German automaker Mercedes-Benz Group may return to defense production amid shifting geopolitical conditions in Europe, CEO Ola Källenius said in an interview with The Wall Street Journal.
He said that the world had become a more unpredictable place, and he thought it was clear that Europe needed to strengthen its defense capabilities. He added that if they could play a positive role in that process, they would be ready to do so.
Defense sector seen as potential growth area
At the same time, Källenius said any return to the defense sector would depend on economic viability. According to him, defense-related business would likely account for only a small share of the company’s overall revenue. However, he acknowledged that the sector could become a growth area for the automaker.
During World War I and World War II, Daimler-Benz produced military equipment and components, including the Panther tank and other military vehicles.
Volkswagen reportedly explores defense cooperation
In April, the Financial Times reported that another major German automaker, Volkswagen, was in talks with Israeli defense company Rafael Advanced Defense Systems about potential cooperation.
According to the newspaper, the companies are considering using Volkswagen’s underutilized plant in Osnabrück, Germany, to manufacture components for Israel’s Iron Dome missile defense system.
Europe boosts defense spending after Russia’s invasion of Ukraine
Since Russia’s full-scale invasion of Ukraine in February 2022, military aid and supplies from the U.S., the European Union and other allies have increased significantly, driving higher defense production across Western countries.
Several weeks ago, the EU approved a €90 billion loan package for Ukraine, including €60 billion designated for military assistance.
With the U.S. scaling back large-scale support for Ukraine, European countries are expected to shoulder a greater share of defense-related costs. European governments are also seeking to expand domestic arms production capacity rather than relying primarily on U.S.-made weapons systems.
