Rheinmetall’s Twin Transformations: A New Forge in Australia and a Clean Break from Automotive

As the Berlin air show gets under way this week, Rheinmetall is stepping onto the tarmac with a radically reshaped identity. The Düsseldorf-based defense contractor has unveiled two moves in quick succession: a A$50 million joint venture to build a large-calibre munitions forge in Queensland, and the long-expected sale of its civilian automotive division, Power Systems, to the investment firm AEQUITA. Taken together, they mark a definitive strategic pivot.

The Australian project, conducted through a local joint venture, will establish a plant capable of producing 15,000 artillery shells a year by the end of 2028. Canberra is racing to secure domestic ammunition supply chains, and Rheinmetall is positioning itself as the go?to partner for that effort. Financially, the contract is a rounding error for a group targeting over €14 billion in revenue this year, but it carries an outsized strategic signal: allied nations increasingly want to manufacture munitions on home soil, and the Düsseldorf group is locking in those partnerships early.

Far more consequential for the corporate structure is the exit from Power Systems. The transaction, which requires a €200 million book impairment in the current fiscal year, ends Rheinmetall’s long involvement with auto components. Investors have long pressed for a pure?play defence structure, and the move leaves the group focused solely on weapons, ammunition and air?defence systems. Behind that stands a record order backlog of €73 billion — ample ammunition for the production ramp?up that management insists will accelerate in the second half.

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

The market, however, remains unimpressed. Rheinmetall shares closed on Monday at €1,204, having lost roughly a quarter of their value since the start of the year. The stock has clawed back about 10% from its May low, and the relative strength index of 42 points to a modest easing of selling pressure, yet the downward trend is intact. The 50?day moving average still sits more than 10% above the current price — a stubborn resistance level. The first?quarter earnings miss weighed heavily, and the company must now prove it can convert its mountainous order book into revenue quickly enough to meet full?year targets.

The ILA Berlin exhibition, which opens on 10 June, serves as the backdrop for Rheinmetall’s new face. Heavy armour takes a back seat; instead, the spotlight falls on high?tech systems. Among the showpieces is the FV?014 loitering munition, a drone that can circle a target area for up to 70 minutes before striking. The group’s subsidiary ICEYE will also present radar?equipped satellites capable of delivering real?time, weather?independent imagery directly to the battlefield.

Analysts remain cautiously optimistic. The consensus price target stands near €1,889, implying roughly 57% upside from current levels. But the path to that target depends on execution. The next major milestone is the half?year results due on 6 August. Between now and then, every order announcement from the ILA floor — whether for drones, satellites or artillery shells — could provide a temporary lift. Failure to hold the €1,200 support, by contrast, risks a swift test of the year’s low. Rheinmetall has cleared its decks. Now it must deliver.

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