Automotive Supplier Crisis: Can Defence Industry Help?

Many technological touchpoints Crisis in the Automotive Industry - Defence Industry as a Lifeline?

2026-03-18 Source: dpa 2 min Reading Time

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The decline in sales for car manufacturers is impacting many suppliers, increasing the demand for alternatives. Can the booming defence industry provide a solution?

According to a study, opportunities in the defence industry are emerging for the struggling automotive supply sector. "Defence is not the sole lifeline for the automotive sector," said industry expert Werner Olle to the German Press Agency. "But companies need to diversify, and defence can be one component." Olle cited examples such as the production of body parts, drive components, as well as vehicle and assistance systems.

The downturn in sales within the German automotive industry and the shift towards electric mobility is affecting many suppliers, leading to job cuts. In contrast, the defence industry is experiencing significant growth due to international conflicts, such as Russia's invasion of Ukraine, and is expanding rapidly.

For instance, the KNDS group has taken over the former wagon factory in Görlitz to produce tank parts. The automotive industry is also looking at defence projects to reduce overcapacity. Volkswagen is seeking a future for its plant in Osnabrück, Lower Saxony, and has stated that it is in talks with defence companies.

Stephan Finkel, Partner and Industry Lead Defence & Security at 3DSE (Source: 3DSE)

Special Vehicles, Armour, Electronics

Many companies in the automotive sector are already active in the defence domain, as highlighted by the analysis conducted by Olle on behalf of the Automotive Association of Thuringia. The study examined 150 suppliers in the defence industry across Germany.

More than 40 of these belong to the diverse supply structure of the automotive industry, spanning metal processing, plastics, glass, and ceramics, as well as IT and engineering services. This demonstrates that companies in the automotive sector and their supply industries are already significantly involved in the so-called defence area, according to the study.

The automotive industry offers many technological touchpoints, particularly concerning products that can be used for both civilian and military applications, Olle explained. Additionally, defence contracts often involve smaller quantities, providing smaller and medium-sized enterprises an opportunity to become active suppliers in this market.

However, there are hurdles, as Olle explains. The defence industry is uncharted territory for many interested suppliers, with different structures, clients, business models, and requirements. A promising approach is to supply parts or components to defence companies or to collaborate with firms already operating in this field.

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