German defense giant Rheinmetall sets new sales record
In a significant shift, German industrial companies are pivoting towards military-grade production, with Deutz and Rheinmetall at the forefront of this transformation.
Deutz, a leading engine manufacturer, is actively expanding its presence in the defense sector. The company plans to capitalize on Germany's increased defense spending, which is set to double to €152 billion by 2029, as part of a larger €500 billion infrastructure and climate plan.
Deutz's strategic move involves scaling up production of military engines, targeting increased revenue from defense contracts. The company aims to produce up to 30,000 engines annually, with production expected to start in early 2027. This expansion includes cooperation with major partners like John Deere and the launch of new engine platforms with advanced technical concepts to meet military standards.
The company's plans include the completion of supplier nominations and design approvals in 2025, finalization of IT interfaces, preparation for engine sample validation in 2026, and the start of series production of a new engine platform in 2027. Deutz also plans to break ground on a new production line for Deutz TCD 3.9 engines in cooperation with TAFE, a large tractor manufacturer.
The focus is on securing significant contracts from military and construction OEMs, leveraging the unprecedented surge in Germany's defense spending to increase revenue in this market.
Rheinmetall, another key player in the defense sector, is also making strides. The company, which generated 5.7 billion euros in revenue in 2021, is on track to meet its annual targets. Rheinmetall expects an improvement to 10.9-12.7 billion euros for the full year 2025. The company's order book is fuller than ever, and its first-half revenue increased by nearly a quarter to 4.7 billion euros.
However, Rheinmetall has faced challenges with delayed orders from the Bundeswehr, causing stock drops for the company, as well as for Augsburg's tank gear manufacturer Renk and radar specialist Hensoldt. Despite these setbacks, Rheinmetall's stocks have roughly tripled in value since the beginning of the year.
CEO Armin Papperger stated that Rheinmetall is investing in European countries to create new capacities. Several projects at Deutz are also underway, expected to contribute to earnings for the first time in 2026.
Heidelberger Druck has also announced its entry into the defense business, focusing on control technology and energy distribution systems. The grand coalition in Berlin could not agree on a budget in time, causing delays in Bundeswehr orders, but the management expects these orders to come in by the end of the year.
Deutz aims to establish itself as a recognized market player in the defense industry, aligning with Germany’s significant defense spending surge and the European strategic rebalancing emphasizing autonomous systems and AI-driven logistics platforms, which require advanced propulsion systems.
Deutz is investing in the development of advanced technical concepts for military engines, aiming to capitalize on Germany's increasing defense spending by producing up to 30,000 engines annually.
Rheinmetall, with a goal to meet its annual targets and further increase revenue, is investing in European countries to create new capacities, particularly in technologies relevant to military standards.
