Rheinmetall sees bundled Europe-wide military orders as path to better prices

Euractiv

5 days ago

Rheinmetall CEO Armin Papperger told Euractiv that Europeans should pool together more military orders to avoid skyrocketing prices and achieve better economies of scale, and the EU should review its environmental rules.
Part of this story was first published in Firepower, Euractiv's defence newsletter. Subscribe here.
Papperger, visiting Brussels last week, said that a lead nation approach has worked well with ammunition and air defence systems, in which one country coordinates a larger order on behalf of a larger group of purchasers.
He contended that the same 'Europeanisation of contracts' should be used for vehicle systems as well.
'We need to bundle [orders] so that fair prices can be achieved,' Papperger told Euractiv after meeting Ursula von der Leyen along with other CEOs from the German state of North Rhine-Westphalia on Wednesday.
The European Commission and NATO have both been pushing countries to place joint orders together to fight price inflation and give industry a long-term perspective for investment into extra production capacity.
Prices for 155mm artillery ammunition, for instance, have quadrupled since the beginning of the war in Ukraine as exploding demand strained supply chains for critical components such as TNT.
The German munitions giant has been one of the biggest beneficiaries from the surge in demand in arms in the past few years, with increase in orders, visibility on the battlefield and expansion of factories. Rheinmetall received its largest order of 155mm ammunition in history last week.
Papperger didn't say so explicitly, but plenty of defence industry executives have tried to make clear in recent years that large, long-term contracts make it much easier for companies to invest in expanding production facilities and forging tighter relations with suppliers.
Rheinmetall's prominence in Europe's race to make ammunition and other types of defence equipment was underscored last year when Papperger was the target of an assassination attempt. Environmental rollback? In the spirit of giving defence firms more leeway to expand production capacity in Europe, Papperger and some fellow CEOs lamented the restrictiveness of the EU's REACH chemical regulation.
He said exemptions from the rules are needed 'to be able to move faster'. The regulation has come in for stiff criticism from the defence sector over provisions that would ban certain components such as lead in bullets.
While the lead ban would not apply to ammunition intended for the military, all types are made on shared production lines and arms makers say banning components from certain bullets would impact production capacity.
Papperger said he also lobbied for a new raft of industrial subsidies and incentives – modelled on the EU's just-expired ASAP ammo programme – to boost the production of long-range missiles. ASAP's core is replicated in the European Defence Industrial Programme (EDIP), still under negotiation . Boosting investment Besides institutional funding programmes directly initiated by the EU, a wider discussion about encouraging private investment in the industry is still ongoing.
'People always talk about this, but in my opinion, it is not yet clearly defined that investment is also needed in the defence sector,' Papperger said, adding that it is important to make investments in the defence market attractive.
EU leaders have been encouraging the European Investment Bank (EIB) to relax certain rules in order to allow for investments in a broader range of defence products.
At the end of June, the EIB announced record new financing of up to €100 billion in 2025, with as much as 3.5% for defence investments – compared to just €1 billion in 2024. However, the EIB's defence investments remain limited to 'dual-use' purposes, meaning products must also serve civilian functions.
(bts)