Rheinmetall’s Bold Move: How a German Defense Powerhouse Plans to Dominate Europe’s Naval Missile Market
Rheinmetall’s Bold Move: How a German Defense Powerhouse Plans to Dominate Europe’s Naval Missile Market
Rheinmetall’s CEO, Armin Papperger, isn’t just expanding his company’s portfolio—he’s quietly engineering a takeover of Europe’s naval missile ecosystem. Over the past few months, Papperger has made a series of strategic moves that point to a clear goal: positioning Rheinmetall as the indispensable link between European warships and the missiles they fire. He’s not after missile design itself, but rather the high-margin business of integration—the crucial bridge where warships and weapons systems meet.
In September, Rheinmetall announced its plan to buy Naval Vessels Lürssen (NVL) for about €1 billion. But Papperger didn’t emphasize ship hulls or steel production. Instead, he spoke of “naval missiles and launchers, missile defense, and sensors.” That focus says it all—he’s buying control over what goes on the ships, not just the ships themselves. Pair that with his earlier partnership talks with Lockheed Martin to set up a European missile production center (with Rheinmetall as majority owner) and a June deal with Anduril on autonomous systems, and the picture becomes crystal clear: own the shipyard, partner on the missiles, and dominate everything in between.
A Vertical Integration Masterstroke
Papperger’s plan doesn’t rely on competing with missile makers like MBDA or Kongsberg. Instead, he’s targeting the layer these giants rely on—the integration between missile and vessel. By taking over launchers, combat bridges, power systems, and training infrastructure, Rheinmetall is carving out territory free from U.S. export restrictions and ripe for profit. The missiles themselves might come from American or European suppliers, but they’ll sit on Rheinmetall’s platforms.
Europe’s naval procurement system practically invites this move. Traditional shipyards such as TKMS or Damen build top-notch vessels but don’t make the weapons that give them punch. Meanwhile, firms like Thales or MBDA build the combat brains but not the ships. Rheinmetall’s acquisition of NVL—set to finalize in early 2026—changes that balance completely. Suddenly, one company can control both the hardware and the systems that make it deadly.
Consider Germany’s aging naval fleet. Many of its frigates and corvettes are nearing the end of their 30-year service lives and need new missile and air-defense systems. These upgrades are already baked into Germany’s €377 billion defense plan, which lists over 300 projects through 2035. By anchoring itself within this domestic modernization wave, Rheinmetall can showcase its integration model before exporting it abroad.
The Lockheed Martin deal fuels the engine. Producing U.S.-made missiles like the ATACMS, Hellfire, JAGM, and PAC-3 within Germany under Rheinmetall’s majority ownership offers European militaries an irresistible proposition: American-grade firepower without American bureaucracy. That means shorter timelines, fewer export delays, and NATO interoperability. For Rheinmetall, every launcher, integration task, and training program becomes a tollbooth on Europe’s road to rearmament.
A Perfect Storm of Politics and Opportunity
Two events in 2025 cracked open the door for Papperger’s ambitions. In July, Washington halted some missile deliveries to Ukraine, reminding Europe just how dependent it remains on U.S. supply chains. Then, in October, the European Commission unveiled its “Readiness 2030” and “ReArm Europe” plans, both designed to boost European missile production and defense autonomy.
Papperger pounced. With naval modernization underway across Germany, the Netherlands, Belgium, and the Nordics, he saw the moment to insert Rheinmetall at the core of every integration project. Whenever a navy upgrades its warships with new missiles, sensors, or electronic warfare suites, Rheinmetall wants to be the one connecting the dots—and collecting the fees. This isn’t just profitable; it’s sticky. Once Rheinmetall’s systems are embedded in a ship, replacing them becomes costly and complicated, locking in long-term business.
Capital-Light, Profit-Heavy
Investors love the elegance of Papperger’s approach. NVL already generates around €1 billion in annual revenue and carries a €5 billion order backlog. The question isn’t whether Rheinmetall can build ships—it’s how much higher-margin tech and integration content Papperger can layer on top without draining cash flow.
His playbook is simple but shrewd. Whether it’s the Bulgarian ammunition joint venture, the planned Lockheed missile center, or new powder plants in Romania, Rheinmetall consistently follows a 51-49 ownership model. The company holds control and profit rights, while governments or EU funds cover most of the capital costs. It’s a clever way to expand without risking the balance sheet.
If Rheinmetall applies that same strategy to missile launchers, test sites, or training centers, it could dramatically improve returns. Shipbuilding margins hover in the low teens, but add integrated systems with higher profitability, and Rheinmetall’s naval division could outperform traditional yards by 200 to 300 basis points. The missile partnerships add even more upside. Even a small slice of that business could bring in hundreds of millions over the next few years.
More than short-term revenue, though, the real prize is stability. Defense investors reward predictability, and Rheinmetall’s expanding order book offers exactly that. As land-based systems orders eventually plateau, naval integration provides the next growth wave—if Papperger executes it smoothly.
Shaking Up Europe’s Naval Power Map
Papperger’s expansion is already disrupting Europe’s defense landscape. Germany now effectively has two naval heavyweights: the long-dominant ThyssenKrupp Marine Systems (TKMS) and the emerging Rheinmetall-NVL alliance. Berlin has pushed for consolidation for years, and Papperger just handed it one—on his own terms. That gives him significant leverage to push for “Made in Germany” solutions on German-funded projects.
This shift puts pressure on incumbents like MBDA and Thales, who dominate France and Italy’s naval markets. They now face a new rival on German and allied export deals. Rheinmetall doesn’t have to replace them entirely; it only needs to control the integration layer—deciding which missiles go where and ensuring every future upgrade runs through its systems.
Still, the challenge ahead is enormous. Over the next few years, Rheinmetall must integrate NVL, launch the Lockheed missile center, scale its ammunition ventures, and keep up with surging land-system demand—all at once. The NVL deal still awaits antitrust and national security approval, likely by early 2026. Any holdup could push revenues back and squeeze margins.
Yet Papperger’s strategy remains unmistakable. He’s not building a missile factory; he’s building the command bridge of Europe’s naval supply chain. In doing so, he’s positioning Rheinmetall at the crossroads of every future European warship program—a place where control means profit, and timing means everything.
NOT INVESTMENT ADVICE