The year 2025 was brutal for Mercedes-Benz. The German manufacturer posted an operating profit of 5.8 billion euros, a drop of 57% compared to the previous year. The cause is a sluggish Chinese market, with sales down 20%, increasingly fierce local competition from BYD and Xiaomi, and an electric transition which is weighing heavily on margins. And customs duties added 1 billion euros in additional costs.
But Mercedes is not the only European player to have a slack time. When Stellantis recorded an exceptional charge of 22 billion euros in the second half of 2025, Volkswagen for its part announced a plan to reduce costs by 20%, and the elimination of 35,000 jobs in Germany.
Car the automobile sector of the Old Continent is going through a deep structural crisisstuck between pressure from Chinese manufacturers, the uncertainties of the energy transition and a market that is running out of steam. In this context, large groups are looking for growth drivers. And more and more of them are looking towards defense, like Mercedes-Benz.
« A growth niche »
In an interview given to Wall Street Journal this Friday, May 15, its CEO, Ola Källenius, affirmed that the manufacturer would be ready to launch into the production of defense equipment, provided that it makes economic sense. “The world has become a more unpredictable place, and it is absolutely clear that Europe needs to strengthen its defense profile. If we can play a positive role in this, we would be willing to do so. », a-t-il étayé.
The leader wants, despite everything, to be cautious. He mentions a part “minor“activity in relation to automobile production, but emphasizes that it could be “a growing niche» capable of contributing to the group’s results.
This timing is not insignificant, as Europe has been engaged in massive rearmament since the Russian invasion of Ukraine. At the same time, the military budgets of NATO member states are reaching levels not seen since the Cold War. Defense today represents a windfall that is difficult to ignore for industrialists looking for new income.
Recently, Volkswagen concluded an agreement with the Israeli group Rafael Advanced Defense Systems to convert its Osnabrück factory into a production site for components for the Iron Dome, the famous Israeli anti-missile shield. Just this week, Rheinmetall, the German arms giant, announced a partnership with Deutsche Telekom to develop an anti-drone shield.
Our analysis
The signal is clear: the German industry, both automotive and electronics, is resolutely turning towards defense. A real economic opportunity in a European context which pushes in this direction. In France, Renault has also established a partnership with the army for the construction of drones.
But this also raises ethical questions that these groups will sooner or later have to face.
- Faced with a catastrophic 2025, Mercedes-Benz plans to diversify into the production of defense equipment, according to its CEO Ola Källenius.
- The manufacturer sees it as a “ growing niche“, in a European context of massive rearmament.
- Mercedes is not alone: Volkswagen has been exploring a similar avenue for several months, a sign of a real turning point for the German automobile industry.
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