiment is cautiously optimistic. Jefferies and Berenberg both rate the stock a ‘Buy’, while JP Morgan maintains a neutral stance. The average price target stands at €116.55, implying upside of roughly 30% from current levels. Whether that target is reached depends largely on how quickly the capacity overhaul takes effect and whether Chinese operations can be stabilised.

Investors also have a dividend decision to look forward to. The board has proposed a payout of €5.26 per preference share for the 2025 financial year, about €1.10 less than the previous year. The annual general meeting is scheduled for 18 June 2026, with payment due on 23 June. The next major financial milestone will come in July, when Volkswagen reports second?quarter results. That report will offer the first chance to gauge whether the “Gamechanger” cost programme is beginning to leave its mark on operating margins.