Rheinmetall chief says tanks to get cheaper despite defence spending surge
Germany’s biggest weapons maker says customers stand to benefit from economies of scale and more automation
The boss of Rheinmetall said the cost of tanks, armoured vehicles and artillery was set to fall in the coming years despite a surge in defence spending by European governments.
Responding to fears that ballooning European defence budgets would lead to price inflation and poor value for taxpayers, chief executive Armin Papperger told the Financial Times that the cost of its armoured vehicles and artillery systems “will go down and not up”.
The head of Germany’s largest weapons maker said economies of scale and greater use of automation “should be good for the company but it should be also good for the customers”.
The cost of ammunition was already falling after Rheinmetall expanded its ammunition production capacity tenfold over the past three years in response to surging demand, Papperger said.
Such economies of scale have been harder to achieve with tanks and armoured vehicles. However, he said the company expected “thousands and thousands” of orders for products such as its Boxer and Puma vehicles as well as the Leopard 2 tank — produced by the Franco-German KNDS but with a gun turret made by Rheinmetall — over the next 12 months.
That forecast included orders worth an estimated €30bn to €35bn for tanks and armoured vehicles from Germany alone after Chancellor Friedrich Merz promised to create the strongest conventional army in Europe and allowed unlimited borrowing to fund defence spending.
Rheinmetall is forecasting new orders worth about €80bn for the year to June 2026. Its order backlog stood at €55bn for the previous 12 months. “It is huge numbers,” Papperger said.
The company has emerged as one of the biggest winners from the surge in European defence spending in the wake of Vladimir Putin’s full-scale invasion of Ukraine in 2022. The stock has since soared, leaving the company worth €72bn.
The rocketing demand is all but certain to continue after European nations pledged to dramatically scale up their spending in response to Russian aggression and US pressure to shoulder more of the burden within Nato.
The spending spree has led to concerns among some economists that it could result in price inflation or even price gouging by defence companies.
Papperger said Rheinmetall had “never, ever” asked for a price mark-up to compensate for the strong inflation that followed the coronavirus pandemic.
He said he saw no risk of a backlash against arms makers even as nations such as Germany and the UK face painful decisions about cuts to social welfare at the same time as increasing military spending.
“I don’t feel that at the moment,” he said. “We are able to deliver . . . If you deliver, you make the customer happy — and the customer is the government.”