Germany’s Hensoldt calls on EU to follow US model for local arms procurement

A leading German defence contractor has urged European governments to follow the United States' example by increasing local procurement of military equipment to strengthen the region's defence capabilities.

Oliver Dörre, CEO of Hensoldt, a top radar and sensor maker, argued that Europe should push for more homegrown manufacturing in response to growing global security concerns, Caliber.Az reports via foreign media sources.

Dörre pointed out that the US has significantly increased its pressure on foreign defence contractors to source locally, particularly since Donald Trump’s election, leading to stronger partnerships between American and foreign companies.

“A direct response to Trump’s election is that the call for local content in the US is getting stronger,” said Dörre, who has been leading Hensoldt since 2023. He added that German defence companies are increasingly collaborating with US counterparts, benefiting both US and European markets.

To counter this trend and boost European defence infrastructure, Dörre recommended that EU governments leverage European Union rules to prioritize local suppliers. “We should call for local content,” Dörre stressed, noting that EU regulations already allow member states to bypass free trade rules in cases involving defence and security needs. This move, he argued, would help align Europe with the US and improve the region’s defence capabilities.

Recent data from the French Institute for International and Strategic Affairs reveals that less than 25% of the €100 billion worth of defence contracts awarded by European governments in the wake of Russia's 2022 invasion of Ukraine went to local companies. Meanwhile, the US captured 80% of non-EU procurement.

Hensoldt, which manufactures air defence radars, has been among the companies benefiting from Germany’s “Zeitenwende” (historical turning point), a policy introduced by Chancellor Olaf Scholz in 2022, which allocated a €100 billion special fund to modernize Germany's military in response to the war in Ukraine.

Hensoldt's shares have nearly tripled since the policy's launch, and the company has reported a record €6.5 billion order backlog in the first nine months of 2024.

As NATO faces increased pressure to boost its defence spending target from 2% to 3% of GDP, European defence contractors are poised to benefit further. Dörre, however, dismissed concerns about the potential for peace in Ukraine affecting the long-term growth of his company. Only around 6% of Hensoldt’s sales are linked to Ukraine.

"I definitely see at least a decade of defence spending ahead of us, regardless of the situation in Ukraine," Dörre stated. He added that even if peace were achieved, Europe and NATO would still need to significantly enhance their arsenals to maintain security and counterbalance Russia's growing military strength.

By Tamilla Hasanova