Rheinmetall CEO predicts falling costs for tanks, armoured vehicles

The chief executive of Rheinmetall, Germany’s largest weapons manufacturer, has said the cost of tanks, armoured vehicles, and artillery systems is expected to decrease in the coming years, despite a significant increase in European defence budgets.

Addressing concerns that rising defence spending could lead to price inflation and reduced value for taxpayers, Armin Papperger told the Financial Times that the cost of Rheinmetall’s armoured vehicles and artillery “will go down and not up,” Caliber.Az cites. 

He explained that economies of scale and greater automation “should be good for the company but it should be also good for the customers.”

Papperger noted that ammunition costs are already falling, following a tenfold expansion of Rheinmetall’s ammunition production capacity over the past three years to meet soaring demand.

While such economies of scale have been more difficult to achieve for tanks and armoured vehicles, the company expects “thousands and thousands” of orders in the next 12 months for products including its Boxer and Puma vehicles, as well as the Leopard 2 tank — produced by the Franco-German consortium KNDS with a turret made by Rheinmetall.

This demand is reflected in an estimated €30 billion to €35 billion worth of orders for tanks and armoured vehicles from Germany alone, following Chancellor Friedrich Merz’s pledge to build the strongest conventional army in Europe and his government’s commitment to unlimited borrowing to fund defence spending.

Rheinmetall forecasts new orders totaling about €80 billion for the year ending June 2026, building on an order backlog of €55 billion from the previous 12 months. “It is huge numbers,” Papperger said.

The company has been one of the biggest beneficiaries of increased European defence spending since Russia’s full-scale invasion of Ukraine in 2022, with its stock value soaring to a market capitalisation of €72 billion.

The sustained demand follows European nations’ commitments to significantly boost military budgets in response to Russian aggression and pressure from the US for greater NATO burden-sharing.

Despite concerns from some economists about potential price inflation or gouging by defence firms, Papperger emphasised that Rheinmetall “has never, ever” requested price increases to offset post-pandemic inflation.

Regarding potential public backlash as governments like Germany and the UK face tough social welfare cuts alongside rising military spending, Papperger said, “I don’t feel that at the moment. We are able to deliver . . . If you deliver, you make the customer happy — and the customer is the government.”

By Sabina Mammadli