With traditional automotive markets contracting across the continent, Ford and other major European carmakers are turning to defence as a potential new avenue of growth, hoping that evolving defence budgets can help sustain factories and safeguard European jobs. As demand for electric vehicles underwhelms and Chinese brands ramp up competition, automotive manufacturers are shifting focus toward military partnerships and contracts in an effort to utilize surplus production lines and protect their workforce.
Defence Projects Emerge as Lifeline for Automakers
Europe’s automotive industry is experiencing sweeping changes. At Ford’s Dagenham facility, annual engine output has dropped to 45,000 units—half the volume produced ten years ago. To compensate for this steep decline, Ford is collaborating with General Dynamics and Ricardo to compete for a Ministry of Defence (MoD) project that involves the delivery of 9,000 vehicles over the next five to seven years, which are set to replace the Army’s ageing Land Rover-based fleet.
Lisa Brankin, Ford UK’s chair, said the bid represents a means for Ford to demonstrate its expertise in the defence sector. She also noted that while these orders would bring much-needed business to Dagenham, the impact would be modest relative to levels of the past.
Other leading manufacturers are exploring similar opportunities. Jaguar Land Rover (JLR) is also vying for the same MoD deal and has formed a specialised division to widen its military product offering worldwide. In a parallel move, Renault has joined forces with Thales to manufacture up to 1,000 military drones per month for the French military, speeding up production by applying Renault’s large-scale manufacturing methods. Elsewhere, Volkswagen is repurposing its Osnabruck factory—previously underutilised—into a defence production site through a partnership with an Israeli defence backer.
Global Competition and EV Uncertainty Spur Restructuring
The rationale behind these reorientations is clear: Europe’s automotive sector faces strong headwinds from Chinese upstarts and lukewarm growth in electric vehicle (EV) sales. Industry data indicates that western European assembly plants currently have approximately 2.5 million vehicles’ worth of annual idle production capacity. While automakers have poured money into EV development, the adoption rate has lagged behind expectations. Chinese competitors, including BYD, Chery, and Geely, are aggressively gaining ground in the region, leveraging lower manufacturing costs and faster go-to-market strategies.
Significant restructuring is underway as a consequence: Volkswagen intends to shed 100,000 jobs over the next several years. Following the shutdown of its Dresden plant, the company is considering closing four additional sites, one of which—at Zwickau—received a €1bn investment for EV conversion only four years prior. At JLR, intensifying financial pressures have prompted the company to announce 4,000 redundancies in the UK, trimming its workforce from 30,000. Industry representatives warn that this marks “the first visible crack,” placing up to 183,000 UK car manufacturing roles in potential jeopardy.
According to Mike Hawes of the Society for Motor Manufacturers and Traders (SMMT), the nation’s automotive supply chain is “very vulnerable.” He stated, “UK automotive output has been in decline over the last eight or nine years. We’re probably half of what we were 10 years ago.”
Strategic Partnerships and Factory Conversions Gain Momentum
Some argue additional opportunity—but also risk—arises from opening up European sites to collaborations with Chinese automakers. Stellantis, the parent of Vauxhall and Peugeot, has acquired a 20% stake in Chinese electric maker Leapmotor; as a result, Leapmotor switched its European production from Poland to Spain to respond to tariff shifts. Similarly, Nissan and Chery International UK have entered into a Memorandum of Understanding to consider building Chery-branded vehicles at the Sunderland plant. Volkswagen’s CEO, Oliver Blume, has indicated the group may also look to share underused European factory space with Chinese venture partners.
While these strategies could defray fixed costs and allow Chinese firms to avoid tariffs by manufacturing within the UK or EU, they do not inherently ensure the revival of domestic supply chains. High-value parts, such as batteries, could continue to be sourced from China, leaving a significant number of local manufacturing jobs exposed.
Sigrid de Vries, who leads the ACEA auto industry association, says carmakers have the capabilities and tools to serve Europe’s defence sector, but she cautions that such contracts “will not be enough to address the underutilisation of manufacturing capacity we currently see.”
Automotive Industry’s Future Hangs in the Balance
The changing landscape faced by Britain’s car industry has prompted major industry suppliers to urge the government to assist with diversification into aerospace and military production. In an open letter, sector leaders argue the industry is “not in decline” but “in the wrong market,” calling for more expansive commercial prospects.
Responding to these concerns, a Ministry of Defence spokesperson affirmed the government’s position, stating that “85% of our defence spending currently stays in the UK”, framing this as a strategy to promote reindustrialisation and to turn defence into a growth lever.
As the continent deliberates its industrial path forward, the future for automaker plants and their workforces depends on strategic government support and companies’ adaptability. However, whether military deals and international partnerships can compensate for the loss of the automotive sector’s traditional scale remains an open question.