Sweden’s decision to join NATO in March 2024 didn’t just end two centuries of military non-alignment — it set off one of the fastest industrial pivots in the country’s modern history. Defense spending has climbed from roughly 1.5% of GDP before accession to 2.5% in 2025, on a trajectory that the government’s Total Defence 2025–2030 Bill puts at 2.8% in 2026, 3.1% in 2028, and 3.5% by 2035. Analysts now expect Sweden’s defense sector to roughly quintuple by 2035.
What makes the story interesting for a startup audience isn’t just Saab’s order book or BAE Systems Hägglunds’ expanding factories — it’s who else is being pulled into the defense economy. Alongside the traditional primes, a wide layer of Sweden’s civilian industrial base — truck makers, steelmakers, and, increasingly, niche vehicle-technology suppliers — is retooling commercial product lines for military buyers. It’s a case study in dual-use pivoting that startups building sensors, autonomy, or ruggedized hardware should be watching closely.
The strategy behind the surge
In June 2025, the Swedish Ministry of Defence, under Defence Minister Pål Jonson, formalized this shift with a national Defence Industry Strategy built on three pillars: Innovation (shortening the path from civilian IP to battlefield use), Production (removing supply bottlenecks and modernizing assembly lines), and Cooperation (aligning with NATO standards and expanding exports via Business Sweden).
Structurally, the strategy links the Swedish Armed Forces, the Defence Materiel Administration (FMV), innovation agency Vinnova, and the Swedish Defence Research Agency (FOI) into a single cross-agency function — designed specifically to help commercial software and hardware companies navigate procurement, export controls, and military certification faster than the traditional multi-year defense acquisition cycle allows.
Four capability areas were named as national priorities: combat aircraft, underwater platforms, command-and-control systems, and ammunition. But the ripple effects extend well beyond those four categories, into any commercial technology that can plausibly serve a battlefield need.
The primes are scaling fast
Sweden’s established defense contractors are the most visible face of the boom. BAE Systems Hägglunds in Örnsköldsvik has increased physical output of its CV90 combat vehicle by 400% since 2020 and more than tripled its workforce, leaning on automated robotic welding and digital-twin assembly modeling. Its sister company, BAE Systems Bofors in Karlskoga, has retooled to accelerate production of the Archer 155mm self-propelled howitzer — a platform that notably repurposes a modified Volvo heavy-hauler chassis, an early sign of how commercial and military manufacturing lines are converging.
Saab AB, the anchor of Swedish defense, is scaling across three fronts simultaneously: JAS 39 Gripen E fighter production in Linköping, Giraffe 4A radar and GlobalEye AEW&C systems in Gothenburg (following NATO’s selection of GlobalEye to replace its AWACS fleet), and submarine and corvette construction at the Kockums shipyard in Karlskrona.
Underneath all of it sits steelmaker SSAB, which supplies the majority of Europe’s certified high-hardness armor plate under its Armox® and Ramor® brands — material used in the Leopard 2, CV90, Boxer, and other NATO platforms. With European demand for armor steel projected as high as eight million tons against certified capacity of under 500,000 tons a year, SSAB has become a structural chokepoint — and is responding with 3D-printable Armox® 500 AM powder and fossil-free HYBRIT steel production.
Where it gets interesting: dual-use retooling
The more distinctive part of Sweden’s DefTech story is the number of purely civilian manufacturers being pulled into defense supply chains without building dedicated military factories from scratch.
Volvo Defence is the clearest example. Rather than standing up separate plants, Volvo integrates militarized variants — armored crew cabs, tactical C4ISR interfaces, multi-fuel engines — directly into its existing commercial truck lines in Tuve and Gothenburg. Its articulated off-road haulers, originally built for construction and mining, now serve as mobility chassis for Bofors’ Archer artillery system. Volvo has also partnered with US autonomy firm Forterra to bring self-driving capability to tactical logistics convoys, and with Nordic Air Defence to build the VIPRO mobile counter-drone platform.
MilDef Group, based in Helsingborg, has grown by ruggedizing commercial computing and networking hardware for battlefield use, working directly with Saab, BAE Systems, and FMV — including a program to rapidly accredit secure tactical IT networks for the Swedish Navy.
The same logic is playing out further down the supply chain, in categories that rarely make defense headlines. Braås-based Bra Vision Scandinavia, an Axel Johnson International company that has spent 80 years building mirror and camera visibility systems for trucks, buses, and construction vehicles, now runs a dedicated Defence line offering ruggedized versions of the same mirror and camera technology for military vehicles — a reminder that dual-use retooling isn’t confined to trucks, steel, and IT networks; it extends into narrower component and subsystem suppliers as well.
Vinnova’s civil-military innovation pipeline — including the Amyna accelerator — is meanwhile funding smaller companies making the same jump. One example cited by Vinnova is Cstrider, a commercial off-road transport startup that received acceleration funding to adapt its vehicles for casualty evacuation and frontline logistics.
Export demand and NATO integration
NATO membership also removed longstanding restrictions on Swedish defense exports, and Business Sweden is now actively helping mid-sized companies navigate foreign tenders and compliance requirements. Swedish firms are expanding across three main markets: North America (Saab’s Giraffe and Sea Giraffe radar deliveries to the US Air Force and Navy), Europe and the wider NATO alliance (CV90 and Archer platforms becoming a standardization baseline across the Baltics, Nordics, and Central Europe), and Asia-Pacific/Latin America (Gripen fighter sales to Brazil, Thailand, and Colombia). Sweden has also signed co-production agreements with Ukraine covering armored vehicle manufacturing and battlefield-informed design feedback.
On the acquisition side, the government has been willing to compress timelines dramatically when needed: a SEK 3.5 billion push into counter-drone systems moved the target deployment date up by eight years, from 2036 to 2028, and a SEK 9 billion deal with Germany’s Diehl Defence will bring seven IRIS-T SLM air defense systems into service starting in 2028 while domestic production scales.
The bottlenecks that could slow things down
None of this is friction-free. Certified armor steel capacity remains the sector’s most acute constraint, with European supply well short of projected demand. Procurement complexity is a real barrier for smaller dual-use firms that lack the legal and compliance infrastructure of a Saab or BAE Systems. And fast-scaling manufacturers across the board — from Hägglunds’ welders to MilDef’s software engineers — are competing for a limited pool of specialized technical talent.
The takeaway for founders
Sweden’s defense boom isn’t only a story about tanks and radar. It’s a live demonstration of how quickly a mature civilian manufacturing base — trucks, steel, ruggedized IT, vehicle vision systems — can be redirected toward military demand when the state creates clear multi-year procurement visibility and an institutional shortcut (Vinnova, FMV, FOI) for civilian technology to clear certification hurdles. For founders in sensing, autonomy, materials, or safety-critical hardware anywhere in Europe, the Swedish playbook — retool an existing commercial product line rather than build a defense business from zero — is likely to become a template well beyond Sweden’s borders.
Sources: Amrop, Business Sweden, militaryspend.org, defence-industry.eu, dsei-gateway.com, government.se, Vinnova, Think Defence, Army Technology, and other publicly available reporting cited in the underlying research.
