Air Defense and Tanks Replace Cars: Germany Reinvents Itself Through Defense Industry Amid Europe's Rearmament
by Kim Seungwook
Published 21 Apr.2026 09:24(KST)
German Automakers See Sharp Decline in Profits and Jobs Each Month
Volkswagen, Schaeffler and Others Seek New Opportunities by Shifting to Defense
Favorable Conditions with Increased Defense Spending and Regulatory Easing
As the automotive industry in Germany, known as a manufacturing powerhouse, faces an economic downturn, reports indicate that the country is seeking new breakthroughs in the defense industry.
A photo of the Volkswagen Commercial Vehicles factory in Hanover, Germany, to aid understanding of the article. Photo by Reuters Yonhap News
원본보기 아이콘According to Yonhap News Agency, on the 19th (local time), The Wall Street Journal (WSJ) reported that "Germany's export-driven economy, led by the automotive industry and other manufacturing sectors, has struggled for years due to a global demand slump, geopolitical risks, and competition from China." According to German government statistics, about 15,000 manufacturing jobs are disappearing each month.
The impact on the automotive industry is especially severe. Last year, Mercedes-Benz saw its profits fall by 49%, Volkswagen by 44%, and Porsche by 98%. Volkswagen has previously announced plans to cut 50,000 jobs in Germany by 2030.
In this situation, the German government and companies are turning their attention to the defense industry. Factories that had ceased operations in Germany are being refurbished to support Europe's rearmament, and skilled workers who were laid off are reportedly being redeployed to the defense sector. Volkswagen is negotiating with Israeli companies to produce components needed for Israel's Iron Dome air defense system.
Companies that have shifted to defense are also seeing improvements. After Russia's invasion of Ukraine, Deutz, a company specializing in internal combustion engines, entered the defense sector and now supplies power engines for Saudi Arabia's Patriot air defense system, as well as a range of unmanned systems and armored vehicles. The company reportedly saw its sales increase by 15% last year. Klaus Rosenfeld, CEO of automotive parts supplier Schaeffler, told WSJ, "Our goal is to generate about 10% of the company's total sales from the defense division we established last year."
These companies emphasize their rapid production capabilities honed in the automotive industry. The WSJ explained, "While traditional defense contractors take years to expand production, manufacturers seasoned in the fiercely competitive automotive market can scale up production at a much faster pace."
The environment for transitioning to the defense industry is also becoming more favorable. In particular, deregulation by Germany and the European Union (EU) has made it easier for defense companies to raise capital. As a result, around 90% of the venture capital invested in Europe's defense industry reportedly flowed into German companies.
Previously, under pressure from U.S. President Donald Trump, European countries in the North Atlantic Treaty Organization (NATO) announced plans to increase their defense spending to 1 trillion euros (about 1,735 trillion won) by 2035. German Economy Minister Katharina Reiche stated, "Europe must be able to defend itself, and that means building a strong and reliable security and defense industry."
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