Rheinmetall from Germany plans to build four arms factories in Ukraine.

Rheinmetall announced on Thursday, March 14, 2024, its plan to build at least four new production facilities in Ukraine, targeting a record turnover of 10 billion euros ($10.9 billion) for this year. Rheinmetall is a German company specializing in defense and automotive industries, particularly in manufacturing defense systems, ammunition, and military vehicles.
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Rheinmetall announced its plan to build at least four new production facilities in Ukraine. (Picture source: Rheinmetall)

The German arms manufacturer, Rheinmetall, recorded a record turnover of 7.2 billion euros last year and aims to exceed 10 billion euros in 2024. This announcement comes in the context of the ongoing conflict in Ukraine, which has significantly increased the demand for military equipment, propelling Rheinmetall into the prestigious DAX index due to a surge in business.

Rheinmetall plans to produce ammunition, military vehicles, gunpowder, and anti-aircraft weapons in the proposed factories in Ukraine. These efforts aim to address the critical shortages faced by Ukraine amid the conflict and to capitalize on the expanding defense market in the region.

"Ukraine has become an essential ally for us, offering an annual sales opportunity estimated between two and three billion euros," said Armin Papperger, CEO of Rheinmetall, while presenting the company's 2023 financial results.

Having previously agreed to manufacture artillery shells in Ukraine in February, Rheinmetall is advancing its plans for a plant whose location remains confidential for obvious reasons. This facility will be inspired by an ammunition manufacturing site currently developing in Germany.

In addition, in October 2023, Rheinmetall and the Ukrainian Defense Industry (UDI), previously known as Ukroboronprom, launched a joint venture in Kyiv. Rheinmetall Ukrainian Defense Industry LLC is co-owned by Rheinmetall Landsysteme GmbH (51%) and UDI (49%). It initially focuses on the service, maintenance, and repair of military vehicles, with plans to expand into the production and development of military vehicles and other selected Rheinmetall products in Ukraine.

This collaboration was initiated in May 2023 and received approval from the German Federal Cartel Office in September of the same year. The partnership aims to foster the growth of Ukraine's defense technology capabilities, offering comprehensive technology transfers and promoting the local production of defense equipment. This effort aligns with broader objectives to reduce Ukraine's dependence on foreign aid, boost the economy, and improve the efficiency and supply of military equipment.

The joint venture signifies a deepening of defense cooperation between Germany and Ukraine, reflecting a mutual commitment to support Ukraine in its defense efforts against external aggression. It encompasses not only immediate aid in terms of military hardware repair and maintenance but also a long-term strategy for building a robust defense industry within Ukraine. This includes plans for the local production of Western weapons to meet growing demand and the potential for developing and exporting jointly produced military systems.

Continuing its expansion, Rheinmetall also plans to establish a facility in Lithuania to support the deployment of a German brigade, thereby strengthening NATO's eastern defenses.

The announcement led to a 5% increase in Rheinmetall's stock price in Frankfurt, underscoring investor confidence. The move highlights a broader effort to increase the production of artillery shells, as Ukraine and its European allies seek to step up their military support amid ongoing hostilities.