Volkswagen Slashes Dividend and Weighs Defense Tie-Ups as Profit Squeeze Deepens

Volkswagen is heading into the summer with a leaner dividend, a new energy business, and a decidedly un-automotive industrial debate under the same roof. The company’s annual operating profit halved last year, margins have collapsed, and management is now scrambling to repurpose factory capacity through projects that would have been unthinkable a decade ago — including talks with defence contractors.

A Dividend Cut and a Shareholder Revolt

The 66th annual general meeting, scheduled for June 2026, will be held virtually. On the agenda is a proposed dividend of €5.26 per preferred share, down 17% from the prior year. One shareholder has already filed a motion to deny discharge to the board, arguing that management failed to adequately correct the strategic course in 2025. Whether that motion secures a majority will set the tone for the entire gathering.

The dividend cut reflects the scale of the earnings reversal. Operating profit for 2025 slumped to €8.9 billion, a 53% decline year-on-year. The operating return on sales fell to 2.8%. For 2026, the group targets a margin of between 4.0% and 5.5% on revenue growth of zero to three percent — though that forecast is conditional on no further escalation in tariffs or geopolitical tensions.

Electricity, Not Just Engines

Alongside the cost-cutting narrative, Volkswagen is rolling out a fresh revenue stream. In June 2026, it will begin pre?registrations for a vehicle-to-grid (V2G) offering, with commercial launch for German retail customers set for the fourth quarter. The product, developed with subsidiary Elli, allows electric cars to feed power into the grid in exchange for payment.

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The package includes a bidirectional vehicle, a compatible charging station, a smart meter, a dynamic electricity tariff, and an app. Analysts estimate that customers could earn up to €700 to €900 a year in the best-case scenario. The technical base is already sizable — roughly one million MEB?based vehicles in Europe are V2G?capable, and the ID. Software 6 update will extend compatibility further.

While V2G won’t move the share price in the short term, it signals a longer?term effort to monetise the electric?vehicle fleet beyond traditional mobility.

Defence as a Capacity Solution

Far more radical is the exploration of defence?industry partnerships. CEO Oliver Blume has confirmed talks with arms manufacturers, a move that goes well beyond the core automotive business. The logic is purely industrial: with German plants under?utilised, fixed costs per vehicle are rising. Farming out production expertise — or building defence?related hardware — could help absorb overheads.

Volkswagen has not announced any concrete projects. But the very fact that the company is publicly considering such a pivot underscores the pressure to fill factories. Those same plants are also being downsized: roughly 50,000 jobs in Germany are scheduled to go by 2030, mainly through early?retirement schemes, as part of a cost?saving plan designed to free up cash for future investments.

Weak Technical Picture, Bigger Strategic Bets

The stock remains stuck in a waiting pattern. On Friday, the preferred share closed at €87.92, down 3.3% for the week and 17.1% below the start of the year. The 52?week low of €83.22 is just under €5 away. The 50?day moving average sits at €88.66, and the relative strength index of 43.4 points to neither oversold nor overbought territory.

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Beyond the defence chatter, two core challenges dominate. The software joint?venture with Rivian, RV Tech, now employs more than 1,500 people and is preparing reference vehicles for winter testing — a crucial step for Volkswagen’s push into software?defined cars. In China, the “In China, for China” strategy aims to bring over 30 new electric models to market in the coming years, though local rivals continue to set the pace on cost, speed, and software.

All roads lead back to the June shareholder meeting. That is where dividend policy, restructuring progress, and — potentially — firm details on industrial collaborations will be put to the test. Until those translate into measurable margin improvements, the strategic opening will carry more curiosity than conviction on the trading floor.

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