Tank maker KNDS seeking spare production capacity from other sectors, CEO says

• KNDS needs to 'significantly increase' production capacity across Europe, particularly in Germany, driven by strong defense orders following increased European military spending
• The company is in active discussions with automotive manufacturers about using their excess capacity, with Mercedes-Benz's Ludwigsfelde plant and Volkswagen's Osnabrueck plant identified as potential partnership options
• Automaker CEOs from Volkswagen and Mercedes-Benz have publicly cited defense partnerships as opportunities to address their sector's challenges with underutilized factories

Summary: KNDS Seeks Auto Industry Capacity to Expand Tank Production

Franco-German defense manufacturer KNDS is actively pursuing partnerships with automotive companies to secure additional production capacity for expanding tank output in Europe, CEO Jean-Paul Alary announced on May 26, 2026.

Key Developments

The talks come as KNDS and fellow defense contractor Rheinmetall experience strong order books amid surging European military spending, while the automotive sector struggles with underutilized factories. KNDS reported revenue growth in 2025, though specific figures were not provided in the article.

Strategic Partnerships

KNDS is specifically in discussions with Mercedes-Benz regarding its Ludwigsfelde plant as a potential production expansion site, according to a source familiar with the matter. Volkswagen has also held talks with defense companies about repurposing its Osnabrueck facility.

Market Context

European automakers are facing significant headwinds including trade tariffs, intensifying Chinese competition, and challenges in transitioning to electric vehicles, leaving many factories operating below capacity. CEOs from both Volkswagen and Mercedes-Benz have recently identified defense partnerships as potential opportunities to address this overcapacity.

Outlook

Alary indicated that "discussions are ongoing" and promised additional announcements in the coming weeks and months, though he declined to provide further details. The CEO emphasized the need to "increase very significantly all our capacity in Europe and in particular in Germany."

This potential convergence between defense and automotive sectors represents a strategic shift as Europe's industrial base responds to changing geopolitical and economic conditions.