In Germany, defense becomes the way out for an industry in crisis and disrupts an old taboo

Since the Russian invasion of Ukraine, Berlin is boosting its rearmament and opening up new prospects for its factories. In an economy weakened by expensive energy, Chinese competition, and the automotive crisis, defense is becoming both an industrial lever and a strategic choice.

In 2022, a crucial turning point of 100 billion euros shifted the focus back to defense in a frozen debate in Germany. Triggered by a clear geopolitical shock, Berlin launched a special fund to modernize the Bundeswehr. Two years later, Germany also reached NATO’s goal of allocating 2% of GDP to defense.

This shift breaks with a historical restraint. Defense has long been a sensitive sector in Germany. However, the war in Ukraine has shifted the debate. Now, national security is factoring into industrial calculations, not just diplomatic rhetoric.

At a time when traditional industries are struggling, the defense sector offers a quick solution. With declining orders and investments leaving the country, the automotive industry is battling Chinese competition, high costs, and the shift to electric vehicles.

Some manufacturers are already feeling the impact of this shift towards defense. It’s about filling order books and preserving skills. For them, defense is seen as a credible way out, even though it doesn’t replace the entire German export engine on its own.

Companies like Deutz and Volkswagen are already making visible shifts towards defense. Deutz, a motor manufacturer, has strengthened its position in drones, while Volkswagen is cautiously testing the market at security exhibitions. The concrete transition has begun.

While defense could help German industry with growth, jobs, and innovation, the shift remains delicate. It goes beyond just weapon orders, potentially supporting investment, preserving skilled jobs, and accelerating certain dual-use technologies. However, the equation is tight, with military programs requiring time, reliable supply chains, and coordinated purchases.

Berlin is banking on protecting itself more and providing a new horizon for its factories. However, there is a major limitation: not all companies will be able to navigate this sensitive, costly, and regulated shift. The industrial landscape is evolving, with some taboos receding as industrial selection processes begin.