Western automakers are actively pursuing defence opportunities as a strategic response to declining car sales and intensifying Chinese competition. According to reports from Reuters, Ford, General Motors and Jaguar Land Rover are bidding for military contracts using modified versions of pickup trucks and off-road vehicles they already produce. The industry is tapping into rising Western defence spending, with analysts noting that defence has emerged as one of the few growth sectors for traditional automakers. Most major automakers ditched military contracts decades ago, but as governments from Europe to North America ramp up military spending, defence has become a viable diversification strategy.
Despite the strategic importance, the financial impact of defence diversification remains limited. As reported by Reuters, GM expects its defence division to generate revenue of $700 million this year and grow by 30% annually for several years, which would reach approximately $1.5 billion in 2029, representing less than 1% of group revenue of $185 billion in 2025. Jefferies auto analyst Vanessa Jeffriess noted that "in reality all of these opportunities will have very little financial impact." Executives and analysts told Reuters that automakers face slowing demand and intensifying competition from Chinese rivals, putting them under pressure to at least show investors they are trying to diversify.
Significant defence contracts are driving automaker interest, with Ford, GM and Britain's JLR bidding for a £900 million ($1.2 billion) UK Ministry of Defence vehicle contract initially for 3,000 vehicles. According to Reuters, Ford is bidding with its Ranger pickup truck, while GM's bid includes retrofitted Chevrolet Silverado pickup trucks modified for UK military use. JLR is bidding with its off-road Defender model, with CEO Mark Cameron indicating discussions with "lots of countries across Europe... and further afield" about similar tenders due in the next 12 to 18 months. GM's vice president for international sales and marketing Gilbert Nelson noted that "they're such capable trucks from the beginning, that's not a heavy lift" referring to the modifications required for military use.
Automakers are finding attractive opportunities in selling surplus manufacturing capacity to defence companies expanding production. As reported by Reuters, Italy's Stellantis is planning to sell an idled Canadian factory to armoured-vehicle maker Roshel, while Germany's Volkswagen agreed to sell its Osnabrueck plant to Israel's Aurelius Capital and the German state of Lower Saxony for a project with Rafael Advanced Defense Systems. Analysts noted that factory disposals rather than diversifying production represent one of the clearest benefits from the defence boom. "There's been a lot of talk about diversifying into defence production, but there's not been a lot of concrete action," said Ian Henry, director of consultancy AutoAnalysis.
The automotive industry's existing manufacturing capabilities provide significant advantages in defence production. According to Reuters, Ford's European head Jim Baumbick noted that providing the military with vehicles fits with the company's existing strengths of providing "tough vehicles with high payloads." French supplier Valeo CEO Christophe Perillat emphasized that "the defence industry drives growth, which the automotive market does not," adding that military contracts offer higher profit margins than traditional automotive business. Forvia recently signed a deal to transfer a factory in Germany and 300 staff to defence firm General Dynamics, with CFO Olivier Durand noting that "the industrial investment required is very low... so it's quite an attractive prospect." Unlike vehicle assembly plants, suppliers' smaller and more flexible production lines can often be adapted to military programmes with limited investment.
