They lost the utility section of the market to the Japanese years ago. Without the "Chav motors" Land Rover would have ceased to exist.
This is not to knock Defenders in anyway (I have a lot of respect for them), but let's get real for a moment. Land Rover can not make any kind of living out of people endlessly rebuilding their Series Land Rovers and need to sell something that's relevant to modern buyers with money to spend. I sometimes think that the only reason for having a Defender in a modern Land Rover showroom is because the typical buyer of a new RR or Disco would feel short changed if there wasn't one in the showroom!
The question is, do they go for the completely practical route and chase the numerous Asian manufacturers down the lowest price route, or use their image and prestige to sell a dream to country wannabes?
As far as vehicles for the army are concerned, I'd suggest that the Defender would be sold to them in ever decreasing numbers anyway and always at a price that will inevitably lose money! Have you ever tried bidding for government contracts?!