Rheinmetall Draws a Line Under Automotive with €350 Million Sale, but Investors Need More Than Strategy

The market's skepticism is proving hard to shake. Rheinmetall has finally severed its last ties to the civilian automotive world, selling its Power Systems division to the Munich-based buyout firm AEQUITA for a headline price of €350 million. The move transforms the Düsseldorf group into a near-pure defence and aerospace play — yet the share price remains stubbornly anchored in negative territory, underlining the gap between strategic clarity and investor conviction.

The transaction encompasses around 6,250 employees and storied brands such as Pierburg. Roughly 34,000 staff will remain with Rheinmetall, which is now solely focused on military equipment, ammunition, and advanced technology. Management expects the sale to close by the fourth quarter of 2026, bringing the chapter of supplying European carmakers to a definitive end. The logic behind the exit is plain: last year the defence business generated roughly €10 billion in revenue, dwarfing the automotive unit’s €2 billion contribution, which had also been suffering from slack demand among European auto manufacturers.

On the exhibition floor of the ILA Berlin air show, which opens tomorrow at the capital’s airport, Rheinmetall is showcasing the breadth of its new identity. Its 840-square-metre stand features the MQ-28 Ghost Bat, an autonomous combat drone developed jointly with Boeing that has already completed more than 150 test flights. The Bundeswehr has pencilled in a procurement decision for 2029. Equally prominent is the group’s foray into space: the Rheinmetall ICEYE joint venture recently landed a contract worth over €1 billion to supply the German armed forces with reconnaissance data from synthetic-aperture radar satellites. Closer to the ground, the company’s facility in Weeze is producing centre fuselage sections for the F-35 Lightning II under a 400-unit order from Northrop Grumman; the eighth component is already on the assembly line.

Should investors sell immediately? Or is it worth buying Rheinmetall?

Behind the headline numbers, the financials tell a more complicated story. Rheinmetall’s order backlog stands at nearly €64 billion, a record. Yet the first quarter of 2026 delivered revenue of €1.94 billion — an 8% increase year-on-year but roughly 15% short of analyst expectations. Management has kept its full-year guidance of €14 billion to €14.5 billion in sales, arguing that the production ramp-up and major contractual deliveries are weighted towards the second half of the year.

The disconnect between fundamentals and sentiment is stark. Since the start of the year the stock has lost 25% of its value, and at €1,201 it now trades 40% below its 52-week high of €1,995. Technical indicators look similarly bruised: the price has fallen nearly 26% below its 200-day moving average, with only the recent trough around €1,100 offering a modest floor.

Analysts remain broadly upbeat. Of the 21 experts covering the stock, 18 rate it a buy and three a hold, with a consensus price target of €1,889 — far above the current level. The bullish case rests on the accelerating pace of European defence spending and the sheer scale of the order book. But the market is demanding proof that a record intake of contracts can be converted into sustainable earnings growth.

For now, Rheinmetall’s management is sticking to its narrative. The second half of the year, it insists, will deliver the financial evidence the market is waiting for. With the automotive side officially consigned to history and the ILA showcase demonstrating the breadth of its capabilities, the company has offered the strategic vision. The hard part — convincing the stock market to believe in it — still lies ahead.

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