Issue Briefs
Germany’s Defense Industrial Ramp-Up: Between Strategic Intent and Industrial Constraints
By Laetitia von Schönburg
July 15,2025- Germany’s ambitious rearmament agenda actively promoted by Chancellor Friedrich Merz is rapidly reshaping the geopolitical landscape of Europe. Yet the success of this vision depends on whether Germany’s defense industrial base can expand rapidly enough to meet the demands of modern warfare across all domains; land, sea, air, and cyber, within a tight 2025–2031 window.
Scaling up production
Germany’s leading defense firms, such as Rheinmetall, ThyssenKrupp Marine Systems (TKMS), Airbus Defense & Space, and Hensoldt, have all initiated production scale-ups. Yet their efforts are challenged by structural and regulatory bottlenecks that risk turning ambition into inertia. Rheinmetall, the country’s central supplier of land systems and munitions, is undergoing a significant expansion. The company plans to produce over one million artillery shells annually by 2027, while also increasing Leopard tank output in the latter half of the decade. These ambitious goals hinge on several factors, including the availability of skilled labor, the ability to obtain permits for new facilities on time, and vulnerability to fluctuations in the supply of electronic components. Without urgent reforms, such as fast-tracked licensing and a national push for vocational training in defense manufacturing, Rheinmetall’s momentum may stagnate. The company may fail to meet the new production goals.
Many challenges
Concerning the navy, ThyssenKrupp Marine Systems is experiencing strong demand, as its shipyards are completely engaged well into the 2030s. The firm has committed €470 million to expand its facilities in Kiel and Wismar, aiming to deliver the F126 class frigates by around 2028. However, the longer-term outlook is haltered by the slow tempo of naval construction, and the fact that a limited number of shipyards are capable of handling high-end military builds. Submarines from the Type 212CD program, for instance, are not expected to be operational before 2032. Berlin should consider incentivizing partnerships with private shipyards and accelerate the adoption of modular building techniques that enable flexible and distributed production, thereby addressing these concerns. Germany’s leading player in air platforms, satellites, and drones, Airbus Defense & Space, faces different challenges. Its production capacity is moderate and limited by existing orders, which halter short-term flexibility. While slight increases in A400M
transport aircraft and Eurofighter output are anticipated, the real opportunity lies in unmanned systems, where drone production could scale meaningfully by 2027. Yet this potential is hindered by the complexity of multi-national procurement structures, particularly joint programs like the Future Combat Air System (FCAS), which is likely not able to deliver operational capabilities before 2040. To unlock Airbus’ full contribution to rearmament, Germany must streamline cross-border cooperation and prioritize the development of autonomous drone systems that can be fielded independently and quickly.
New actors
Among the most agile actors is Hensoldt, a technology-driven firm specializing in radar, electronic warfare, and sensor systems. The company has demonstrated the capacity to double its TRML-4D radar output within one to two years. Still, Hensoldt is vulnerable to broader macroeconomic trends. Its reliance on global semiconductor supply chains and its exposure to a talent drain toward the civilian tech sector presents real risks to sustained output. Germany will need to take steps to secure critical chip supplies and invest in dual-use research and development programs that keep high-skilled workers engaged in the defense sector.
Political will is the key variable
The scale and pace of Germany’s military-industrial buildout will depend heavily on political will and public investment. At the high-investment end of the spectrum, the country could rapidly scale up ammunition and radar production, expand its drone and sensor capabilities, and address the infrastructure bottlenecks currently limiting the output of tanks and frigates.
Conversely, a low-investment approach would likely result in partial capacity increases, an overreliance on foreign imports, and missed delivery timelines, particularly in naval and unmanned domains. The risk is clear: without adequate funding and structural reform, Germany may lose its industrial momentum by 2030 as strategic pressure from Russia and global instability intensifies.
Creating the enabling environment
To avoid this outcome, the German government must take decisive action on several fronts. Permitting processes for new defense production facilities must be accelerated, especially in the shipbuilding and heavy manufacturing sectors. A national talent strategy focused on training workers in defense technology and naval construction is essential to address chronic labor shortages.
Berlin should also coordinate with EU partners to establish secure, long-term supply chains for critical materials, such as semiconductors, propellants, and specialized steel. For procurement, simplified governance frameworks for joint programs, particularly with France, are crucial to prevent delays in key systems, such as drones and FCAS. Finally, the government must require transparent, benchmarked delivery milestones tied to public funding, ensuring that industrial performance aligns with strategic timelines.
It can be done
Germany’s rearmament plan is industrially feasible, but its success is not guaranteed. It requires more than financial resources. It demands speed, decisiveness, and a whole-of-government approach. Without sustained political support and targeted reform, the Bundeswehr’s 2031 modernization goal may remain aspirational, deferred into the future, while Germany and Europe cannot afford delay.
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Laetitia von Schönburg is a Policy Research Fellow with the Global Policy Institute. She was born and raised in Germany. She holds a Comparative Literature and Culture degree from Royal Holloway University of London. Her academic background includes the Middle Eastern Studies Program at the University of Saint Joseph in Beirut and the History and Culture of Korea at Korea University in Seoul. |