The Czech Republic, historically known for its per-capita car production, reached a record of 1.4 million vehicles in 2024 — about 4% higher than the previous year — despite having just 10 million inhabitants. However, automotive output dropped by 7.1% in Q1 2025, due to weak Western demand, a slow transition toward electric vehicles, and retaliatory U.S. tariffs. At the same time, the country’s arms industry is surging, driven by increased defense budgets and wartime demand.

Following Russia’s invasion of Ukraine in February 2022, Czech arms manufacturers ramped up production of tanks, ammunition, military vehicles, drones, radar systems, and machine guns. Around 40% of output is now sent to Ukraine, and overall defense exports account for up to 90% of Czech arms production. In 2024, the Czech government increased defense spending to 2% of GDP, with official plans to reach 3% in coming years.

This shift has also impacted labor markets. With automakers like Škoda Auto cutting workforces by around 15%, arms producers such as STV Group, PBS Group, and the Czechoslovak Group are expanding rapidly—STV plans to triple ammunition output and hire roughly 1,000 workers, while PBS will double missile and drone engine production. These defense companies, several of which already employ thousands (e.g., Czechoslovak Group at 14,000 employees), are increasingly drawing in displaced automotive workers, many of whom require minimal retraining to switch the industries.

Source: https://www.dw.com/en/czech-republic-are-weapons-not-cars-the-future-engine-of-the-czech-economy/a-72528699