German automotive giant Volkswagen and Israeli defence company Rafael Advanced Defense Systems are reportedly preparing to establish a joint venture in Germany for the production of components related to the Iron Dome air defence system. According to a Bloomberg report based on sources familiar with the matter, the two companies aim to finalize the planned defence cooperation by the end of the year.

As part of the discussions, Rafael CEO Yoav Tourgeman reportedly met German government officials in Berlin and Volkswagen representatives in Wolfsburg this week. The talks are said to have focused on the structure of the planned partnership, production responsibilities, supply chain arrangements and the possible use of Volkswagen facilities for defence-related manufacturing. Germany’s Defence Ministry, Volkswagen and Rafael have not yet made an official statement on the matter.

Under the proposed joint venture, Volkswagen’s production facility in Osnabrück, Germany, could be redirected from automobile production toward military vehicle manufacturing. The plant has reportedly been facing capacity-related challenges, making defence production a possible option for using excess industrial capability. Sources indicate that military trucks for Rafael’s mobile Iron Dome air defence system could be produced at the Osnabrück facility.

In addition to Iron Dome, production support for the laser-based Iron Beam air defence system is also reportedly under consideration. Two other production centers could also be included in the project through the supply chain. According to the reported plan, missile systems and the main components of the air defence architecture would continue to be produced in Israel, while military trucks manufactured in Germany would be used for system integration.

Iron Dome is known as a short-range air defence system designed to counter threats such as rockets, artillery rounds, mortar shells and some unmanned aerial systems. Developed by Rafael, the system is one of the key layers in Israel’s air defence architecture. A potential production partnership in Germany would be directly linked to Europe’s broader effort to strengthen its short- and medium-range air defence capabilities.

The systems are expected to serve as an additional layer within the European Sky Shield Initiative, which is led by Germany and coordinated with NATO. Launched in 2022 by then-German Chancellor Olaf Scholz, the initiative aims to build a more integrated and layered air defence capability across Europe. The Russia-Ukraine War has increased demand across the continent for stronger protection against rockets, drones, cruise missiles and low-altitude aerial threats.

For Volkswagen, the potential cooperation could mark a significant step toward using existing automotive production capacity for defence industry requirements. Volkswagen CEO Oliver Blume recently indicated during a financial results meeting that the future of the Osnabrück facility could involve defence-related production. He said the company was in contact with the defence sector and described the use of excess capacity in this way as a smart option.

The planned Volkswagen-Rafael partnership also reflects a broader trend in Europe: the integration of civilian industrial capacity into defence production. Automotive manufacturers have extensive experience in large-scale production, logistics, quality control and supply chain management. Their participation in defence projects could help increase Europe’s ability to produce critical military systems more quickly and efficiently.

Although the partnership has not yet been officially announced, the reported talks point to a new phase in Germany’s effort to strengthen its air defence capabilities. If finalized, the project could support both Germany’s defence industry transformation and the European Sky Shield Initiative. It may also position Germany as a production and integration hub for elements of the Iron Dome system and potentially future laser-based air defence technologies.