{"id":41903,"date":"2026-04-05T12:56:33","date_gmt":"2026-04-05T12:56:33","guid":{"rendered":"https:\/\/foreignnewstoday.com\/?p=41903"},"modified":"2026-04-05T12:56:33","modified_gmt":"2026-04-05T12:56:33","slug":"can-defense-save-europes-ailing-car-industry","status":"publish","type":"post","link":"https:\/\/foreignnewstoday.com\/?p=41903","title":{"rendered":"Can defense save Europe\u2019s ailing car industry?"},"content":{"rendered":"<p><br \/>\n<\/p>\n<div id=\"RegularArticle-ArticleBody-5\" data-module=\"ArticleBody\" data-test=\"articleBody-2\" data-analytics=\"RegularArticle-articleBody-5-2\"><span class=\"HighlightShare-hidden\" style=\"top:0;left:0\"\/><\/p>\n<div class=\"InlineImage-imageEmbed\" id=\"ArticleBody-InlineImage-107073263\" data-test=\"InlineImage\">\n<div class=\"InlineImage-wrapper\">\n<div>\n<p>Ludovic Marin | AFP | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>The European car industry is in a structural crisis. Slowing demand for electric vehicles, lost market share to Chinese competitors and higher borrowing costs have created the perfect storm for the sector over the past five years, as sales volumes continue to slump well below pre-pandemic levels.\u00a0<\/p>\n<p>Europe&#8217;s automakers have a long history of producing defense equipment and weapons when called upon during wartime. Some firms now think returning to these roots could offer a lifeline.<\/p>\n<p>Analysts at Citi have dubbed this shift the &#8220;anything but autos&#8221; trade.<\/p>\n<p>On Monday, <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-1\"><a href=\"https:\/\/www.cnbc.com\/quotes\/RNO-FR\/\">Renault<\/a><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" aria-label=\"Add To Watchlist\" data-testid=\"dropdown-btn\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"\/><\/button><\/span><\/span><\/span> announced it was developing a ground-based drone for military and civilian use. This followed its announcement of a partnership with defense group Turgis Gaillard in January to produce aerial drones in France.\u00a0<\/p>\n<p>Meanwhile, German automaker <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-2\"><a href=\"https:\/\/www.cnbc.com\/quotes\/VOW3-DE\/\">Volkswagen<\/a><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" aria-label=\"Add To Watchlist\" data-testid=\"dropdown-btn\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"\/><\/button><\/span><\/span><\/span> is reportedly in talks with Israeli defense firm Rafael to produce parts for missile defense systems.<\/p>\n<p>The pair are in discussions to convert VW&#8217;s factory in Osnabr\u00fcck, Germany, into facilities for making components for the Israeli Iron Dome missile-defense system produced by Rafael, the FT reported on March 24.\u00a0<\/p>\n<p>European autos are struggling to compete directly with Chinese rivals, such as BYD. While new-car sales dropped in the EU through January, BYD stunned the market by reporting a 175% year-on-year increase in deliveries to 13,982 units, according to ACEA data.<\/p>\n<p>The industry&#8217;s decline is felt in carmakers&#8217; share prices, too. The Stoxx 600 Automobiles index has fallen 30% over the past five years as of April 2, while VW has tanked over 60% since then. <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-3\"><a href=\"https:\/\/www.cnbc.com\/quotes\/STLA\/\">Stellantis<\/a><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" aria-label=\"Add To Watchlist\" data-testid=\"dropdown-btn\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"\/><\/button><\/span><\/span><\/span>, which owns brands including Fiat and Peugeot, has shed 58% over the same period.<\/p>\n<\/div>\n<div>\n<div class=\"Collapsible-proliveCollapsableContainer\" role=\"button\" tabindex=\"0\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"256\" height=\"256\" viewbox=\"0 0 256 256\" aria-labelledby=\"title desc\" role=\"img\" focusable=\"false\" preserveaspectratio=\"xMinYMin\" class=\"Collapsible-stockChartIcon\"><title>Stock Chart Icon<\/title><desc>Stock chart icon<\/desc><g transform=\"translate(1.4065934065934016 1.4065934065934016) scale(2.81 2.81)\"><path d=\"M 87.994 0 H 69.342 c -1.787 0 -2.682 2.16 -1.418 3.424 l 5.795 5.795 l -33.82 33.82 L 28.056 31.196 l -3.174 -3.174 c -1.074 -1.074 -2.815 -1.074 -3.889 0 L 0.805 48.209 c -1.074 1.074 -1.074 2.815 0 3.889 l 3.174 3.174 c 1.074 1.074 2.815 1.074 3.889 0 l 15.069 -15.069 l 14.994 14.994 c 1.074 1.074 2.815 1.074 3.889 0 l 1.614 -1.614 c 0.083 -0.066 0.17 -0.125 0.247 -0.202 l 37.1 -37.1 l 5.795 5.795 C 87.84 23.34 90 22.445 90 20.658 V 2.006 C 90 0.898 89.102 0 87.994 0 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"\/><path d=\"M 65.626 37.8 v 49.45 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 23.518 L 65.626 37.8 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"\/><path d=\"M 47.115 56.312 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 42.03 L 47.115 56.312 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"\/><path d=\"M 39.876 60.503 c -1.937 0 -3.757 -0.754 -5.127 -2.124 l -6.146 -6.145 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 59.844 C 41.952 60.271 40.933 60.503 39.876 60.503 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"\/><path d=\"M 22.937 46.567 L 11.051 58.453 c -0.298 0.298 -0.621 0.562 -0.959 0.8 V 87.25 c 0 1.519 1.231 2.75 2.75 2.75 h 8.782 c 1.519 0 2.75 -1.231 2.75 -2.75 V 48.004 L 22.937 46.567 z\" transform=\" matrix(1 0 0 1 0 0) \" stroke-linecap=\"round\"\/><\/g><\/svg><\/p>\n<div class=\"Collapsible-proLivePlayerCloseOrExpand\"><img decoding=\"async\" src=\"https:\/\/static-redesign.cnbcfm.com\/dist\/a54b41835a8b60db28c2.svg\" class=\"Collapsible-dismissButton\" alt=\"hide content\"\/><\/div>\n<\/div>\n<p><iframe title=\"How the STOXX Europe 600 Automobiles &amp; Parts index has performed in the five years since April 2021.\" src=\"https:\/\/www.cnbc.com\/appchart?symbol=0MP0-GB&amp;dtLeft=2021-04-03&amp;dtRight=now&amp;type=mountain&amp;embedded=true&amp;$DEVICE$=undefined\" height=\"460\" scrolling=\"no\" loading=\"lazy\" style=\"border:0;width:100%\"><\/iframe><\/p>\n<p>How the STOXX Europe 600 Automobiles &amp; Parts index has performed in the five years since April 2021.<\/p>\n<\/div>\n<div class=\"group\">\n<p>By contrast, the European defense industry is booming. The urgent need to rearm following Russia&#8217;s invasion of Ukraine in 2022 and an apparent fracturing of relations within NATO mean Europe must become more self-sufficient in its defense production.\u00a0<\/p>\n<p>Last year, EU president Ursula von der Leyen said Europe was in an &#8220;era of rearmament&#8221; and could mobilize 800 billion euros in defense investment through loans and other programs.<\/p>\n<p>&#8220;The defense industry has huge growth prospects with government budgets and Nato requirements backing it,&#8221; Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, told CNBC by email.\u00a0<\/p>\n<p>&#8220;For the defense industry it&#8217;s rather a question of how to expand production than if. Redirecting production capacity is an opportunity for the automotive industry.&#8221;<\/p>\n<p>But other analysts question whether riding the coattails of the defense sector will be enough to save the ailing auto industry, flagging several concerns about carmakers&#8217; ability to grow in this space.\u00a0<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\"><a id=\"headline0\"\/>A farewell to arms? Not so fast<\/h2>\n<div class=\"group\">\n<p>The relationship between carmakers and weapons manufacturing has always been symbiotic. During World War II, automotive companies across the world halted civilian production to focus on their nations&#8217; respective war efforts \u2014 producing military vehicles, aircraft engines, as well as guns and ammunition.<\/p>\n<p>The transition from wheels to weapons and back again is achievable in part because many of the underlying skills are highly transferable, according to experts.<\/p>\n<p>&#8220;There is significant overlap in capabilities, as both industries rely on advanced manufacturing, complex supply chains, and engineering,&#8221; Zuzana Pelakova, economy and business director at Slovakian think tank Globsec, told CNBC over email.<\/p>\n<p>&#8220;There is also a historical precedent. Countries like Slovakia and Czechia \u2013 today among the world leaders in car production per capita \u2013 built much of their automotive strength on a workforce that once worked in defense industries before the end of socialism.&#8221;<\/p>\n<p>VW is in a particularly tight spot, facing deteriorating profitability and looking to reduce headcount by 35,000 \u2014 or roughly 5% of its workforce \u2014 before 2030.<\/p>\n<p>Should talks with Rafael or other defense suitors bear fruit, VW&#8217;s potential to repurpose its obsolete Osnabr\u00fcck plant \u2013 which the company is due to close in 2027 \u2013 could save up to 2,300 jobs.\u00a0<\/p>\n<p>But Germany&#8217;s largest trade union said that transferring large numbers of workers from other industrial sectors to defense industry companies is &#8220;unrealistic&#8221; and &#8220;not a solution&#8221; to the industry&#8217;s structural problems.<\/p>\n<p>&#8220;This will not be enough to offset the impending job losses in the automotive industry, among suppliers, and in other core sectors of the metal and electrical industries,&#8221; IG Metall told CNBC over email.\u00a0<\/p>\n<p>&#8220;The sectors operate too differently for that. Unlike in the high-volume automotive industry, for example, the defense sector is dominated by small-batch production. Even if production volumes are ramped up here, manufacturing will not resemble that of the automotive industry.&#8221;<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\"><a id=\"headline1\"\/>Ethical concerns<\/h2>\n<div class=\"group\">\n<p>Automakers&#8217; partnerships with defense firms could also raise ethical concerns among workers, should they be given the choice of producing weaponry or facing layoffs.<\/p>\n<p>Citi flagged the political risks involved, citing how public opinion of Elon Musk&#8217;s involvement in the U.S. President Donald Trump&#8217;s administration dovetailed with collapsing Tesla sales in Europe.<\/p>\n<p>&#8220;What European political reaction any VW association with an Israeli defense company might attract is currently unknown,&#8221; the analysts added.<\/p>\n<p>&#8220;If firms give workers the opportunity to keep their job, I would say the majority of the workforce would continue their contractual obligations and continue producing for defense manufacturers,&#8221; said Matthias Schmidt, founder of Schmidt Automotive Research.<\/p>\n<p>&#8220;If you have a family to support, your morals can only go so far.&#8221;<\/p>\n<p>Despite the flurry of partnerships between automakers and defense firms, analysts are skeptical of a full-blown pivot to weapons manufacturing.<\/p>\n<p>&#8220;I do not expect leading automakers to become large-scale defense manufacturers,&#8221; Pelakova added. &#8220;What we are likely to see are selective and opportunistic moves into the defense sector.&#8221;<\/p>\n<p>IG Metall said that on a large scale, defense cannot offer the solution to the industry&#8217;s woes.<\/p>\n<p>&#8220;We warn against pinning all hopes on the defense industry and neglecting other sectors,&#8221; they told CNBC over email.<\/p>\n<\/div>\n<div class=\"ArticleBody-googlePreferredSourceContainer\" data-module=\"GooglePreferredSource\" data-id=\"RegularArticle-GooglePreferredSource-5\"><a href=\"https:\/\/www.google.com\/preferences\/source?q=https:\/\/www.cnbc.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.<\/a><\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.cnbc.com\/2026\/04\/05\/autos-defense-europe-car-industry.html\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ludovic Marin | AFP | Getty Images The European car industry is in a structural crisis. Slowing demand for electric vehicles, lost market share to Chinese&hellip;<\/p>\n","protected":false},"author":1,"featured_media":41904,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[28],"tags":[],"class_list":["post-41903","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-us-news"],"_links":{"self":[{"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/posts\/41903","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=41903"}],"version-history":[{"count":0,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/posts\/41903\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=\/wp\/v2\/media\/41904"}],"wp:attachment":[{"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=41903"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=41903"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/foreignnewstoday.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=41903"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}