Czech arms production is experiencing a golden age and is rapidly gaining importance. It could complement or even replace the automotive industry as the driving force of the Czech economy.
Over the past thirty years, the Czech Republic has become the country with the highest per capita automobile production in the world. 2024 was a record year: 1.4 million vehicles were produced, an increase of almost 4% compared to the previous year. However, production fell sharply by 7.1% in the first quarter of 2025, mainly due to lower demand in Western Europe. This, in turn, is related to the problems of the European automotive industry, the slow transition to electromobility and US customs tariffs.
While auto production is shrinking, the defense industry is booming. Over the past three years, Czech arms factories have massively expanded their production and multiplied their profits.
According to Ales Rodi of the Center for Economic and Market Analysis, the Czech arms industry’s share of the economy could increase several times in the coming years, from its current level of about one percent of Gross Domestic Product (GDP). “We see potential for this,” Rodi told Czech Radio. “We see demand in the arms industry for a decade or even fifteen years from now. We see empty warehouses. What we produce cannot be cooled and bought.”
DEFENSE INDUSTRY AS A NEW ECONOMIC ENGINE?
Danuse Nerudova, former rector of Mendel University in Brno and member of the European Parliament’s Budget Committee, thinks similarly. “The defense industry could become a new engine of the Czech and European economies. It could use the supply capacities and workforce freed up by the automotive sector, boost economic growth and strengthen our security at the same time,” Nerudova told DW.
However, another prominent Czech economist, Petr Zahradnik, is somewhat more skeptical. “Czech arms factories are living in a golden age, it’s true. Their capacities are expanding, Czech defense companies are expanding their capital in the most advanced parts of the world,” the adviser to the European Economic and Social Committee in Brussels told DW. But: “I don’t think they will replace the automotive sector as the driving force of the Czech economy.” And he adds: “I also don’t want arms production to replace civilian production.”
CZECH REPUBLIC: TRADITIONAL WEAPON MANUFACTURER
The area that is now the Czech Republic has been a center of arms production since before World War I. Even between the two world wars and afterwards, Czechoslovakia was one of the world’s leading producers and exporters of arms. For a long time, arms exports accounted for about a tenth of all Czechoslovak exports. Between 1958 and 1989, Czechoslovakia produced, for example, ten thousand fighter and trainer aircraft. According to experts, Czechoslovak weapons were then the best in the Eastern Bloc and were exported to dozens of countries around the world.
But there was also a domestic need, as Czechoslovakia had a heavily armed army of several hundred thousand men in the late 1980s and was spending up to 20 percent of its state budget on defense. The end of the Warsaw Pact and the confrontation in Europe, as well as the general disarmament in the early 1990s, which was accompanied by a significant reduction in the military budget, hit Czech defense companies hard. The last major arms order in Czechoslovakia was an export contract for 250 Czechoslovak T72 tanks to Syria, approved by the first non-communist government in 1991.
PARTITION AFTER THE DISSOLUTION OF CZECHOSLOVAKIA
The dissolution of Czechoslovakia into two separate states in 1992 also led to a division in the defense industry: the production of tanks and heavy machinery remained mainly in Slovakia, while the aircraft industry, the production of light weapons, ammunition, radar systems and, above all, small arms remained in the Czech Republic. Not always successful privatizations, the reduction of Czech defense spending to one percent of GDP, the professionalization and reduction of the army to only about 20.000 soldiers, have all significantly weakened the Czech defense industry.
WAR IN UKRAINE AS A GROWTH FACTOR
Following Russia’s large-scale invasion of neighboring Ukraine in February 2022, Czech arms factories increased their production, often by hundreds of percent per year. In particular, ammunition production, tank modernization, production of military vehicles, self-propelled howitzers, drones, radar equipment, and world-famous machine guns and cartridges have experienced a boom since then. The Aero aircraft factory, the pride of the Czech defense industry, has developed the new Skyfox fighter and trainer aircraft, which will be used to train Ukrainian F-16 fighter pilots.
Forty percent of the output of Czech arms factories is destined for Ukraine, where joint ventures have also been established. In total, up to 90% of production is exported. At the same time, however, purchases by the Czech military are increasing. Last year, Czech defense spending reached two percent of GDP for the first time. Prime Minister Petr Fiale has announced that this figure should reach three percent within a few years.
ARMS FACTORIES EMPLOY THOUSANDS OF WORKERS
And the boom will continue in the coming years. Ammunition manufacturer STV Group will triple its production of large-caliber artillery ammunition, which it supplies mainly to Ukraine, this year to 100.000 pieces. PBS Group also plans to double its production of engines for missiles and drones. The number of employees in the companies is also growing significantly. STV Group alone plans to hire 1000 more employees. According to its annual report, the largest Czech defense company, the Czechoslovak Group, which in addition to ammunition production also owns the Tatra military vehicle factory, now employs 14.000 people.
By comparison, the largest car group, Skoda Auto, employs around 20.000 people at its main plant in Mlada Boleslav. The profits of private owners of defense companies are also growing: The owner of the Czechoslovak Group, Michal Strnad, has more than doubled his assets since last year, from 129.5 billion crowns (about 5 billion euros) to 230.5 billion crowns (about 9 billion euros). Other major Czech arms manufacturers experienced a similar development last year. (DW)
