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A joint venture between Leonardo of Italy and Germany’s Rheinmetall to build tanks for the Italian army will open up new overseas markets and pave the way for greater consolidation in Europe’s arms sector, according to the chief executives of the two groups.
“The goal is to create a new generation of vehicles that are superior compared to competitors in terms of their technical characteristics,” Leonardo chief executive Roberto Cingolani told the Financial Times in an interview.
If the tank performs well, “it will open new global markets for us that we could not have competed in as standalone [companies],” he said.
The announcement comes after the Italian contractor last month said negotiations to collaborate with Franco-German tank venture KNDS, an alliance of France’s Nexter and Germany’s Krauss-Maffei Wegmann, had broken down.
Defence sector collaboration in Europe has historically been hampered by disagreements among governments over how to ensure national sovereignty and equal work share.
However, Cingolani expressed confidence in the Italian-German deal. “A platform like this one has good chances of being competitive for the European main battle tank,” he said.
![Leonardo chief executive Roberto Cingolani](https://skynews.icu/wp-content/uploads/2024/07/German-Italian-tank-tie-up-sets-sights-on-global-markets.jpg)
Under the 50:50 joint venture unveiled this week, Leonardo and Rheinmetall will be the lead contractor to develop Italy’s main battle tank and armoured infantry combat vehicles, based on the German company’s Panther and Lynx models respectively.
Leonardo will play a key role in the construction, especially for the electronics and tank turrets, the rotating hubs which sit on top of the vehicle’s main body.
Italy’s decision this year to allocate around €20bn over 15 years to renew the country’s armoured vehicle fleet helped to spur collaboration talks between the contractors.
On Leonardo’s talks with KNDS, Cingolani said the Italian group pulled out because there was “no clear industrial strategy in the long term” for the Italian group.
“Our technology contribution would have been minimal on their platform. They would have sold their platform, we would have made a few components, but the platform would have been theirs [not a joint one],” he said.
Europe’s land vehicle industry remains fragmented despite the wake-up call from Russia’s invasion of Ukraine and the ensuing boost in defence spending among governments. Progress on a Franco-German plan for a joint tank, dubbed the Main Ground Combat System (MGCS), has been slow amid political discord.
Armin Papperger, chief executive of Rheinmetall, told the FT in a separate interview that in order to balance concerns around maintaining national sovereignty with the need to consolidate, it was important for the companies involved to enter into a true partnership.
“That is the reason that we created this joint venture. If you have a German-Italian joint venture, it is a long-term partnership in that area, you can do both.”
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The venture will be headquartered in Italy, where 60 per cent of the work will be done but split equally between the two companies; 50 per cent will be done by Leonardo in Italy with another 10 per cent done by Rheinmetall’s Italian-based workforce. The rest will be carried out by Rheinmetall in Germany.
Ester Sabatino, research associate for Defence and Military Analysis at the International Institute for Strategic Studies, said the new joint venture could also prove a competitor to the European tank programme MGCS led by KNDS, which also includes Rheinmetall.
It could “go in and take the spot of delivering an intermediate solution for a European main battle tank if there are further delays to the MGCS programme,” she said.
“What is certain is that despite political declarations on the willingness to consolidate. industrial interests and competences remain key challenges [for MGCS].”
Both companies expect to move quickly. The venture, said Cingolani, “allows us to start immediately which is very important”.
“This is the first tangible step in the direction of the European defence space we’ve been talking about for a few months,” he added.
The venture has already had inquiries from potential export customers, said Papperger, noting that securing orders from other European nations would help to drive consolidation.
“We think other nations will also order now from that joint venture so that you can make a European network and this network will have production lines in different satellite states,” he said.
It was a “process that we have to learn in Europe”, he added. “We have to involve a lot of different countries, not only two or three, and then we have a European solution.”
On the new venture’s position in Europe’s defence map, Papperger said it could eventually join the Franco-German MGCS. “Long-term I believe Italy will also, with this opportunity, be part of the MGCS,” he said.