I have played as Germany, and when I buid lite Armor divisions they upgrade to Medium Armor divisions. Anybody know why this would be?
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Not quite...
Armored Divisions originally equipped with Light Tanks get re-equipped with Medium Tanks, when these become available.
... just like in real life.
Remember that the in-game units do not represent Tanks... they represent Armored Divisions. Only a small fraction of the soldiers in the Armored Division are Tankers... most of them are Infantry, Artillerymen, Signallers, truck drivers, typists, file clerks, etc. The equipment might change with new technology, but the unit retains its integrity.