NATO Expansion Effect: German Manufacturing Accelerates Development of Defense Industry Supply Chain

With NATO countries expanding their military capabilities, Germany is accelerating the development of its defense industry. It is applying industrial technologies originally developed for civilian use to military production. Experts analyze that in addition to leveraging existing industrial capabilities to enter the military supply chain, Germany is also strengthening cooperation with allies to expand military research and development and production, driving an overall industrial transformation. Christoph Mester, an expert at the Federal Foreign Trade and Investment Agency (GTAI), stated in an interview with CNA that under the expansion of military capabilities by NATO countries, Germany has prioritized defense and security industries in its policies. The government plans to invest approximately 100 billion euros (about 3.7 trillion NT dollars) by 2030 to strengthen military capabilities, creating long-term demand for related industries. Mester pointed out that this does not mean Germany's entire industrial sector is shifting to weapons production, but rather extending its existing manufacturing capabilities into the defense sector. For example, core manufacturing industries such as mechanical engineering, automation, electronics, vehicles, and aerospace are entering the military market through 'dual-use' technologies where products can be used for both civilian and military purposes. He further explained that the growth of the defense industry has begun to drive overall industrial development, not only increasing factory utilization rates but also helping to retain critical technologies and promote investment and innovation. This trend is most evident in Germany's automotive manufacturing industry. According to a study commissioned by the Thuringian Automotive Association in March of this year, nearly one-third of German defense suppliers come from the automotive supply chain. Researcher Werner Olle stated that automotive manufacturing's technologies in metal processing, electronics, and engineering services highly overlap with military uses. Additionally, military orders are typically smaller in quantity, giving small and medium-sized enterprises within the original automotive supply chain opportunities to enter the military supply chain. In addition to industrial transformation, Germany is also strengthening collaboration with allies to expand its military equipment research, development, and production capabilities. Volkswagen, a major German auto manufacturer, has reportedly partnered with an Israeli state-owned defense company to transform its plant in Osnabrück from car production to manufacturing 'Iron Dome' missile defense system equipment. Rheinmetall, a traditional German defense manufacturer, announced this week that it will form a joint venture with Dutch defense technology company Destinus to produce cruise missiles and ballistic rocket artillery, targeting the European and NATO markets. Mikhail Kokorich, CEO of Destinus, stated in a cooperation press release that Europe is entering a new phase of missile mass production, where modern warfare emphasizes cost-effectiveness and scaled production rather than just small quantities of high-priced equipment. Destinus's software advantages combined with Rheinmetall's production capacity can create large quantities of missile systems that meet current battlefield demands. Ukrainian President Volodymyr Zelenskyy also announced during his visit to Germany this week, together with German Chancellor Friedrich Merz, that Germany and Ukraine will jointly produce long-range attack drones in Munich, combining German manufacturing capabilities with Ukraine's battlefield and innovation experience to deepen bilateral defense cooperation.