South Korean defense companies are accelerating efforts to build production systems in Europe as the region tightens procurement rules. To meet local-content requirements under the European Union’s SAFE defense loan program, companies are setting up factories and building supply chains with European parts makers.
According to the defense industry on Wednesday, the European Commission recently approved eight countries — Romania, Bulgaria, Croatia, Belgium, Denmark, Spain, Portugal and Cyprus — as eligible for SAFE, which offers low-interest loans to member states for joint weapons purchases. SAFE aims to invest 800 billion euros (about 1,370 trillion won) in defense through 2030 to strengthen European security, focusing on procurement of advanced equipment such as ammunition, missiles, artillery, drones and artificial intelligence. To use the fund, however, at least 65% of weapons production and parts sourcing must be European.
Moves by South Korean defense firms to establish local bases are becoming more visible. Hanwha Aerospace said it broke ground Tuesday on a plant in Romania to produce K9 self-propelled howitzers and K10 ammunition resupply armored vehicles. The site, called H-ACE Europe, will include advanced assembly lines, performance and verification test facilities, and a 1,751-meter driving test track.
Hanwha Aerospace said the Romania facility will provide full life-cycle support, including assembly, integration, testing and maintenance, repair and overhaul. The company aims to raise localization to 80% by building partnerships with about 30 local parts suppliers. A company official said Hanwha plans to strengthen the cooperation network and develop the site into a European hub that could expand to production and support for advanced ground systems such as infantry fighting vehicles, long-range precision strike systems and unmanned ground vehicles.
Hyundai Rotem is also strengthening cooperation with Polish defense company Bumar after signing a second implementation contract last year with Poland’s Armament Agency for K2 tanks. About 250 K2 tanks to be delivered to Poland will be produced at Bumar’s plant, and Hyundai Rotem said it plans to expand capacity depending on future orders. The company is also moving to secure overseas bases, including establishing an about 8,500-square-meter rail-vehicle electrical components plant in California called Hyundai Rotem Smart Electric America, or HRSEA.
A defense industry official said building defense plants in Europe is highly challenging because it requires weighing many factors, including contract size, understanding of the local market, language, labor skills and the parts ecosystem. Still, the official said, companies are continuing to review potential sites as trade bloc trends are expected to persist.
* This article has been translated by AI.
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