European industry shifts from automotive to defense production

As the European automotive industry faces decline, there is a growing trend of converting civil industrial capacity into defense capabilities. The European rearmament plan, ‘Readiness 2030’, is mobilizing over 800 billion euros, prompting major manufacturers to pivot toward military applications.

Key examples include Renault partnering with Thales to produce tactical vehicles and drone munitions, and Volkswagen negotiating to repurpose its Osnabrück factory—where automotive production ends in 2027—to supply components for the Israeli Iron Dome air defense system.

Despite this growth, the defense sector lacks the scale to replace the automotive industry. In Germany, the defense sector is currently only about 6% the size of the automotive sector. While the defense industry is expanding due to regional conflicts and a desire for strategic autonomy, it is viewed as a way to soften the economic blow of automotive decline rather than a full replacement for the lost industrial base.