Opportunities and Limits of Automotive-to-Defense Reinvention
As Russia’s war against Ukraine reshapes European security priorities and defense budgets surge to historic highs, an unexpected industrial pivot is taking shape across the continent.
Kyiv Post
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From Volkswagen plants producing fighting vehicles to Romanian cities eyeing defense contracts, Europe’s struggling car sector may hold the key to closing the military-industrial gaps that Ukraine’s defenders – and Western strategists – have long warned about.
Romania is a country with strong industrial ties to both Germany and France – ties that are especially apparent in its automotive sector. Part of Romania’s economic success story has been its deep integration into European automotive supply chains, alongside IT and aerospace. Beyond the Dacia and Ford factories, Romanian cities are studded with facilities producing components for major car manufacturers. That exposure, however, has become a source of anxiety.
European competitiveness fears hit Romania hard: Chinese competition in third markets, lagging sales, high energy prices, supply chain shocks – from the COVID-19 pandemic to the Nexperia chip crisis – and the collapse of EV subsidies against a backdrop of inadequate charging infrastructure, have all taken their toll.
The recent Competitive Europe Summit in Belgium attempted to address these challenges, drawing on the Draghi Report’s call for a European paradigm shift. With “European preference,” defense sovereignty, industrial acceleration, and deregulation now on the table, policymakers are searching for the architecture of a genuine European industrial renaissance.
Security services investigate a wave of arson and bombing attempts targeting Jewish sites and US financial institutions in London, Paris, and Brussels, with suspected ties to Tehran.
A compelling answer is emerging – and the war in Ukraine is central to it.
Russia’s full-scale invasion of Ukraine and the Trump Administration’s forceful insistence on higher European defense spending have, for the first time in decades, generated credible expectations of sustained military investment.
The new SAFE program will unlock €150 billion in competitively priced, long-maturity loans to EU member states, complemented by deficit allowances for an additional €650 billion in military spending under the Readiness 2030 program.
By 2035, most NATO allies will have committed to defense budgets reaching 3.5% of GDP plus 1.5% for related investment in infrastructure and cybersecurity.
Ukraine, which has been fighting a full-scale industrial war since February 2022, has demonstrated in the starkest possible terms what it costs to sustain modern high-intensity conflict – and how woefully underprepared European defense industries were when the continent finally had to confront that reality.
This creates a near-perfect match with the automotive sector’s predicament.
Companies such as Rheinmetall are exploring the use of Volkswagen’s Osnabrück plant to meet substantial expected demand for Lynx fighting vehicles, while KNDS is converting a railcar factory to produce tanks. Greenfield investments continue – Rheinmetall’s propellant powder factory in Victoria, Romania, and in Sopot, Bulgaria – but excess automotive capacity is proving an exceptionally good fit for defense manufacturing.
Tooling, parts, and assembly-line organization are strikingly similar across both sectors. Sophisticated logistics, deep supplier networks, and proven scalability address precisely the weaknesses that have long plagued purely military producers.
The First and Second World Wars validated civilian-to-defense industrial conversion at scale – most famously, US car plants producing aircraft – but those were mobilization paradigms for total war. More recently, the European Space Agency has explored automotive spin-ins to accelerate European aerospace capacity. While the past few decades saw dual-production companies such as Saab separate their civilian and military businesses to sharpen focus, today’s overlapping economic and security pressures demand rapid adaptive reuse of facilities under flexible partnerships – to meet both new demand and long-deferred requirements.
Retooling to serve Ukraine’s survival
The war in Ukraine has already provided a live laboratory. The speed with which Western nations have had to source artillery shells, armored vehicles, air defense systems, and logistics support has brutally exposed the gap between political ambition and industrial reality. European manufacturers that can retool quickly, scale reliably, and deliver on long-term contracts are not merely serving national interest – they are serving Ukraine’s survival and European collective security.
Romania is waking up to these opportunities. Its western county of Timiș hosts a concentration of automotive manufacturing around Timișoara. The city’s German-born mayor, Dominic Fritz, is looking to traditional Western partners for inspiration and has publicly positioned defense industry as a strategic path forward. Romania’s broader defense industrial base – long neglected but historically significant for a country of its size, with factories originally designed with military conversion in mind – has received a genuine strategic boost since Russia’s invasion of Ukraine began.
Yet pivoting the automotive sector toward defense is no “get out of jail free” card. It requires meaningful action from both industry and policymakers.
Key priorities and actions
On the technology side, new paradigms must be prioritized: predictive maintenance and nimble logistics through AI and digital twins, IoT-enabled diagnostics, drone and robotics-assisted field inspection, and VR/AR tools for technician training can materially improve the dismal readiness levels of European forces – readiness levels that Ukraine’s battlefield experience has made impossible to ignore. Better data-sharing and lifecycle reuse between customers, contractors, and original equipment manufacturers (OEMs) would represent a macro-level reform with outsized returns.
On governance, better procurement discipline is essential. Full capability certification must be enforced, and short-term acquisition savings cannot come at the cost of long-term reliability. Episodic shopping binges – such as the €200 billion special defense package floated by Chancellor Merz in early 2025 – may or may not materialize, but even if they do, they do not guarantee industrial sustainability.
Decision-makers across Europe, including in Romania, must make credible, long-term purchase and investment commitments that give manufacturers and suppliers the confidence to invest in new factories, retooling, and emerging technologies. Defense industries do not thrive oscillating between feast and famine – particularly when military contracts mandate idle capacity while cash-constrained militaries defer the very maintenance and upgrades those contracts were meant to cover.
Finally, beyond the obvious automotive opportunity, Europe must confront its military sustainability gaps more systematically – gaps that US officials rightly, if selectively, highlight.
Tanks and armored vehicles need fleets of transport trucks. Modern warfare, as Ukraine has demonstrated daily since 2022, depends on Earth Observation data, secure telecommunications, and drone capabilities at scale. These all represent productive spin-ins from the automotive sector that can address European dependencies on the US – in logistics and aerospace capabilities especially – while generating a virtuous feedback loop into civilian competitiveness.
The overall trajectory warrants cautious optimism. For Romania specifically, the Strategy for the Defense Industry and its €17 billion participation in SAFE – the second-largest national commitment after Poland – signal a growing strategic awareness of the dual opportunity: security resilience and industrial reinvention.
Article 346 of the Treaty on the Functioning of the EU gives member states the flexibility to tailor defense-industrial cooperation, and the civilian-to-defense paradigm opens new configurations for national industrial policy.
European and national leaders have a genuine window to realign incentives and governance in the post-“peace dividend” era, and to make a tangible contribution to European strategic autonomy. Done right, this will not divide Europe from the US, but make Europe a more credible and capable security partner – one that demonstrably carries its own weight.
American intellectual Randolph Bourne once wrote that “war is the health of the state.” History – and Ukraine’s painful experience – suggests otherwise. But defense procurement, intelligently structured, may yet be the health of European industrial policy.
The views expressed are the author’s and not necessarily of Kyiv Post.
