Rising demand for military equipment: strategic opportunities for gear manufacturers

How can the European gear industry capitalize on the surge in European military spending?

The growing demand for military equipment is redefining the defense landscape in Europe, offering unique opportunities to manufacturers of gears and mechanical components. In 2024, European military investments increased by 89%, reaching €20 billion. This trend, with the prospect of spending increasing by up to 5% of GDP in the coming years, promises new challenges and opportunities for the Italian manufacturing industry.

A rapidly evolving sector

The recent increase in defense investments is not only related to the purchase of new military vehicles, but also to the demand for high-precision components and advanced materials. If every NATO country in Europe increased spending by just one percentage point of GDP, a potential market of €190 billion more per year would be created. This scenario represents a huge opportunity for European SMEs, which have consolidated expertise in the production of high-quality gears.

Bringing the point to our Italian gear manufacturers, they are well positioned to meet this growing demand. The main opportunities are in precision mechanics, with the production of gears, transmissions and motion systems for armored vehicles, helicopters and military ships. In addition, there is a strong demand for advanced materials: the development of light alloys and high-strength components is essential to reduce the weight of vehicles and improve their operational performance.

Automation and robotics offer further room for growth. Technological solutions for advanced production and maintenance represent a key area in a sector that requires efficiency and reliability. Finally, the growing attention of European governments to supply chain security is favoring local producers. The desire to reduce dependence on non-EU suppliers opens up new opportunities for European companies, which have already been protagonists in the automotive, industrial and aerospace sectors.

Challenges for European SMEs

However, despite the opportunities, the defence market presents some difficulties for European small and medium-sized enterprises. One of the main challenges is represented by national obligations and protectionism: many countries favor domestic suppliers for reasons of national security, limiting access to foreign markets. In addition, there are stringent regulations that require specific certifications, such as NATO AQAP or EN 9100 for aerospace, without which it is impossible to operate in the sector.

Complex decision-making processes also constitute an obstacle. Military procurement requires long lead times and complex procedures, which can discourage less structured companies. Access to large contracts is often limited, as the most important projects are managed by industrial giants, leaving little room for small suppliers. Finally, financing difficulties represent a further limit: some investors and credit institutions avoid the defense sector for ethical or ESG compliance reasons.

Strategies to seize opportunities

To overcome these obstacles, European SMEs can adopt various targeted strategies. The creation of consortia and collaborations between companies represents an effective solution to increase bargaining power and participate more competitively in calls for tenders. Investing in required certifications, such as military and aerospace, is essential to access defense markets.

Another key element is the increase in digitalization and automation of production processes, which allows for improved efficiency and reduced costs. Collaborating with large defense companies can facilitate entry into the supply chain and open the way to new business opportunities. Finally, focusing on innovation and research allows for offering advanced technological solutions, differentiating yourself from competitors in a highly competitive market.

And you, do you think that the European industrial sector is ready to take on this challenge or do we risk losing ground compared to other countries?

To learn more about how to tackle this sector, contact GSI Ingranaggi: the ideal partner for tackling the future of precision mechanics.