Defending economy: Czech Republic’s shift from cars to weapons production

As car production in the Czech Republic slows down, a new industry is revving up at full speed—defence manufacturing. With the global automotive sector facing a dip, the country’s arms factories are experiencing a boom, driven by increasing demand fueled by the ongoing war in Ukraine. As Czech defence exports skyrocket and military spending surges, experts see the sector as a new engine of economic growth. 

The Czech Republic has emerged as the world leader in car production per capita over the past three decades, with a record 1.4 million vehicles manufactured in 2024, marking a 4 per cent increase from the previous year, according to the German media. 

Despite a population of just 10 million, the country’s automotive sector has been a key economic driver. However, production dropped by 7.1 per cent in the first quarter of 2025 due to decreased demand from Western markets, a slower transition to electric vehicles, and US tariffs impacting the European automotive industry.

In contrast, the Czech defence industry is seeing rapid growth. Danuse Nerudova, a member of the European Parliament's Committee on Budgets, believes that the defence sector could become a new economic engine for both the Czech Republic and Europe. "It can utilize the supply capacities and workforce freed up by the automotive sector, boost economic growth and strengthen our security at the same time," Nerudova said.

While the defence sector flourishes, Czech economist Petr Zahradnik is more cautious. "Czech arms factories are experiencing golden times, that's true," he said, but added that he does not believe arms production will replace the automotive industry as the main economic pillar. "I also don't want to see weapons production replace commercial production," he stated.

The Czech Republic has a long history of arms manufacturing, dating back to before World War I. During the Cold War, Czechoslovakia was a leading arms producer. After the dissolution of Czechoslovakia in 1992, the Czech Republic became a centre for aircraft manufacturing and small arms production. However, defence spending and production significantly weakened in the post-Cold War period.

Since Russia’s invasion of Ukraine in 2022, the Czech arms industry has surged, with increased production of ammunition, military vehicles, and drones. Approximately 40 per cent of Czech arms production is exported to Ukraine, with joint ventures established there. In 2024, Czech defence spending reached 2 per cent of GDP, with plans to increase it to 3 per cent in the coming years.

The boom in defence production is expected to continue. Companies like STV Group and PBS Group are expanding their production capabilities, with STV planning to triple its artillery shell output and PBS doubling its missile and drone engine production. As a result, the workforce in the defence sector is growing, and many automotive workers, including those at Skoda Auto, which plans a 15 per cent workforce reduction, may transition into defence jobs with minimal retraining required.

By Naila Huseynova