Chief Rheimetall is one of the few European leaders with vision and courage, able to give the Russians a very firm response. It was not for nothing that Moscow tried to assassinate him last year. An analysis by Politico paints a bleak picture of the German economy, badly hit by high labor and energy costs, problems to which have been added the complications of the trade war with China.

The car industry fueled Germany’s rise as Europe’s economic power. Now the same sector is in crisis and dragging down the entire German economy.

The causes of the perfect storm?

Along with high production costs, we can say that the green transition has suffocated Germany.

Automakers are facing a shift to less complex electric vehicles, where Germany does not control crucial battery technology, while aggressive competition from Chinese rivals is close to putting the great German auto industry on the hook.

Another blow could come from US President Donald Trump, who is threatening tariffs that would upset the free trade system behind Germany’s export-led economic success.

The moment somehow resembles the Nokia scenario, when the Finnish communications giant definitively lost the battle with its more agile competitors Apple and Samsung.

This time, the situation could be different, especially since the German car industry is the backbone of the country, and the politician has every interest in saving it. Where salvation could come from Rheinmetall, Europe’s largest ammunition manufacturer, plans to retool two of its car factories in Germany to produce mainly defense equipment, Reuters reports.

While some European political leaders are showing their limits (see the dramatic-embarrassing scene at the end of the Munich conference), Rheinmetall’s Director-General, Armin Papperger, is acting swiftly.

The factories in Berlin and Neuss where the company currently manufactures automobile parts, will become part of Rheinmetall’s weapons and ammunition division and will serve as so-called hybrid factories, ensuring that automobile production can continue.

„Above all, factories will benefit from the industrial power that Rheinmetall Group has as a major supplier of military equipment, as well as the high demand from customers in Germany and around the world”, the German group said.

The company also stated that no explosives will be processed in these two facilities, but they will produce protective and mechanical components for military use.

LEOPARD 2 and Puma will be produced in a former train factory Rheinmetall’s decision is the second such measure in just one month, after the German subsidiary of conglomerate KNDS announced that it would take over from French train manufacturer Alstom a factory in eastern Germany that now produces rolling stock.

KNDS, owned in equal holdings by Germany’s Wegmann & Co GmbH and the French state, plans to manufacture military equipment there, including the LEOPARD 2 battle tank and the PUMA infantry fighting vehicle.

The German car industry, a toxic relationship with China

Germany’s auto giants have grown rich in China, entering the market decades ago when domestic car sales were just starting to rise; their Asian success has helped support higher wages at home.

This trend reversed in 2018, when China’s new car market contracted for the first time since the 1990s, falling 3%. It fell 8% more in 2019 before the pandemic halted global markets.

Nowadays, the market shares of the three major German automakers are declining as Chinese rivals introduce cheaper electric vehicles that often have better technology.