Carmakers Without Cars: Europe's Auto Industry Reaches for the Drone

Europe's automotive industry has a crisis and a potential lifeline, and they happen to share the same factory floor. As slumping car sales hollow out production capacity across the continent, a growing number of manufacturers are turning to defence contracts to fill the gap. Analysts at Citi have taken to calling it the "anything but autos" trade.

Renault has moved furthest and fastest. The French carmaker confirmed earlier this year that it will produce long-range strike drones at its Le Mans and Cléon plants in partnership with defence contractor Turgis Gaillard, under a contract with France's Directorate General for Armament that could be worth up to €1 billion over ten years. The target is production of up to 600 drones per month. Between 100 and 200 of Le Mans' 1,800 workers will be redeployed to a dedicated drone assembly line, with the first units due for delivery to the French military by mid-2026.

Renault is not alone. Rheinmetall has announced plans to convert a Volkswagen plant in Osnabrück into a production line for armoured vehicles, while defence group KNDS has repurposed a former train factory in eastern Germany for battle tank manufacturing. The industrial logic is straightforward. Both sectors rely on mass production, complex supply chains, precision engineering, and increasingly, battery and sensor technology.

The structural backdrop makes the pivot almost inevitable. European light vehicle sales remain around 15 million units annually, far below the 18 million registered in 2019, with no forecast return to that level before 2040. Meanwhile, EU president Ursula von der Leyen has signalled that Europe could mobilise up to €800 billion in defence investment.

Unions remain sceptical, warning that weapons contracts cannot substitute for a functioning car market. They may be right in the long run. But for now, the factories need work, and European governments need drones.