The Eastward Shift: How Central Europe Became NATO's New Industrial Backbone

For decades, Europe's defense industry had a familiar center of gravity.

Germany produced tanks and ammunition. France built fighter aircraft, submarines, and warships. Italy specialized in helicopters, naval platforms, and electronics. The United Kingdom remained Europe's largest defense exporter.

The countries along NATO's eastern flank were largely customers, maintenance providers, or subcontractors.

That picture is changing.

Over the past three years, a growing share of Europe's defense manufacturing investment has moved eastward. New ammunition plants are being built in Lithuania, Romania, and Latvia. Vehicle production is expanding in Romania and Hungary. Polish companies have become major suppliers of drones, loitering munitions, and communications systems. Croatian firms are entering European supply chains through partnerships with larger defense groups, while Türkiye continues expanding its industrial footprint across NATO markets.

The shift is not replacing Western Europe's industrial base. Instead, it is creating a broader manufacturing network designed to increase production capacity closer to NATO's eastern frontier.

The change reflects more than the immediate demands of supporting Ukraine. It represents a long-term restructuring of Europe's defense industrial base.

Geography has become an industrial advantage

For years, European defense companies optimized production around existing facilities and established workforces. The war in Ukraine changed the equation.

Governments no longer measure factories only by efficiency or labor costs. They increasingly consider logistics, resilience, supply chain security, and the ability to expand production quickly.

Facilities located in Poland, Romania, the Baltic states, Slovakia, the Czech Republic, and other eastern NATO members now offer proximity to military logistics corridors, expanding defense budgets, and governments willing to support industrial investment.

The European Commission has also placed industrial capacity at the center of its defense strategy. Through initiatives such as the White Paper for European Defence and the SAFE financing instrument, Brussels aims to increase European production while encouraging joint procurement and cross-border industrial cooperation. The broader objective is not only higher defense spending but a stronger European manufacturing base capable of sustaining long-term military readiness.

Rheinmetall illustrates the trend

Few companies better demonstrate this shift than Rheinmetall.

Before 2022, most of the company's production remained concentrated in Germany and several long-established facilities elsewhere in Europe.

Since then, Rheinmetall has pursued a strategy of expanding production closer to NATO's eastern flank through partnerships and joint ventures.

Lithuania is building a Rheinmetall-operated 155 mm ammunition plant expected to strengthen regional shell production, while the two sides have also agreed to pursue a second project focused on propellant manufacturing.

Romania has signed an agreement with Rheinmetall to establish a gunpowder production facility in Brașov County through a joint venture with the Romanian state. The project is expected to create hundreds of jobs while strengthening Europe's supply of energetic materials, one of the industry's most significant bottlenecks.

Latvia has also agreed to establish a joint ammunition production facility with Rheinmetall, extending the company's manufacturing footprint across the Baltic region.

Beyond ammunition, Rheinmetall has expanded its industrial presence in Romania through vehicle production and maintenance capabilities, while its acquisition of a majority stake in Croatia's DOK-ING adds expertise in unmanned ground systems and engineering to its broader European portfolio.

Rather than concentrating manufacturing in one country, Rheinmetall is building a distributed production network spanning multiple NATO members.

Poland has become more than a customer

No country better illustrates the region's industrial transformation than Poland.

Traditionally viewed as one of Europe's largest defense importers, Poland has simultaneously invested heavily in expanding its domestic industrial base.

Companies such as WB Group have become internationally recognized suppliers of unmanned systems, communications equipment, and loitering munitions. The state-owned PGZ continues expanding production across ammunition, armored vehicles, artillery, and missile support systems while supporting Poland's large modernization programs.

Foreign manufacturers have also increased their industrial presence through technology transfer, assembly, and local partnerships rather than relying solely on exports.

The result is an increasingly integrated industrial ecosystem serving both national requirements and wider NATO demand.

Romania is emerging as a manufacturing hub

Romania has quietly become one of Europe's most active destinations for defense investment.

The country combines expanding defense spending with access to the Black Sea and a sizeable industrial workforce.

In addition to Rheinmetall's investments, Romania is preparing local production linked to Hanwha Aerospace's K9 self-propelled howitzer program, which includes a new manufacturing facility intended to support both Romanian requirements and future regional opportunities.

Romania is also strengthening cooperation with Western suppliers across armored vehicles, aerospace, naval modernization, and ammunition production, positioning itself as one of Southeast Europe's most significant defense manufacturing centers.

Smaller countries are finding industrial niches

The eastward shift is not limited to the region's largest economies.

Croatia has attracted growing attention through companies specializing in robotics, demining technologies, armored vehicle production, and naval shipbuilding. Partnerships involving DOK-ING, Đuro Đaković, and Iskra Shipyard demonstrate how smaller industrial players can integrate into larger European programs.

The Czech Republic has expanded through Czechoslovak Group, whose acquisitions and production capacity have made it one of Europe's fastest-growing privately owned defense companies.

Slovakia continues investing in artillery, ammunition, and armored vehicle production, while the Baltic states increasingly focus on ammunition manufacturing, unmanned systems, and electronic technologies.

Rather than competing directly with Europe's largest defense primes, many of these companies are positioning themselves as specialized suppliers within broader multinational production networks.

Capacity matters as much as spending

Europe's defense debate often focuses on budgets.

Industrial capacity may prove equally important.

Increasing defense spending does not automatically produce additional tanks, missiles, or artillery shells. Production depends on factories, skilled workers, machine tools, energetic materials, and resilient supply chains.

This reality has become increasingly apparent as European governments attempt to replenish inventories while continuing military support for Ukraine.

Analysts have repeatedly noted that production capacity, rather than funding alone, is becoming the principal constraint on Europe's rearmament effort.

The expansion into Central and Eastern Europe is therefore not simply about lower costs.

It is about creating additional manufacturing capacity where it can be developed relatively quickly and integrated into NATO's evolving logistics network.

A permanent shift

Whether Europe's defense spending eventually stabilizes or continues to rise, the industrial geography is unlikely to return to its pre-2022 balance.

Production facilities now under construction will operate for decades. Joint ventures are creating long-term industrial relationships. Supply chains are becoming increasingly multinational.

Western Europe will remain home to the continent's largest defense companies and many of its most advanced technologies.

But the factories producing ammunition, assembling armored vehicles, manufacturing components, and supporting future military production are increasingly located further east.

For Central, Eastern, and Southeastern Europe, the change represents more than economic opportunity.

It marks a transition from the edge of Europe's defense industry to one of its fastest-growing centers of production.