16% of Italian automotive suppliers are already active in defence: the areas with the greatest overlap are powertrain, electronics, and bodywork & chassis.
Light vehicle production in Italy hit a new low in 2024, with fewer than 600,000 units produced, a 67% decline compared to 2000. Europe also saw a contraction, though to a lesser extent.
In recent years, volatility and uncertainty have made planning difficult: actual volumes were more than 30% lower than expected. In 2024, average utilisation of production facilities in Italy fell to 38%, far below the 72% recorded in 2017. This figure has a direct impact on the economic sustainability of the sector.
The components sector risks losing up to £25 billion in cumulative turnover between 2025 and 2027 if action is not taken now. It is time to rethink strategies, investments and alliances to build a more resilient and competitive industrial future.
At the same time, Italian defence spending is set to grow significantly in the coming years, in line with European commitments. After reaching €33.7 billion in 2024, it is expected to increase to €51.5 billion in 2027 and over €80 billion in 2035. In terms of impact on GDP, Italy will go from spending 1.5% in 2024 to 2.3% in 2027, with a projection of reaching 3.5% in 2035.
To support this acceleration, it will be necessary to address the structural weaknesses affecting the defence sector, increase production capacity, strengthen the supply base, and accelerate the development and adoption of advanced technologies.
Industrial reconversion can generate benefits for all stakeholders. Defence contractors can rapidly increase production capacity by utilising underutilised automotive facilities. Supply chains can be integrated through acquisitions and strategic partnerships. Solid automotive suppliers can diversify their business and access longer and potentially more profitable contracts. Automotive technologies, such as ADAS, can be reused for defence applications such as autonomous land vehicles. In addition to the benefits for the various players in the supply chain, there are opportunities for financial investors to allocate capital to support the real economy, with attractive prospects for returns.
The automotive sector has faced several crises over the last twenty years, but the one we are currently experiencing is unprecedented for an industrial sector of fundamental importance to the country's economy. The current crisis could lead to the loss of over 70,000 jobs and €10 billion in GDP per year, considering the direct effects and related industries.
The increase in defence spending is not just a geopolitical response: it is an industrial lever. Italy has a real opportunity to convert important production assets in numerous supply chains, particularly in the automotive sector, into strategic capabilities for European security. We are talking about existing facilities, skills and technologies that can be reactivated quickly. Public-private coordination is needed, and it needs to be done now, before the industrial gap becomes structural.
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