Future of the German Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022

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The Future of the German Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022, published by Strategic Defense Intelligence, provides readers with detailed analysis of both historic and forecast defense industry values, factors influencing demand, the challenges faced by industry participants, analysis of industry leading companies, and key news.

Synopsis

This report offers detailed analysis of the German defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, it provides an in-depth analysis of the following –
– The German defense industry market size and drivers: detailed analysis of the German defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns
– Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country
– Porter’s Five Force analysis of the German defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry
– Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years
– Market opportunities: details of the top five defense investment opportunities over the next 10 years
– Competitive landscape and strategic insights: analysis of the competitive landscape of the German defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis

Scope

– Germany, a major economic power in Europe, has outlined plans to increase its defense expenditure over the forecast period in an attempt to strengthen the combat readiness of the country’s armed forces. The German Ministry of Defense (MoD) has been accused of operating a less efficient military base with an arsenal of outdated equipment. German defense expenditure is projected to increase at a CAGR of 5.0% over 2018-2022, compared to a CAGR of 2.8% over 2013-2017.

– Capital expenditure’s share of Germany’s total defense budget increased from 26.0% in 2013 to 30.7% in 2017. Over the forecast period, capital expenditure’s average share is expected to be 31.2%, while the remaining 68.8% will be directed towards revenue expenditure.

– The MoD is expected to invest in Military-IT Networking, Frigates, Transport Aircraft and Multi-role Aircraft among others.

Reasons to Buy

– This report will give the user confidence to make the correct business decisions based on a detailed analysis of the German defense industry market trends for the coming five years

– The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period

– Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector

– A deep qualitative analysis of the German defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts

Diehl Stiftung
Airbus Group
Heckler & Koch GmbH (HK)
MAN Truck & Bus AG
Airbus Helicopters
ESG Elektroniksystem-und Logistik (ESG)
ThyssenKrupp Marine Systems
Thales Deutschland
MBDA
Eurofighter Jagdflugzeug
Rheinmetall

Table of Contents

Table of Contents

1. Introduction 8

1.1. What is this Report About? 8

1.2. Definitions 8

1.3. Summary Methodology 10

1.4. About Strategic Defense Intelligence 11

2. Executive Summary 12

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Primary Threat Perception 14

3.1.2. Military Doctrine & Strategy 15

3.1.3. Military Fleet Size 16

3.1.4. Procurement Programs 20

3.1.5. Social, Political and Economic Environment and Support for Defense Projects 23

3.1.6. Political and Strategic Alliances 24

3.2. Defense Market Size Historical and Forecast 25

3.2.1. Germany’s defense expenditure is expected to increase at a CAGR of 5% over 2018-2022 25

3.2.2. Maintenance of the country’s armed forces and peacekeeping operations to drive defense expenditure over the forecast period 27

3.2.3. German defense expenditure as a percentage of GDP expected to decrease 28

3.3. Analysis of Defense Budget Allocation 30

3.3.1. Germany to allocate a higher share towards revenue expenditure than capital expenditure over the forecast period 30

3.3.2. Capital expenditure to increase at a CAGR of

5.0% over the forecast period 32

3.3.3. Per capita defense expenditure is expected to increase significantly between 2018-2022 34

3.4. Homeland Security Market Size and Forecast 36

3.4.1. German homeland security expenditure is expected to increase at a CAGR of

8.02% during the forecast period 36

3.4.2. Counter terrorism and cyber security to drive homeland security expenditure 38

3.4.3. Germany falls under “moderately affected” on the Terrorism Index 39

3.4.4. Germany has a terrorism index score of

4.3 40

3.4.5. Germany faces a moderate threat from foreign terrorist organizations 41

3.5. Benchmarking with Key Global Markets 43

3.5.1. German defense budget expected to increase over the forecast period 43

3.5.2. Germany’s defense expenditure is expected to be one of the top among European countries 45

3.5.3. Germany allocates a lower share of GDP for defense compared to other European countries 46

3.6. Market Opportunities: Key Trends and Growth Stimulators 47

3.6.1. Military IT- Networking 47

3.6.2. Frigates 48

3.6.3. Transport Aircraft 49

3.6.4. Multi-role Aircraft 50

4. Defense Procurement Market Dynamics 51

4.1. Import Market Dynamics 52

4.1.1. Defense imports are expected to remain steady during the forecast period 52

4.1.2. Germany sourced most of its arms imports from the US 53

4.1.3. Missiles and sensors dominate military hardware imports 54

4.2. Export Market Dynamics 55

4.2.1. Arms exports recovered over 2014-2016 after a decrease in 2012 and 2013 55

4.2.2. The US and Israel are Germany’s biggest arms importers 56

4.2.3. Naval vessels and armored vehicles are the main exported defense products 57

5. Industry Dynamics 58

5.1. Five Forces Analysis 58

5.1.1. Bargaining Power of Supplier: Low 59

5.1.2. Bargaining Power of Buyer: High 59

5.1.3. Barrier to Entry: Low 59

5.1.4. Intensity of Rivalry: Low 59

5.1.5. Threat of Substitution: Low 59

6. Market Entry Strategy 60

6.1. Market Regulation 60

6.1.1. Investment policy promotes 100% FDI in the defense industry 60

6.2. Market Entry Route 61

6.2.1. Budget Process 61

6.2.2. Procurement Policy and Process 62

6.2.3. Foreign defense OEMs form large conglomerates to enter the market 62

6.2.4. Foreign OEMs establish subsidiaries or form JVs to enter the industry 62

6.3. Key Challenges 63

6.3.1. Project delays deter defense industry growth 63

6.3.2. German arms exports to large defense markets outside the EU are minimal 63

7. Competitive Landscape and Strategic Insights 64

7.1. Competitive Landscape Overview 64

7.1.1. Foreign OEMs have strong collaborations with domestic defense firms 64

7.2. Key Companies 66

7.2.1. Diehl Stiftung: Overview 66

7.2.2. Diehl Stiftung: Products 66

7.2.3. Diehl Stiftung: Recent Announcements and Strategic Initiatives 66

7.2.4. Diehl Stiftung: Alliances 67

7.2.5. Diehl Stiftung: Recent Contract Wins 68

7.2.6. Airbus Group: Overview 69

7.2.7. Airbus Group: Products 69

7.2.8. Airbus Group: Recent Announcements and Strategic Initiatives 69

7.2.9. Airbus Group: Alliances 70

7.2.10. Airbus Group: Recent Contract Wins 71

7.2.11. Airbus Group: Financial Analysis 72

7.2.12. Heckler & Koch: Overview 74

7.2.13. Heckler & Koch: Products 74

7.2.14. Heckler and Koch: Recent Announcements and Strategic Initiatives 75

7.2.15. Heckler and Koch: Recent Contract Wins 75

7.2.16. MAN Truck & Bus AG: Overview 76

7.2.17. MAN Truck & Bus AG: Products and Services 76

7.2.18. MAN Truck & Bus AG: Recent Announcements and Strategic Initiatives 76

7.2.19. MAN Truck & Bus AG: Alliances 77

7.2.20. MAN Truck & Bus AG: Recent Contract Wins 77

7.2.21. Airbus Helicopters: Overview 78

7.2.22. Airbus Helicopters: Products and Services 78

7.2.23. Airbus Helicopters: Recent Announcements and Strategic Initiatives 78

7.2.24. Airbus Helicopters: Alliances 79

7.2.25. Airbus Helicopters: Recent Contract Wins 79

7.2.26. ESG Elektroniksystem-und Logistik: Overview 81

7.2.27. ESG Elektroniksystem-und Logistik: Products 81

7.2.28. ESG Elektroniksystem-und Logistik: Recent Announcements and Strategic Initiatives 81

7.2.29. ESG Elektroniksystem-und Logistik: Alliances 82

7.2.30. ESG Elektroniksystem-und Logistik: Recent Contract Wins 82

7.2.31. ThyssenKrupp Marine Systems: Overview 83

7.2.32. ThyssenKrupp Marine Systems: Products 83

7.2.33. ThyssenKrupp Marine Systems: Recent Announcements and Strategic Initiatives 83

7.2.34. ThyssenKrupp Marine Systems: Alliances 84

7.2.35. ThyssenKrupp Marine Systems: Recent Contract Wins 84

7.2.36. Thales Deutschland: Overview 85

7.2.37. Thales Deutschland: Products 85

7.2.38. Thales Deutschland: Recent Announcements and Strategic Initiatives 86

7.2.39. Thales Deutschland: Alliances 87

7.2.40. Thales Deutschland: Recent Contract Wins 87

7.2.41. MBDA: Overview 89

7.2.42. MBDA: Products 89

7.2.43. MBDA: Recent Announcements and Strategic Initiatives 90

7.2.44. MBDA: alliances 90

7.2.45. MBDA: Recent Contract Wins 91

7.2.46. Eurofighter Jagdflugzeug: Overview 93

7.2.47. Eurofighter Jagdflugzeug: Products 93

7.2.48. Eurofighter Jagdflugzeug: Recent Announcements and Strategic Initiatives 93

7.2.49. Eurofighter Jagdflugzeug: Recent Contract Wins 94

7.2.50. Rheinmetall: Overview 95

7.2.51. Rheinmetall: Products and Services 95

7.2.52. Rheinmetall: Recent Announcements and Strategic Initiatives 99

7.2.53. Rheinmetall: Alliances 100

7.2.54. Rheinmetall: Recent Contract Wins 101

7.2.55. Rheinmetall: Financial Analysis 103

8. Business Environment and Country Risk 105

8.1. Economic Performance 105

8.1.1. Gross Domestic per Capita 105

8.1.2. Gross Domestic Product, current US$ 106

8.1.3. Exports of Goods and Services 107

8.1.4. Imports of Goods and Services 108

8.1.5. Gross National Disposable Income 109

8.1.6. Local Currency Unit per US$ 110

8.1.7. Market Capitalization of Listed Companies 111

8.1.8. Market Capitalization of Listed Companies as a Percentage of GDP 112

8.1.9. Total Government Cash Surplus/Deficit as a Percentage of GDP 113

8.1.10. Goods Exports as a Percentage of GDP 114

8.1.11. Goods Imports as a Percentage of GDP 115

8.1.12. Services Exports as a Percentage of GDP 116

8.1.13. Services Imports as a Percentage of GDP 117

8.1.14. Foreign Direct Investments, Net (BoP, Current US$ billion) 118

8.1.15. Net Foreign Direct Investment as a Percentage of GDP 119

8.1.16. Mining, Manufacturing, Utilities, Output (LCU billion) 120

9. Appendix 121

9.1. About SDI 121

9.2. Disclaimer 121

Table

List of Tables

Table 1: German Army Strength 16

Table 2: German Air Force Strength 18

Table 3: German Navy Strength 19

Table 4: German – Ongoing Development and Procurement Programs 20

Table 5: German – Future Procurement Programs 22

Table 6: Germany Defense Expenditure (EUR Billion & US$ Billion), 2013-2022 25

Table 7: GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2013-2022 28

Table 8: German Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 30

Table 9: German Defense Capital Expenditure (EUR Million & US$ Million), 2013-2022 32

Table 10: Per Capita Defense Expenditure (US$), 2013-2022 34

Table 11: German Homeland Security Expenditure (EUR Billion & US$ Billion), 2013-2022 36

Table 12: Terrorism Index, 2017 41

Table 13: Benchmarking with Key Markets- 2013-2017 vs 2018-2022 43

Table 14: Germany Budget Formation Timetable 61

Table15: Key Foreign Players and Operations in the German Defense Industry 64

Table 16: Competitive Landscape of the German Defense Industry 65

Table 17: Diehl Stiftung – Product focus 66

Table 18: Diehl Stiftung – Alliances 67

Table 19: Diehl Stiftung – Contract Wins 68

Table 20: Airbus Group – Products 69

Table 21: Airbus Group – Alliances 70

Table 22: Airbus Group – Contract Wins 71

Table 23: Heckler & Koch GmbH (HK) – Products 74

Table 24: Heckler & Koch – Recent Contract Wins 75

Table 25: MAN Truck & Bus AG – Product Focus 76

Table 26: MAN Truck & Bus AG – Alliances 77

Table 27: MAN Truck & Bus AG – Recent Contract Wins 77

Table 28: Airbus Helicopters – Product Focus 78

Table 29: Airbus Helicopters – Alliances 79

Table 30: Airbus Helicopters – Contract Wins 79

Table 31: ESG Elektroniksystem-und Logistik (ESG) – Products 81

Table 32: ESG Elektroniksystem-und Logistik – Alliances 82

Table 334: ESG Elektroniksystem-und Logistik – Recent Contract Wins 82

Table 34: ThyssenKrupp Marine Systems – Product Focus 83

Table 35: ThyssenKrupp Marine Systems – Alliances 84

Table 36: ThyssenKrupp Marine Systems – Recent Contract Wins 84

Table 37: Thales Deutschland – Product Focus 85

Table 38: Thales Deutschland – Alliances 87

Table 39: Thales Deutschland – Contracts Wins 87

Table 40: MBDA – Product Focus 89

Table 41: MBDA – Alliances 90

Table 42: MBDA – Recent Contract Wins 91

Table 43: Eurofighter Jagdflugzeug – Product Focus 93

Table 44: Eurofighter Jagdflugzeug – Recent Contract Wins 94

Table 45: Rheinmetall – Product Focus 95

Table 46: Rheinmetall – Alliances 100

Table 47:Rheinmetall – Recent Contract Wins 101

Figures

List of Figures

Figure 1: German Defense Expenditure (EUR Billion), 2013-2022 26

Figure 2: German Defense Expenditure (US$ Billion), 2013-2022 26

Figure 3: GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2013-2022 29

Figure 4: German Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022 31

Figure 5: German Defense Capital Expenditure (EUR Billion), 2013-2022 33

Figure 6: German Defense Capital Expenditure (US$ Billion), 2013-2022 33

Figure 7: German Per Capita Defense Expenditure (US$), 2013-2022 35

Figure 8: German Homeland Security Expenditure (EUR Billion), 2013-2022 37

Figure 9: Germany Homeland Security Expenditure (US$ Billion), 2013-2022 37

Figure 10: Terrorism Heat Map, 2017 39

Figure 11: Terrorism Index, 2016 40

Figure 12: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 44

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022 45

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 46

Figure 15: Military IT- networking Market Size (US$ Million), 2017-2027 47

Figure 16: Frigates Market Size (US$ Million), 2017-2027 48

Figure 17: Transport Aircraft Market Size (US$ Million), 2017-2027 49

Figure 18: Multirole Aircraft Market Size (US$ Million), 2017-2027 50

Figure 19: German Defense Imports Trend, 2012-2016 (TIV values) 52

Figure 20: German Defense Imports by Country (%), 2012-2016 53

Figure 21: German Defense Imports by Category (%), 2012-2016 54

Figure 22: German Defense Exports Trend, 2012-2016 (TIV values) 55

Figure 23: German Defense Exports by Country (%), 2012-2016 56

Figure 24: German Defense Exports by Category (%), 2012-2016 57

Figure 25: Industry Dynamics Porter’s Five Forces Analysis 58

Figure 26: Airbus Group – Revenue Trend Analysis (EUR Billion), 2012-2016 72

Figure 27: Airbus Group – Operating Profit Trend Analysis (EUR Billion), 2012-2016 73

Figure 28: Airbus Group – Net Profit Trend Analysis (EUR Billion), 2012-2016 73

Figure 29: Rheinmetall – Revenue Trend Analysis (EUR Billion), 2012-2016 103

Figure 30: Rheinmetall – Operating Profit Trend Analysis (EUR Million), 2012-2016 103

Figure 31: Rheinmetall – Net Profit Trend Analysis (EUR Million), 2012-2016 104

Figure 32: Germany GDP per Capita, 2015-2025 105

Figure 33: Germany Gross Domestic Product (current US$ Billion), 2015-2025 106

Figure 34: Germany Exports of Goods and Services (LCU Billion), 2005-2014 107

Figure 35: Germany Imports of Goods and Services (LCU Billion), 2005-2014 108

Figure 36: Germany Gross National Disposable Income (US$ Billion), 2005-2012 109

Figure 37: Germany LCU per US$, 2015-2024 110

Figure 38: Germany Market Capitalization of Listed Companies (US$ Billion), 2005-2012 111

Figure 39: Germany Market Capitalization of Listed Companies as a Percentage of GDP, 2005-2012 112

Figure 40: Germany Government Cash Surplus/Deficit as a Percentage of GDP,2005-2012 113

Figure 41: Germany Goods Exports as a Percentage of GDP, 2005-2013 114

Figure 42: Germany Goods Imports as a Percentage of GDP, 2005-2013 115

Figure 43: Germany Services Exports as a Percentage of GDP, 2005-2013 116

Figure 44: Germany Services Imports as a Percentage of GDP, 2005-2013 117

Figure 45: Foreign Direct Investments, Net (BoP, Current US$ Billion) 2005-2013 118

Figure 46: Germany Net Foreign Direct Investment as a % of GDP, 2005-2013 119

Figure 47: Mining, Manufacturing, Utilities Output (LCU billion), 2005-2014 120

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