Opportunities and Limitations of Transforming the Automotive Industry into Defense
The ongoing war between Russia and Ukraine has significantly reshaped European security priorities, leading to unprecedented increases in defense budgets across the continent. In this context, an unexpected industrial realignment is gaining momentum, particularly within the automotive sector, which is exploring new opportunities for development in defense.
The war in Ukraine has had a profound impact on European security priorities, resulting in record increases in defense budgets. This shift has prompted an unexpected industrial realignment across the continent, especially in the automotive industry, which is actively seeking new avenues for growth in the defense sector.
On August 27, 2025, German arms manufacturer Rheinmetall inaugurated the largest ammunition production facility in Europe, located in Unterlüß, northern Germany. Spanning 30,000 square meters—equivalent to five football fields—the facility is projected to produce 350,000 artillery shells annually by 2027. This opening is part of Berlin's efforts to restore military capabilities after decades of reduced military spending.
Amid these developments, the struggling European automotive industry may hold the key to closing long-identified military-industrial gaps, as warned by Ukrainian defenders and Western strategists. From Volkswagen factories producing combat vehicles to Romanian cities eager to secure defense contracts, Europe’s automotive sector is poised to discover new pathways for defense-related growth.
Romania, a country with strong industrial ties to Germany and France, exemplifies these connections particularly well within the automotive sector. A significant part of Romania's economic success stems from its deep integration into European automotive supply chains, alongside its IT and aerospace industries. However, despite the presence of Dacia and Ford factories, Romanian cities are facing anxiety over their heavy reliance on the automotive industry.
Competitive challenges in Europe have severely impacted Romania: competition from China in third markets, declining sales, high energy prices, and supply chain shocks—from the COVID-19 pandemic to the Nexperia chip crisis—coupled with reduced subsidies for electric vehicles amid inadequate charging infrastructure, have all negatively affected the country's economy.
A recent summit titled 'Competitive Europe' held in Belgium sought to address these challenges, building on the call from Draghi's report for a necessary European paradigm shift. With discussions centered around 'European priority,' defense sovereignty, industrial acceleration, and deregulation, policymakers are exploring the architecture for a genuine European industrial revival.
Thus, while the European automotive industry is navigating tough times, it possesses the potential to become a significant player in the defense sector. However, achieving this goal will require overcoming numerous challenges and adapting to the new realities that are emerging on the continent in light of changing security conditions.