Europe’s ailing auto Industry pivots to defence production, Here’s what the changes entail

What used to be robust auto markets leading the export trends are now witnessing a structural crisis as the demand for electric vehicles slows down. Sales volumes in markets such as Europe have slumped well below pre-pandemic levels.

In the case of Europe, most influential brands such as Rolls-Royce and Bentley once produced defence equipment and weapons during wartime. As a new change, some believe that returning to these old roots could help brands get through the jeopardy.

A slew of recent announcements all showcase the direction of companies towards defence production. Renault recently announced that it was developing a ground-based drone for military and civilian use. This followed its announcement of a partnership with defence group Turgis Gaillard in January to produce aerial drones in France.

Volkswagen is in talks with Israeli defence firm Rafael to produce parts for missile defence systems. The duo are planning to convert VW’s factory in Osnabrück, Germany, into facilities for making components for the Israeli Iron Dome missile defence system produced by Rafael.

More from Auto

Competition with Chinese Rivals

European auto manufacturers are struggling to compete directly with Chinese rivals such as BYD. While new car sales have dropped in the EU through January, BYD has continued to showcase a 175% year-on-year increase in deliveries to 13,982 units, as per ACEA data.

The decline in the auto industry sits in contrast with the boom in the defence industry. The urgent need to rearm following Russia’s invasion of Ukraine in 2022, and an apparent fracturing of relations within NATO, means Europe must become more self-sufficient in its defence production.

Auto Industry–Defence Industry: An Old Relationship

The relationship between car makers and weapons manufacturing has always been symbiotic. During World War II, automotive companies across the world halted civilian production. During World War I, automotive companies across the world halted civilian production to focus on their nations’ respective war efforts—producing military vehicles, aircraft engines, as well as guns and ammunition.

Several manufacturers are in a real tight spot, facing deteriorating profitability and looking to reduce headcount by 35,000, which accounts for about 5% of its workforce. But could this lead to ethical concerns? Musk’s involvement with US President Donald Trump’s administration had raised similar concerns and led to plummeting Tesla sales in Europe.