Volkswagen’s official announcement of its potential entry into the military vehicle market has sparked interest in how this move might affect Kia, which has already established a presence in Europe’s defense sector.
On March 11, Volkswagen CEO Oliver Blume confirmed that the company is actively exploring opportunities in the defense market. While Volkswagen has previously collaborated with domestic defense contractor Rheinmetall to produce military vehicles, it is now considering a solo venture into the sector. Plans include repurposing two shuttered factories, marking Volkswagen’s return to military manufacturing for the first time since producing the World War II-era “Type 181” off-road vehicle.
Analysts suggest Volkswagen’s decision to enter the defense market is a strategic move to find new revenue streams. The company faces challenging industry conditions and expanding EU defense budgets.
Despite being the world’s second-largest automotive group, with reported sales of EUR 324.7 billion (USD 355 billion), an operating profit of EUR 19.1 billion (USD 21 billion), and 9 million new vehicles sold last year—Volkswagen saw a 15% decrease in operating profit and a 3.5% drop in sales volume compared to the previous year.
Furthermore, the company’s operating profit margin stood at 5.9%, barely surpassing the 5% threshold considered the minimum for survival among global automakers. Reports indicate that Volkswagen’s sales in the Chinese market plummeted by over 20%, underscoring the company’s ongoing challenges.
Meanwhile, Europe’s push for self-reliance in the wake of Trump’s isolationist policies has accelerated military spending. The Stockholm International Peace Research Institute (SIPRI) projects that NATO member countries’ defense expenditures will increase from USD 380 billion last year to USD 420 billion this year. While South Korea’s defense industry, led by products like the K-9 self-propelled howitzer and Cheongung missile system, has benefited from this trend, there’s a growing shift towards favoring European-made weapons under the “Buy European” policy. This changing landscape may have influenced Volkswagen’s decision to enter the defense market.
Kia, which has been in the military vehicle business since 1973, produces light tactical vehicles and military trucks for 27 countries, including the Philippines, Sudan, Indonesia, and Chile. Two years ago, the company expanded into the European military market with a contract to supply 400 light vehicles to Poland, valued at approximately $255 million.
However, Kia has not secured additional regional contracts since its European debut. A Kia spokesperson stated, “Since our entry two years ago, we haven’t secured any additional sales or contracts in the European market. We are closely monitoring the situation.”
