When Industrial Capacity Becomes a Weapon: Can Germany Reinvent Itself?

Before I moved to Germany, I had a friend and coworker who had preceded me there. He was Turkish and moved to work in Germany, so one day I asked him: Do you not think that Germany, by all indicators, is regressing rather than progressing? He answered me in a single sentence: “The Germans will know how to solve their problems. They have faced bigger crises and overcome them. They are Germans, and if things go wrong I will simply return to Turkey.”

Since I heard that sentence, I have followed everything related to defense industries and industry in Germany, with one question in my mind: Will the Germans do it? Will they really be able to solve their problems?

On February 27, 2022, the then-Chancellor Olaf Scholz delivered a famous speech before the Bundestag, in which he announced a historic turning point. It was called that because it was not merely a tactical adjustment or a marginal revision of German security policy, but rather a radical transformation in the nature of the German economy itself.

To grasp the seriousness of the situation at that time, several analysts pointed out that the German army’s ammunition stockpile at that moment would not suffice for more than a day or two in high-intensity combat, while NATO standards require a stock covering roughly thirty days of operations.

Think carefully — we are talking about Germany, which recently was a great military power, which possesses a massive industrial base, and which is the strongest country in the European Union.

That transformation was not merely an increase in the defense budget or signing contracts to buy new weapons; rather, it was a complete reorientation of the civilian industrial base. Factories that used to produce cars, trains, and heavy equipment turned into factories manufacturing weapons and ammunition. And here rises the question we will try to answer: How could Germany convert its civilian factories into military facilities in any critical moment?

On February 24, 2022, the Russian armies crossed the Ukrainian border. Before that day, Germany saw itself as a peaceful democratic country, investing in renewable energy and caring for the environment, while its defense budget was relatively weak.

In his 27 February 2022 Zeitenwende speech, Chancellor Olaf Scholz announced the creation of a €100 billion special fund (Sondervermögen) to modernize the German army (Bundeswehr) and pledged that Germany would aim to spend more than 2 % of its GDP annually on defence.

However, there were deeply rooted structural problems in the German system. There was a fundamental law issued in 1961 known as the War Weapons Control Act (KrWaffKontrG). It is not just an ordinary administrative regulation but a constitutional instrument derived from Article 26 of the German Basic Law.

(Don’t worry, I won’t burden you with legal details or article numbers.)

The core idea is that this law was established in light of the experience of World War II, meaning it was literally designed to restrict Germany and prevent it from becoming engaged again in an arms race.

This law created a strict regime based on a highly complex chain of licenses and approvals, such that any company wishing to produce war weapons must first obtain a permit from the Federal Ministry for Economic Affairs and Energy (BMWK), and then be subject to close supervision and inspection by the Federal Office for Economic Affairs and Export Control (BAFA).

Later, Germany developed a system that relies on using civil standards as much as possible, shifting to military standards only when military requirements differ substantially from civilian norms.

This system is known as DEMAR, derived from a European framework called EMAR.

The concept is that they built an official bridge that starts with dependence on DIN/EN/ISO standards as far as possible — which are essentially civilian — and only when necessary, a special temporary military standard is adopted. Those requirements are then gradually integrated back into the general framework of standards.

This means that a civilian manufacturer adhering to ISO standards automatically becomes part of the military-industrial base, while standards such as AQAP serve as a NATO quality assurance seal.

In essence, Germany began to change its administrative tools themselves. Since 2023, the Federal Office for Export Control (BAFA) has adopted a general licensing system, replacing the old method that required opening a separate file for every shipment or component.

This step may look small on paper, but in reality, it is profoundly significant, because it means that the state has come to recognize that the bureaucracy designed for peacetime cannot remain the same during industrial mobilization. Otherwise, it would cause any factory—no matter how ready for production—to wait endlessly for a signature or an administrative license.

Now, let us move to practical examples, so the idea does not get lost among the paragraphs of legal texts.

In 2025, information emerged about talks between Volkswagen and Rheinmetall—one of Germany’s most important defense manufacturers—regarding the Osnabrück plant, which had been used for assembling civilian vehicles, and the possibility of repurposing it for defense-related activities.

The CEO of Rheinmetall stated that before building an entirely new factory from scratch, it is only natural to first look at existing ones, as that is both more economical and faster.

And we are not talking here about a marginal industrial site, but rather about the backbone of the German economy itself—the automotive industry, which has now become the subject of a fundamental question:

Can it serve national security in times of necessity?

Another example is the Unterlüß ammunition plant. In February 2024, its construction began under Rheinmetall, and by 2025 the facility was already operational.

The construction cost reached around 500 million euros, and the entire site was completed in just fifteen months.

The factory produces 155 mm artillery shells, which—if we may put it this way—are the tragedy of Ukraine, as they represent the primary ammunition used by the German army, European armies, and Ukrainian forces alike.

The plant’s production plan is projected at 25,000 shells in 2025, 140,000 shells in 2026, and from 2027 onward, it will produce 350,000 shells annually.

As for the contract that gave the plant the kiss of life, it was signed in June 2024, valued at 8.5 billion euros, marking the largest contract in Rheinmetall’s history.

The German government, represented by the Federal Office for Bundeswehr Equipment and Technology, concluded this deal not only to meet the needs of the German army, but also to support the Netherlands, Estonia, Denmark, and Ukraine.

The second case, more significant and distinct, is the Görlitz plant, a factory that has existed for 175 years and has specialized in manufacturing train carriages.

In February 2025, the companies Alstom and KNDS Deutschland announced a historic deal, in which KNDS purchased the factory from Alstom.

You might think to yourself, “It’s just a regular acquisition deal.” But I tell you — no, it is not an ordinary deal at all.

The agreement stipulates the conversion of the plant from producing train carriages to manufacturing military vehicles, while retaining 400 employees out of the 700 who had been working there.

This means the transformation of civilian industrial capacity into military manufacturing capability in the fullest sense of the expression.

The factory will produce components for the Leopard 2 tanks, parts of the PUMA armored vehicle, and several modules of the Boxer armored vehicle.

This shift, in particular, is extremely important for two reasons:

First, because when I say that civilian industrial capacity is, in essence, military capacity, this example stands as the greatest proof of that statement’s validity.

Second, because those who in the past signed contracts to import trains and buses from abroad, under the pretext that “it’s not worth local production,” have lost greatly in the long run, for they have lost an industrial capability that could have easily been converted into military capacity in times of necessity.

Another example also came in February 2025, when Rheinmetall announced plans to convert two factories in Berlin and Neuss into hybrid facilities.

These factories had originally produced automotive components, but they now manufacture weapons and ammunition while retaining a portion of civilian production.

And what does that mean?

They explained that mechanical components and protective parts for weapons would be produced in these hybrid factories, while the processing of explosive materials would take place in specialized sites, since that kind of work requires different licenses and extremely sensitive procedures.

That means they are moving intelligently between the lines of the law. As long as Germany remains bound by the legacy of World War II, the military components that can be manufactured in hybrid factories will be produced independently, while sensitive parts will be handled in dedicated military plants.

This allows the overall production capacity to increase, despite the restrictions and bureaucracy imposed on the state.

In addition, hybrid factories feature high flexibility, enabling them to be completely converted into military factories in wartime.

Thus, production efficiency rises by utilizing existing factories without needing to build new facilities.

It also allows for the use of idle resources during downturns, while distributing costs and risks between fulfilling civilian and military needs simultaneously, and drawing on the workforce already employed in those factories.

In this model, the state itself purchases production lines, meaning it ensures that machines keep running even at a low rate, so that they will not have to start from zero in times of crisis.

There is also another idea being discussed — that the state would pay for the readiness of reserve production lines, just as it pays for backup power stations.

And although this system may not yet be fully implemented, there is a clear trend moving in that direction.

The war in Ukraine revealed that the most crucial element is not the shell itself but the gunpowder, propellants, and chemicals—without which any factory would simply come to a halt.

For this reason, Rheinmetall did not stop at expanding its ammunition production plants; it also acquired the Spanish company Expal and invested in the production of explosives and propellant powders.

This means that both the state and the companies realized that leaving the core supply chain outside their control is equivalent to building industrial capability on a fragile foundation.

The global transformation now underway—and which Germany is striving to implement—is about owning the entire production chain, from the raw material all the way to the ready-to-use shell.

And after all that has been said, one highly critical and often-overlooked element emerges in this story: long-term government contracts.

The reality is that no rational private company in the world would spend hundreds of millions—or even billions—of euros to build military production capacity without first ensuring the existence of real and stable demand.

Defense industries, by their very nature, require a state standing firmly behind them and supporting them.

The Rheinmetall contract, worth 8.5 billion euros, is not merely a transaction; it is a long-term political and economic commitment.

The German government is telling the company plainly: “I will purchase from you for years to come, in specific quantities, at agreed-upon prices, and according to a clear production plan.”

This contract means that Rheinmetall can build new factories, hire workers, and undertake long-term investments without living in fear of sudden demand collapse, as happened to companies in South Africa during the 1990s.

Industrial capacity cannot be built on temporary or emergency orders; it rests on long-term planning.

Without such contracts, everything we have discussed so far would have remained mere theoretical talk on paper, without any practical implementation.

In December 2024, the German government adopted a highly important document known as the “National Security and Defence Industry Strategy.”

This document serves as a clear roadmap in which the German state declared that Germany and all of Europe must now take responsibility for their own security, and that there is no longer any room for luxury, delay, or dependence on others.

The strategy laid out a clear framework for transforming the German industrial base, focusing on defining the key technologies that must remain within Germany and Europe, and formally linking the civilian and military sectors in a direct and institutionalized way.

It also pledged to reduce the bureaucracy that had strangled industry for many years, and to make securing supply chains a national security priority, after they were previously treated as a mere commercial issue.

But does all of this mean that Germany has passed through the bottleneck?

The answer is: no.

However, it can be said that it is trying to rise and is working on changing itself after a long period of stagnation; like a person who has left a toxic relationship, started exercising, reading, and fixing their diet, yet still needs time to completely rid themselves of the effects of that former relationship.

Germany began in 2022 with a financing plan in the form of the 100-billion-euro fund we mentioned earlier, which served as the main entry point.

This was immediately followed by talk of an additional fund, expected to be launched in 2025, with a value that could reach 500 billion euros.

By 2029, the projected annual defense budget may reach 160 billion euros per year, equivalent to around 3.5% of GDP.

This increase is not a normal development; it represents a redefinition of the role of the German state itself.

But—as we said earlier—Germany is still under the influence of the remnants of that toxic relationship with the “former partner,” so to speak.

In a previous article titled “The Economics of Military Readiness,” I referred to reports released in February 2025, which revealed that German military readiness does not exceed 50%, meaning that almost half of the army is not ready for combat.

What is even more alarming is that this percentage is lower than it was before the invasion of Ukraine, in addition to a shortage of around 20,000 soldiers and a severe ammunition deficit—despite all the investments we have mentioned and others yet to be discussed.

This leads us to an even more serious idea: the time gap.

The Kiel Institute for the World Economy issued an extremely pessimistic report stating that for Germany to return to the tank levels it possessed in 2004, it would need around 40 years.

As for combat aircraft, it would take 10 years, while artillery might require an entire century—yes, literally 100 years, as the report explicitly stated.

You may spend billions, build factories, and sign contracts—and yet remain unable to recover for a long time. Defense industries are not a switch you can press to suddenly start producing drones and exhibit them at the next “EDEX,” claiming you have joined the club of major powers.

And beyond all of that, there is a real human-resources crisis.

Rheinmetall alone plans to hire about 9,000 new employees by 2028, but the essential question remains:

Where will they come from?

Reports indicate a shortage ranging between 35,000 and 45,000 specialists in the fields of defense maintenance and repair alone—not in missile development or engineering, but in pure maintenance work, nothing more.

And of course, all of this comes in addition to the major disaster: critical raw materials.

In October 2025, China announced restrictions on the export of permanent magnets, which plunged Germany into a genuine crisis, since 92% of the magnets it uses come from Asia. There is not a single domestic facility capable of separating or refining rare earth elements, meaning Germany is almost entirely dependent on China.

These magnets are far from a trivial matter—they are essential to the motors of drones, guidance systems, and radar technologies.

This means that if the supply chain is disrupted, the entire production line could grind to a halt the very next day.

Hence, the crucial question: Is Germany truly ready?

The honest answer: No.

It is not ready now, and perhaps will not be ready for several years to come.

What is happening now is the building of a foundation, but one that has come far too late.

Most of these capabilities will not reach full operational capacity before 2027 or 2028.

A readiness rate of 50% means that half the forces are not fully equipped.

Gaps in short-range air defense mean the army remains exposed.

Then there is dependence on Asia, a shortage of labor, a prolonged time gap, and political instability that could shift priorities in any upcoming election.

But on the other hand, one thing is different this time — there is now a genuine political commitment.

The direction has become clear: Germany is trying to build what is known as a mobilization-based industrial base.

These are not traditional war factories, but rather a comprehensive industrial system that can, in times of crisis, rapidly shift to military production.

This means the state has the right to declare defense order priority and to redirect part of industrial capacity toward military needs.

In other words, the state will no longer stand pleading before companies or wait for lengthy approvals — it will begin direct execution when necessary.

Will it succeed?

No one knows the answer yet.

But what is certain is that the Germany that is emerging will not be the same Germany we have known over the past thirty years.