According to the study "Results of the Activities and Development of Ukraine's Defense Industry in 2024. Prospects and Future Steps", conducted by the Ukrainian Institute for the Future with the support of the Ukrainian Council of Defence Industry, in 2024, Ukraine's defense industry made a significant breakthrough. The sector demonstrated a sixfold growth, scaled up arms production, and significantly strengthened international ties. However, key challenges—production volumes, financing, import substitution, and the protection of manufacturing facilities—remain.
Below, I provide the key points from this lengthy report.
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Key Indicators and Achievements of Ukraine’s Defense Industry in 2024
The defense industry’s production capacity increased sixfold compared to 2023.
The total defense production in 2024 reached $10 billion (compared to $1 billion in 2022 and $3 billion in 2023).
Over 800 state-owned and private enterprises operate in the defense sector, employing more than 300,000 specialists.
More than 1,000 new weapon and equipment models were approved for use, half of which were domestically produced; the share of Ukrainian-made weaponry in the Armed Forces of Ukraine (AFU) reached 30%.
The "ZBROYARI: Manufacturing Freedom" project attracted $1.5 billion in foreign investment into Ukraine’s defense industry.
Increased Production of Weapons and Ammunition
Over 2.5 million artillery and mortar shells were produced (calibers ranging from 60mm to 155mm).
Mass production launched for long-range drones, cruise missiles, and missile drones.
Production of the Bohdana self-propelled howitzer exceeded 10 units per month (compared to 6 at the beginning of the year), making Ukraine a leader among European countries. According to the more recent resources, the monthly production of Bohdana is around 19 units. (Read one of my recent newsletters for more info about Bohdaha).
Mass production of domestic drones was initiated, including various types such as FPV drones, reconnaissance UAVs, strike drones, and long-range UAVs.
A new version of the Neptune missile was developed and put into production.
Growing Localization and Import Substitution. Expansion of International Defense Cooperation
Strategic priorities include the development of explosives, gunpowder, and armored steel production.
Cooperation with international partners is expanding through joint defense projects and co-production agreements, including with Lockheed Martin, Northrop Grumman, Raytheon, and Rheinmetall (the first Marder IFV was refurbished in Ukraine in June 2024).
Joint production of 155mm ammunition was launched in partnership with American and European companies.
127 companies from 24 countries joined the Defense Industries Alliance, while Ukraine signed agreements with 40 foreign defense companies.
Ukroboronprom opened its first international office in Washington, D.C.
Development of New Technologies
Scaling up ground-based robotic platforms, including those for fire support, demining, logistics, and evacuation.
Implementation of the "FrankenSAM" project, aimed at integrating various air defense systems. This Ukrainian-American hybrid air defense initiative combines missiles and launchers not originally designed to work together.
Establishment of the "Iron Range", a state-backed testing and evaluation facility that enables defense developers and manufacturers to accelerate trials and certification of their products.
Increased Funding and Investments
Ukraine’s defense budget for 2024 amounts to 2.23 trillion UAH (53.7 bln USD).
739 billion UAH (17.8 bln USD) allocated specifically for arms procurement and production.
The "Danish model" of financing has been launched and is expanding, enabling international partners to order weapons directly from Ukrainian manufacturers.
Plans for 2025 include attracting an additional $1 billion in investments.
Key Challenges and Risks for Ukraine’s Defense Industry in 2025 and Beyond
Insufficient funding – state orders cover less than 50% of existing production capacity.
Shortages of explosives and gunpowder, leading to critical dependence on imports.
Ongoing missile and air attacks on defense industry enterprises – over 150 strikes recorded in 2022–2023, with the trend continuing in 2024.
Addressing workforce retention and expansion to sustain and grow the industry.
Technological competition with Russia necessitates the rapid adoption of new developments to maintain an edge.
Security Forecasts, Strategic Priorities, and Objectives for Ukraine’s Defense Industry in 2025
The security threats from Russia will persist regardless of ceasefire negotiations.
Focus areas for 2025: strengthening missile and drone programs, advancing innovative technologies, and deepening strategic partnerships with Western nations.
Weapons production target: at least $30 billion.
Expansion of drone technologies, with a goal of producing 30,000 long-range drones.
Production of 3,000 cruise missiles and drone-launched missiles, along with expanded cooperation with international partners.
Development of new air defense and missile defense systems, as well as enhancing aviation capabilities.
A long-term national strategy to equip the Armed Forces of Ukraine primarily with domestically produced and jointly developed weaponry, ensuring sustainable defense industry growth and guaranteed funding for long-term contracts with manufacturers.
Additional points from the text:
One of the top priorities for Ukraine’s Ministry of Strategic Industries in 2024 was the development of technological solutions aimed at saving soldiers' lives, including FPV drones; UAVs for reconnaissance and fire adjustment; strike drones of various ranges, including long-range UAVs exceeding 1,000 km; maritime unmanned systems; ground robotic platforms.
By 2024, the protection of Ukraine’s defense industry enterprises from enemy strikes had become a critical issue. Out of the 100 top-performing defense companies (based on financial indicators prior to the full-scale invasion), at least one-third faced attacks, shelling, or were located directly in combat zones during 2022. By 2023, total losses in the defense sector amounted to tens of billions of UAH. State-owned Antonov’s losses alone were estimated at 40 billion UAH, excluding the cost of restoring the Mriya aircraft.
According to the analytical center Bruegel, Ukraine can produce approximately 180 Bohdana self-propelled howitzers (SPH) per year, while its closest competitor, France, manufactures around 70 CAESAR SPHs annually. The Ukrainian Bohdana SPH costs about $2.3 million per unit, which is comparable to the price of the Chinese PLZ-05 but more than twice as expensive as the Russian Msta-S system (starting at $1.478 million). All other Western-made SPHs are significantly more expensive than the Bohdana: the Slovak Zuzana-2 – $5.932 million; the French CAESAR – $5.863 million.
The key factor that allowed Defense Procurement Agency to stabilize and even reduce prices in the defense procurement market was the reduction in the share of intermediaries. While under transitional contracts signed by the Agency in 2023, special importers accounted for 82% of the total contract value, this share dropped to 12% in 2024.
The level of supply of the Armed Forces of Ukraine with Ukrainian-made equipment varies depending on the category. For example, Ukraine is highly dependent on its partners when it comes to medium- and long-range air defense systems and missiles for these systems, as well as for multiple rocket launch systems.
The Defense Forces use only Ukrainian-made ground robotic systems. Additionally, electronic warfare (EW) equipment is predominantly of Ukrainian production. Long-range strike UAVs used against Russia are exclusively Ukrainian weapons, enabling Ukraine to deliver asymmetric strikes on enemy logistics and oil depots.
In 2024, new Ukrainian developments emerged, including drone-missiles such as "Palianytsia," "Peklo," and "Ruta." UAV carriers for kamikaze drones entered serial production and began being used in combat operations. Read more about drone carriers here.
The main projects focused on developing long-range strike capabilities, including the "Deep Strike" UAV, drone-missiles, and jet-powered UAVs. Additionally, the field of electronic warfare (EW) systems has been actively advancing.
The main direction of development is the localization of production, including through the creation of joint ventures. The "Library of Components" project is in its final stage of implementation. This will be an online database of Ukrainian component manufacturers, where defense industry producers can search for suppliers, establish contacts for future orders, and access a constantly updated catalog with sellers' (manufacturers') contact details and their available offerings.
A survey conducted by the "Technological Forces of Ukraine" association, which brings together several UAV and other technology manufacturers, among 35 private defense companies revealed that underutilized production capacity and a lack of funding for development are pushing manufacturers to relocate abroad. 85% of the companies surveyed by "TFU" have considered moving part of their business abroad or have already done so.