Automakers seek lifeline from defence boom

Western automakers are pursuing a potential lifeline in the form of increased defence spending, as they seek to utilize underemployed factories and sell more vehicles. Ford, General Motors, and Jaguar Land Rover are among the automakers bidding for military contracts, using modified versions of their existing pickup trucks and off-road vehicles.

However, executives and analysts warn that opportunities to significantly boost revenue remain limited, as automakers face challenges such as slowing demand and growing Chinese competition. GM forecasts its defence division to generate $700 million in revenue this year, growing by 30% annually for several years, but this would still represent less than 1% of the company's total revenue.

Traditional automakers are losing ground in China to local rivals, while Chinese brands expand rapidly into Europe and emerging markets, squeezing profit margins and leaving Western manufacturers with excess capacity. Analysts see the most realistic opportunities in assets that automakers already possess, such as Ford's European head stating that providing the military with vehicles fits with the company's existing strengths.

In addition to diversifying production, factories with idled capacity are being sold to defense manufacturers looking to expand production, offering a more concrete benefit from the defence boom.