The procurement of arms contracts in Germany is under increased scrutiny, with concerns about the transparency of procedures and the fact that the significant budget dedicated to defense spending benefits only large groups.
Will Rheinmetall be the big winner of the German government’s rearmament policy? The many contracts on the horizon to support the defense effort raise questions at the highest level, to the point that Chancellor Friedrich Merz and his Finance Minister Lars Klingbeil are seeking a better overview of the procurement procedures by the Defense Ministry, the Financial Times reveals.
According to the FT, they want to ensure that large groups – especially the conglomerate Rheinmetall, which produces both tanks and ammunition – are not the sole beneficiaries of the billions of euros that the government will spend to equip the armed forces.
The aim is to also benefit startups and R&D divisions from the funds allocated to defense spending, particularly in the fields of drones, artificial intelligence, and quantum. As such, the Finance Ministry has asked senior officials from the Defense Ministry to provide data on the amount of funds allocated to R&D, for example.
The giant Rheinmetall is indeed the big winner of this armament race in Berlin. It anticipates a revenue growth between 30 and 35% for 2025, compared to 7.7 billion euros in 2024, as well as an operating margin between 18.5% and 19%, when it was only around 5% on average between 2011 and 2020.
No “trickling down”
Sources interviewed by the FT also hope for more transparency on procurement procedures, a subject that had already raised concerns in the past: the government had passed a law to carry out certain types of purchases without going through the tender process. This decision had sparked controversy among some MPs, especially from the Budget Committee, tasked with reviewing acquisition projects, while bureaucratic red tape and the length of procedures are also criticized.
Another source of criticism and questioning is the nature of the equipment ordered in recent years, as the German Chancellor aims to make his conventional army “the most powerful in Europe.”
Indeed, according to the Financial Times, the contracts being signed mainly involve equipment that does not “trickle down” into the German economy, whether it’s American F-35 fighter jets or heavy CH-47 Chinook helicopters.
And the war in Ukraine has highlighted the importance of both remotely piloted platforms and civilian innovations used for military purposes – technologies in which Germany should invest more.
Export Challenges
Ranked fifth in global arms exports for the period 2020-2024, according to Sipri, Germany holds a 5.6% market share, far behind the American champion (43%), with France in second place (9.6%), followed by Russia (7.8%) and China (5.9%). The main beneficiaries of the German defense industry are Ukraine and Egypt equally (19%), followed by Israel (11%).
But the country has made a spectacular leap in the ranking of the world’s biggest defense spenders. According to the IISS report, it now ranks fourth with 107 billion dollars, behind the United States (921 billion), China (251 billion), and Russia (186 billion) – against seventh place in 2022. It now far surpasses France, eighth in the world with 70 billion dollars.
As for German companies, their ranking among the top 100 global companies fluctuates slightly depending on the parameters considered. According to the Sipri ranking for 2024, the top German company (excluding the multinational Airbus) is – predictably – Rheinmetall, in 20th place (rising six spots in a year, nine in two years). Defense News’ 2025 ranking places the German giant in 18th place.
The conglomerate ThyssenKrupp and the electronics company Hensoldt only rank 61st and 62nd respectively in Sipri, with the former not even in Defense News’ ranking and the latter in 52nd place. As for Diehl, it ranks 67th in Sipri’s ranking (rising 13 places in a year) and “only 82nd” in Defense News’ rankings.
