Amid an industrial downturn and challenges in the automotive sector, Germany is indeed accelerating the reorientation of some of its production capacity toward defense products; however, this does not mean a complete abandonment of the automotive industry, but rather a significant strengthening of the defense-industrial sector. The Wall Street Journal reports on this, and other international media outlets have previously confirmed specific examples of this shift.
According to the WSJ, Berlin is attempting to utilize idle capacity, engineering expertise, and the workforce of traditional industries—primarily the automotive sector—to expand the production of defense-related goods. The newspaper links this shift to the industrial downturn, rising defense spending in Germany and Europe, as well as heightened security threats amid Russia’s war against Ukraine and Europe’s declining confidence in long-term U.S. guarantees.
Part of this trend has already been confirmed at the level of specific companies. For instance, Reuters previously reported that Rheinmetall intended to repurpose two of its automotive plants in Germany for primarily defense production, retaining only a portion of civilian output. Additionally, Volkswagen is exploring the possibility of using its site in Osnabrück to manufacture military equipment, though it emphasized that no final production decisions have been made yet.
Another example is the negotiations regarding the potential production of components for the Iron Dome air defense system at one of Volkswagen’s German plants. However, Reuters separately noted that the automaker itself ruled out the production of weapons per se and spoke only of exploring options for utilizing the facility and producing components.
At the same time, pressure on the German auto industry is mounting. Reuters reported in February that nearly half of the auto suppliers surveyed were cutting jobs in Germany, and the industry association VDA described the situation as a crisis. Against this backdrop, the defense sector is becoming one of the few growing markets with a long-term order horizon for some manufacturers.
An additional factor has been the sharp intensification of Germany’s own defense policy. Following changes to budget rules and an expansion of borrowing capacity, Berlin has gained the leeway to significantly increase military spending in the coming years. Reuters previously reported that Germany’s total defense spending could rise from €95.1 billion in the 2025 draft budget to €161.8 billion by 2029, while the total volume of potential borrowing for defense in 2025–2029 was estimated at €380 billion.
auto industry, CRISIS, DEFENSE SECTOR, GERMANY, MANUFACTURING, reorientation
