German defense company Rheinmetall has formed a joint venture with Italian defense group Leonardo to supply more than a thousand main battle tanks and infantry fighting vehicles to the Italian armed forces, in a deal worth €23 billion.
The partnership includes the KF51 Panther main battle tank and the Lynx infantry fighting vehicle, as announced by Rheinmetall on Tuesday. The Panther will be produced in equal parts by Italian companies, Rheinmetall, and its subsidiaries.
This deal is a significant step towards positioning Rheinmetall as one of the world’s largest defense contractors. Recently, Rheinmetall acquired U.S. vehicle specialist Loc Performance Products for $950 million, boosting its share of the U.S. defense market—the world’s largest.
The acquisition increases Rheinmetall’s production capacity in the U.S. and strengthens the group’s ability to secure $60 billion worth of contracts for armored personnel carriers and military trucks for the U.S. armed forces.
Rheinmetall expands into the U.S. defense market
According to German Foreign Policy, Rheinmetall heavily promoted its weapon systems at the U.S. defense trade fair AUSA, which concluded on October 16.
The U.S. remains the world’s largest defense market, and Rheinmetall aims to increase its presence there significantly. The company hopes to secure the tender to replace the Bradley infantry fighting vehicle (IFV), with around 4,000 IFVs worth an estimated $45 billion at stake.
Rheinmetall is also bidding for the Joint Tactical Truck Program, which involves producing 40,000 military trucks at a cost of $16 billion.
In addition, Rheinmetall recently won a contract to produce eight prototypes by 2025 for an unmanned ground vehicle designed to transport supplies and equipment in rough terrain. The company is also collaborating with U.S. firm Honeywell to develop advanced vision systems and auxiliary units for military vehicles.
Critical supply to the Pentagon
Rheinmetall’s acquisition of Loc Performance Products in August significantly improved its chances of winning major U.S. defense contracts, including those for armored personnel carriers and military trucks.
This acquisition is particularly valuable as it brings both new expertise and production capacity to Rheinmetall, enabling the company to comply with U.S. regulations requiring these vehicles to be manufactured domestically.
Rheinmetall states that the acquisition provides “significant capabilities in the U.S.” and enhances its subsidiary, American Rheinmetall Vehicles, to serve the U.S. Department of Defense more effectively.
Strengthening Rheinmetall’s position in Europe
Rheinmetall has also made significant strides in consolidating its dominance in the German and European markets. The Düsseldorf-based company could receive between €30 billion and €40 billion from Germany’s €100 billion defense budget for the Bundeswehr.
Rheinmetall supplies a range of defense products, including €8.5 billion in artillery ammunition, 6,500 military trucks worth €3.5 billion, and 123 vehicles under the “Heavy Infantry Gun Carrier” project, valued at €2.7 billion.
Further orders come from other EU countries, partly driven by the war in Ukraine. For instance, in July, Rheinmetall agreed to supply 14 Leopard 2A4 main battle tanks and three Büffel armored recovery vehicles to the Czech Republic, for delivery to Ukraine.
Lithuania, in parallel with the deployment of the German “Lithuanian Brigade” equipped with Leopard 2A8s, plans to purchase these tanks, in which Rheinmetall is involved. Denmark has also ordered 16 Skyranger 30 turrets from Rheinmetall for its air defense system.
Rheinmetall’s joint venture with Leonardo
On Tuesday, Rheinmetall announced its next step in penetrating the international tank market through a joint venture with Leonardo. This collaboration will produce the KF51 Panther, which is still under development, and supply the Italian army with both the Panther and the Lynx IFV.
In total, over a thousand tanks will be delivered to the Italian armed forces under the €23 billion contract. The joint venture is split 50-50 between Rheinmetall and Leonardo, with 60% of the Panther’s production to take place in Italy, and 40% in Rheinmetall’s German plants. Of the Italian portion, 10% will be managed by Italian Rheinmetall branches, ensuring equal distribution of sales.
Funding for AI subsidiary
Rheinmetall’s subsidiary, YardStick Robotics, specializing in AI-controlled robots, and Rheinmetall Waffe Munition, received €1.4 million in funding for the ‘RoX’ research project. This project, supported by the German Federal Ministry of Economics and Climate Protection, has a total budget of €52 million.
YardStick Robotics aims to advance AI-driven robotic systems for industries such as manufacturing, logistics, and services. Earlier this year, it secured €3.2 million for its ‘Robot-X’ project under the Manufacturing-X initiative, furthering research in AI-based automation.
Franco-German partnership falters
Italy initially planned to purchase Leopard battle tanks from KNDS, a Franco-German joint venture between Krauss-Maffei Wegmann (KMW) and French tank maker Nexter, which uses parts from Rheinmetall. However, disputes within KNDS delayed the project, and Italy opted to proceed with Rheinmetall and Leonardo instead.
This move provides KNDS with new competition in the German and EU defense markets.
Rheinmetall’s role in NATO
By expanding into both the U.S. and European defense markets, Rheinmetall is securing its position as a major pillar of NATO’s defense industrial base. U.S. defense contractors have taken notice, with Rheinmetall also contributing to the production of F-35 fuselage components.
Reflecting the importance of its U.S. business, around one-fifth of Rheinmetall shares are held by U.S. investors, including BlackRock, Goldman Sachs, and Bank of America.
