Why the Austrian automotive industry is struggling

The crisis in Austria's automotive supply industry is not a passing dip but the result of several developments reinforcing each other. At the centre stands the shift to e-mobility. An electric car uses far fewer components than a combustion vehicle and depends on less external know-how, which gradually dissolves the long-established value chains in which many Austrian suppliers had a fixed role. According to the German Association of the Automotive Industry (VDA), roughly 100,000 jobs were lost across Europe between 2019 and 2025 – and the trend is still pointing downwards.

On top of that comes a tangible sales slump. New registrations are declining in key markets, order books are shrinking, and many European plants are running below capacity. The pressure is felt most acutely by suppliers whose business model is closely tied to the German OEM ecosystem. Wherever OEM orders soften, tier-one and tier-two suppliers pass the strain further down the chain.

All of this hits a location that has, in any case, become expensive. Energy prices, raw material costs and labour costs in Austria sit well above international benchmarks, producing a persistent competitive disadvantage with direct consequences for employment. At the same time, Chinese manufacturers are entering the European market with aggressively priced electric vehicles – a competition that domestic producers face with higher production costs and a stricter regulatory regime. A 2023 study by TU Graz warned of a possible loss of up to one billion euros in value-add and several thousand jobs in the regions of Styria and Upper Austria alone.

The defense market as a growth opportunity for suppliers

While the traditional automotive market is contracting, the European defense industry is expanding. Drivers include higher NATO and EU security spending, the ReArm Europe programme and a clear policy push for European sovereignty in critical technologies. This opens a strategic window for Austria's supplier base.

Which automotive capabilities are in demand in defense?

Many capabilities built up in automotive manufacturing transfer directly into defense:

• Mechatronics & powertrain: armoured vehicles, logistics platforms, unmanned systems.
• Sensors & optoelectronics: core technology for reconnaissance, targeting and autonomy.
• Electronics, embedded software & cybersecurity: critical for modern weapon, communication and command systems.
• Production, quality assurance & supply-chain management: defense procurement expects automotive-grade quality (AQAP in addition to IATF 16949).
• Additive manufacturing & lightweight design: drones, special-purpose vehicles, spare-parts logistics.

How the defense market differs from automotive

Entering the defense market is non-trivial. Suppliers coming from automotive should plan for four structural differences:

1. Regulation & export control: EU dual-use regulation, national foreign-trade law, ITAR touchpoints.
2. Procurement logic: long sales cycles, public procurement, consortium-based business instead of direct OEM relationships.
3. Security requirements: personnel and facility clearances, NIS-2 cyber-resilience and sector-specific standards.
4. Ethics and compliance: clear governance, ESG alignment despite defense exposure, and credible stakeholder communication.

How suppliers can structure their defense market entry

A credible market entry rarely emerges from a single pitch; it comes from an ordered process. It begins with an honest internal assessment: which of the company's own products and processes are genuinely dual-use capable, where is the leverage greatest, and where would the effort outweigh the expected return? Out of this assessment grows the market and stakeholder mapping, in which the relevant tier-one defense primes – Rheinmetall, KMW, Patria, Leonardo, Thales, Airbus DS or Hensoldt – and national and European procurement bodies are systematically identified.

With this picture of the market in mind, the technical and organisational setup follows: export control, security clearance, and AQAP- or CMMC-equivalent processes need to be in place before serious conversations become possible. Only then do pilot projects and long-term partnerships begin – typically through clearly scoped component or subsystem deliveries that generate the references on which follow-on contracts can be built.

These exact steps – from the first strategic assessment to a credible market-entry roadmap – are at the heart of TU Wien Academy's Defense Market Readiness, opens an external URL in a new window seminar.

The new “Defense Market Readiness” seminar offered by the TU Wien Academy demonstrates how Austrian companies can successfully enter the defense industry. Starting in October 2026, the program will provide practical insights into the specific requirements, processes, and opportunities of this dynamic sector. If you are interested in the defense market and are considering entering it, we are offering an online information session on June 22.

➡️ Register for the information session

FAQ – automotive supplier crisis and defense market entry

Which Austrian automotive suppliers are currently cutting jobs?

Most notably Magna Steyr, AVL (350 jobs), Hella in Großpetersdorf (225 jobs, site phase-out by 2027), Schaeffler Berndorf (450 jobs, closure by end-2026) and ZKW in Wieselburg (600 jobs by 2027). Across Lower Austria's supplier industry, around 900 jobs have been lost in total.

Why is the automotive industry losing so many jobs?

Four main causes compound each other: the shift from combustion engines to e-mobility (fewer parts, fewer suppliers), a general sales slump, high European energy and labour costs, and intensifying competition from low-cost Chinese EV manufacturers.

What does dual use mean?

Dual-use goods are products, technologies or software that can be used for both civilian and military purposes – such as sensors, encryption, high-strength materials or specific control electronics. In the EU they are governed by a dedicated Dual-Use Regulation.

How can an automotive supplier enter the defense industry?

In four steps: (1) identify dual-use capable products and processes, (2) map relevant defense primes and procurement bodies, (3) build compliance, export-control and certification infrastructure, (4) build references through pilot projects and subsystem deliveries. TU Wien Academy's Defense Market Readiness seminar structures this process.

When does the TU Wien Academy's Defense Market Readiness seminar start?

The next cohort starts in October 2026. A free online info session takes place on 22 June 2026.

Continuing education at TU Wien Academy: from structural shift to market opportunity

TU Wien Academy helps companies and leaders shape technological discontinuities – whether in digital transformation, mobility or entry into new, regulated markets. Programmes and seminars particularly relevant for automotive and supplier executives include:

• Defense Market Readiness – practitioner seminar on entering the defense industry (starts October 2026).
• Executive MBA Digital Transformation & Change Management – leading transformation in technology-driven companies.
• Executive MBA Advanced Technologies & Global Leadership – strategic technology leadership in a global context.
• Management & Leadership Seminars – focused short formats on innovation, AI and leadership.
• International Learning Experiences – compact international programmes for executives.

In 2026, TU Wien Academy, opens an external URL in a new window was again ranked among Austria's leading MBA providers (INDUSTRIEMAGAZIN ranking 2026).