Defense
The German Defense Industry –
Market Opportunities, Entry
Strategies, Analyses and Forecasts
to 2016
Reference code: DF0064MR
Published: January 2012
www.icd-research.com
Table of Contents
TABLE OF CONTENTS
1 Introduction ......................................................................................................................... 11
1.1 What is this Report About? ..........................................................................................................11
1.2 Definitions .....................................................................................................................................11
1.3 Summary Methodology .................................................................................................................13
1.4 ICD Research Terrorism Index .....................................................................................................14
1.5 About ICD Research......................................................................................................................14
1.6 About Strategic Defense Intelligence ..........................................................................................14
2 Executive Summary ............................................................................................................ 15
3 Market Attractiveness and Emerging Opportunities ........................................................ 17
3.1 Defense Market Size Historical and Forecast..............................................................................18
3.1.1 German annual defense expenditure to reach US$44.4 billion by 2016 ................................................ 18
3.1.2 Defense expenditure driven by factors such as security of EU, peacekeeping initiatives and A400M
development program ...................................................................................................................................... 21
3.1.3 Defense expenditure as a percentage of GDP expected to decrease ................................................... 22
3.2 Analysis of Defense Budget Allocation .......................................................................................24
3.2.1 Majority of defense budget allocated for the acquisition of advanced technology and equipment .......... 24
3.2.2 Air force receives largest capital expenditure allocation ........................................................................ 27
3.2.3 Capital expenditure for army is expected to increase............................................................................ 29
3.2.4 Capital expenditure of air force is expected to decrease ....................................................................... 31
3.2.5 Naval capital expenditure is set to increase.......................................................................................... 33
3.2.6 R&D expenditure is expected to increase ............................................................................................. 35
3.3 Homeland Security Market Size and Forecast ............................................................................37
3.3.1 Homeland security budget US$4.8 billion for 2010 ............................................................................... 37
3.3.2 Preventive defense measures used to counter terrorism threat ............................................................ 37
3.3.3 Germany has a moderate threat of terrorism ........................................................................................ 40
3.4 Benchmarking with Key Global Markets .....................................................................................42
3.4.1 German defense budget growth expected to be negligible over the forecast period .............................. 42
3.4.2 Germany‘s rank of the sixth-largest defense spender set to decline...................................................... 44
3.4.3 Germany allocates 1.2% of its GDP for defense expenditure................................................................ 45
3.5 Market Opportunities: Key Trends and Growth Stimulators ......................................................46
3.5.1 Demand for heavy lift helicopters to increase ....................................................................................... 46
3.5.2 Increased spending on Interactive Defense and Attack System for Submarines weapons .................... 46
3.5.3 Demand for medium-altitude long-endurance (MALE) UAVs will increase ............................................ 47
3.5.4 Germany plan to procure armored vehicles will increase business opportunities .................................. 47
4 Defense Procurement Market Dynamics ........................................................................... 48
4.1 Import Market Dynamics ...............................................................................................................48
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4.1.1 Network centric warfare capability for peacekeeping initiatives drive defense imports ........................... 48
4.1.2 Netherlands and the US are Germany‘s main arms suppliers ............................................................... 48
4.2 Export Market Dynamics ..............................................................................................................50
4.2.1 Superior defense technology and strong trade relationships with other countries will continue to drive
defense exports ............................................................................................................................................... 50
4.2.2 Germany‘s arms exports grew during 2005–2010 ................................................................................ 50
4.2.3 Germany is the third-largest arms exporter globally .............................................................................. 51
4.2.4 Ships and armored vehicles are the main exported defense products .................................................. 52
5 Industry Dynamics .............................................................................................................. 54
5.1 Five Forces Analysis.....................................................................................................................54
5.1.1 Bargaining power of supplier: low ........................................................................................................ 55
5.1.2 Bargaining power of buyer: high........................................................................................................... 55
5.1.3 Barrier to entry: low.............................................................................................................................. 55
5.1.4 Intensity of rivalry: low ......................................................................................................................... 55
5.1.5 Threat of substitution: low .................................................................................................................... 55
6 Market Entry Strategy ......................................................................................................... 56
6.1 Market Regulation .........................................................................................................................56
6.1.1 Investment policy promotes 100% FDI in the defense industry ............................................................. 56
6.2 Market Entry Route .......................................................................................................................56
6.2.1 Foreign defense OEMs form large conglomerates to enter the market ................................................. 56
6.2.2 Foreign OEMs establish subsidiaries or form JV to enter the industry ................................................... 56
6.3 Key Challenges .............................................................................................................................57
6.3.1 The European debt crisis will negatively affect defense procurements.................................................. 57
6.3.2 Modernization of military through downsizing existing systems and personnel ...................................... 57
6.3.3 German arms exports to large defense markets outside EU are minimal .............................................. 57
7 Competitive Landscape and Strategic Insights ................................................................ 58
7.1 Competitive Landscape Overview ...............................................................................................58
7.1.1 Foreign OEMs have strong collaborations with domestic defense firms ................................................ 58
7.2 Key Domestic Companies ............................................................................................................59
7.2.1 Heckler & Koch: overview .................................................................................................................... 59
7.2.2 Heckler & Koch: products and services ................................................................................................ 59
7.2.3 Heckler & Koch: recent announcements and strategic initiatives .......................................................... 60
7.2.4 Heckler & Koch: alliances .................................................................................................................... 60
7.2.5 Heckler & Koch: recent contract wins ................................................................................................... 60
7.2.6 Heckler & Koch: financial analysis........................................................................................................ 60
7.2.7 MAN Nutzfahrzeuge: overview............................................................................................................. 61
7.2.8 MAN Nutzfahrzeuge: products and services ......................................................................................... 61
7.2.9 MAN Nutzfahrzeuge: recent announcements and strategic initiatives ................................................... 61
7.2.10 MAN Nutzfahrzeuge: alliances ............................................................................................................. 62
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7.2.11 MAN Nutzfahrzeuge: recent contract wins............................................................................................ 62
7.2.12 MAN Nutzfahrzeuge: financial analysis ................................................................................................ 62
7.2.13 Eurocopter: overview ........................................................................................................................... 63
7.2.14 Eurocopter: products and services ....................................................................................................... 63
7.2.15 Eurocopter: recent announcements and strategic initiatives ................................................................. 63
7.2.16 Eurocopter: alliances ........................................................................................................................... 64
7.2.17 Eurocopter: recent contract wins .......................................................................................................... 64
7.2.18 Eurocopter: financial analysis .............................................................................................................. 64
7.2.19 ESG Elektroniksystem- und Logistik: overview ..................................................................................... 65
7.2.20 ESG Elektroniksystem- und Logistik: products and services ................................................................. 65
7.2.21 ESG Elektroniksystem- und Logistik: recent announcements and strategic initiatives ........................... 66
7.2.22 ESG Elektroniksystem- und Logistik: alliances ..................................................................................... 66
7.2.23 ESG Elektroniksystem- und Logistik: recent contract wins .................................................................... 66
7.2.24 ESG Elektroniksystem- und Logistik: financial analysis ........................................................................ 66
7.2.25 Diehl Stiftung: overview ....................................................................................................................... 67
7.2.26 Diehl Stiftung: products and services ................................................................................................... 67
7.2.27 Diehl Stiftung: recent announcements and strategic initiatives.............................................................. 67
7.2.28 Diehl Stiftung: alliances........................................................................................................................ 68
7.2.29 Diehl Stiftung: recent contract wins ...................................................................................................... 68
7.2.30 Diehl Stiftung: financial analysis ........................................................................................................... 68
7.2.31 ThyssenKrupp Marine Systems: overview ............................................................................................ 69
7.2.32 ThyssenKrupp Marine Systems: products and services........................................................................ 69
7.2.33 ThyssenKrupp Marine Systems: recent announcements and strategic initiatives .................................. 69
7.2.34 ThyssenKrupp Marine Systems: alliances ............................................................................................ 70
7.2.35 ThyssenKrupp Marine Systems: recent contract wins........................................................................... 70
7.2.36 ThyssenKrupp Marine Systems: financial analysis ............................................................................... 70
7.2.37 Thales Deutschland: overview ............................................................................................................. 71
7.2.38 Thales Deutschland: products and services ......................................................................................... 71
7.2.39 Thales Deutschland: recent announcements and strategic initiatives.................................................... 73
7.2.40 Thales Deutschland: alliances.............................................................................................................. 73
7.2.41 Thales Deutschland: recent contract wins ............................................................................................ 74
7.2.42 Thales Deutschland: Financial Analysis ............................................................................................... 74
7.2.43 EADS: overview................................................................................................................................... 75
7.2.44 EADS: product and services ................................................................................................................ 75
7.2.45 EADS: recent announcements and strategic initiatives ......................................................................... 75
7.2.46 EADS: alliances................................................................................................................................... 76
7.2.47 EADS: recent contract wins ................................................................................................................. 76
7.2.48 EADS: financial analysis ...................................................................................................................... 76
7.2.49 Airbus Military: overview ...................................................................................................................... 77
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7.2.50 Airbus Military: products and services .................................................................................................. 77
7.2.51 Airbus Military: recent announcements and strategic initiatives............................................................. 78
7.2.52 Airbus Military: alliances ...................................................................................................................... 78
7.2.53 Airbus Military: recent contract wins ..................................................................................................... 78
7.2.54 Airbus Military: financial analysis.......................................................................................................... 78
7.2.55 MBDA: overview .................................................................................................................................. 79
7.2.56 MBDA: products and services .............................................................................................................. 79
7.2.57 MBDA: recent announcements and strategic initiatives ........................................................................ 80
7.2.58 MBDA: alliances .................................................................................................................................. 81
7.2.59 MBDA: recent contract Wins ................................................................................................................ 81
7.2.60 MBDA: financial analysis ..................................................................................................................... 81
7.2.61 Eurofighter Jagdflugzeug: overview ..................................................................................................... 82
7.2.62 Eurofighter Jagdflugzeug: products and services ................................................................................. 82
7.2.63 Eurofighter Jagdflugzeug: recent announcements and strategic initiatives............................................ 82
7.2.64 Eurofighter Jagdflugzeug: alliances...................................................................................................... 82
7.2.65 Eurofighter Jagdflugzeug: recent contract wins .................................................................................... 83
7.2.66 Eurofighter Jagdflugzeug: financial analysis ......................................................................................... 83
7.2.67 Rheinmetall: overview.......................................................................................................................... 84
7.2.68 Rheinmetall AG: products and services................................................................................................ 84
7.2.69 Rheinmetall: recent announcements and strategic initiatives ................................................................ 88
7.2.70 Rheinmetall: alliances .......................................................................................................................... 89
7.2.71 Rheinmetall: recent contract wins ........................................................................................................ 89
7.2.72 Rheinmetall: financial analysis ............................................................................................................. 89
8 Business Environment and Country Risk ......................................................................... 92
8.1 Business Confidence ....................................................................................................................92
8.1.1 business confidence index ................................................................................................................... 92
8.1.2 Market capitalization trend – The Frankfurt Stock Exchange (FWB), Germany ..................................... 93
8.1.3 FDI inflows by industry ......................................................................................................................... 94
8.1.4 Deployment of credit by industry .......................................................................................................... 95
8.2 Economic Performance ................................................................................................................96
8.2.1 GDP at constant prices ........................................................................................................................ 96
8.2.2 GDP per capita at constant prices ........................................................................................................ 97
8.2.3 GDP at current prices .......................................................................................................................... 98
8.2.4 GDP per capita at current prices .......................................................................................................... 99
8.2.5 GDP split by key industries ................................................................................................................ 100
8.2.6 Agriculture – agriculture net output at current prices (local currency) .................................................. 101
8.2.7 Agriculture – agriculture net output at current prices (us dollar) .......................................................... 102
8.2.8 Agriculture – agriculture net output at current prices as a percentage of gdp ...................................... 103
8.2.9 Manufacturing – manufacturing net output at current prices (local currency) ....................................... 104
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8.2.10 Manufacturing – manufacturing net output at current prices (us dollar) ............................................... 105
8.2.11 Manufacturing – manufacturing net output-current prices as a percentage of gdp............................... 106
8.2.12 Manufacturing – mining, manufacturing and utilities net output at current prices (local currency) ........ 107
8.2.13 Manufacturing – mining, manufacturing and utilities at current prices (us dollars) ............................... 108
8.2.14 Manufacturing – mining, manufacturing and utilities at current prices, as a percentage of gdp ............ 109
8.2.15 Construction – construction net output at current prices, (local currency)............................................ 110
8.2.16 Construction – construction net output at current prices (us dollar) ..................................................... 111
8.2.17 Construction – construction output-current prices as a percentage of GDP......................................... 112
8.2.18 Industry – crude steel production ....................................................................................................... 113
8.2.19 Industry – crude oil consumption........................................................................................................ 114
8.2.20 Inflation rate....................................................................................................................................... 115
8.2.21 Fiscal deficit as a percentage of GDP ................................................................................................ 116
8.2.22 Trade balance as a percentage of GDP ............................................................................................. 117
8.2.23 Exports as a percentage of GDP........................................................................................................ 118
8.2.24 Imports as a percentage of GDP ........................................................................................................ 119
8.2.25 Exports growth .................................................................................................................................. 120
8.2.26 Imports growth ................................................................................................................................... 121
8.2.27 Exchange rate US$–EUR (annual average) ....................................................................................... 122
8.2.28 Exchange rate US$–EUR (end of fiscal) ............................................................................................ 123
8.3 Infrastructure Quality and Availability ....................................................................................... 124
8.3.1 Transport – total airports and ports .................................................................................................... 124
8.3.2 Transport – railways system .............................................................................................................. 125
8.3.3 Transport – passenger vehicle production volume.............................................................................. 126
8.3.4 Transport – commercial vehicle production volume ............................................................................ 127
8.3.5 Transport – automotive components export trend............................................................................... 128
8.3.6 Transport – automotive products import trend .................................................................................... 129
8.3.7 Transport – passenger vehicle export trend ....................................................................................... 130
8.3.8 Transport – commercial vehicle export trend ...................................................................................... 131
8.3.9 Transport – passenger car penetration............................................................................................... 132
8.3.10 Utilities – total installed capacity for electricity generation ................................................................... 133
8.3.11 Utilities – installed capacity for conventional thermal electricity generation ......................................... 134
8.3.12 Utilities – electricity production ........................................................................................................... 135
8.3.13 Utilities – installed capacity for hydro-electricity generation................................................................. 136
8.3.14 Utilities – installed capacity for renewable electricity generation ......................................................... 137
8.3.15 Utilities – electric power consumption................................................................................................. 138
8.3.16 Utilities – electricity exports ................................................................................................................ 139
8.3.17 Utilities – electricity imports ................................................................................................................ 140
8.3.18 Healthcare – healthcare expenditure.................................................................................................. 141
8.3.19 Healthcare – healthcare expenditure as a percentage of GDP ........................................................... 142
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8.3.20 Healthcare – healthcare expenditure per capita ................................................................................. 143
8.3.21 Technology – R&D expenditure as a percentage of GDP ................................................................... 144
8.3.22 Communication – total internet subscribers ........................................................................................ 145
8.3.23 Communication – broadband internet subscribers .............................................................................. 146
8.3.24 Communication – personal computer penetration............................................................................... 147
8.3.25 Communication – mobile phone penetration rate................................................................................ 148
8.4 Labor Force .................................................................................................................................149
8.4.1 Labor force ........................................................................................................................................ 149
8.4.2 Unemployment rate ........................................................................................................................... 150
8.5 Demographics ............................................................................................................................. 151
8.5.1 Annual disposable income ................................................................................................................. 151
8.5.2 Annual per capita disposable income ................................................................................................. 152
8.5.3 Annual consumer expenditure on food ............................................................................................... 153
8.5.4 Annual per capita consumer expenditure on food ............................................................................... 154
8.5.5 Urban and rural population................................................................................................................. 155
8.5.6 Females as a percentage of the population ........................................................................................ 156
8.5.7 Males as a percentage of the population ............................................................................................ 157
8.5.8 Mean age of population ..................................................................................................................... 158
8.5.9 Median age of population................................................................................................................... 159
8.5.10 Population density ............................................................................................................................. 160
8.5.11 Age distribution – total population ...................................................................................................... 161
8.5.12 Age distribution-of male population .................................................................................................... 162
8.5.13 Age distribution of female population ................................................................................................. 163
8.5.14 Number of households ....................................................................................................................... 164
8.6 Political and Social Risk .............................................................................................................165
8.6.1 Political Stability................................................................................................................................. 165
8.6.2 Terrorism Index ................................................................................................................................. 165
8.6.3 Transparency Index ........................................................................................................................... 166
9 Appendix ............................................................................................................................ 167
9.1 Contact Us ...................................................................................................................................167
9.2 About ICD Research....................................................................................................................167
9.3 Disclaimer ....................................................................................................................................167
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List of Figures
LIST OF FIGURES
Figure 1: German Defense Expenditure, 2007–2011 .................................................................................................................................................. 19
Figure 2: German Defense Expenditure, 2012–2016 .................................................................................................................................................. 20
Figure 3: German Defense Expenditure as a Percentage of GDP, 2007–2011 ......................................................................................................... 22
Figure 4: German Defense Expenditure as a Percentage of GDP, 2012–2016 ......................................................................................................... 23
Figure 5: German Defense Budget Split Between Capital and Revenue Expenditure, 2007–2011 .......................................................................... 25
Figure 6: German Defense Budget Split Between Capital and Revenue Expenditure, 2012–2016 .......................................................................... 26
Figure 7: German Defense Capital Expenditure Breakdown (%), 2007–2011 ........................................................................................................... 27
Figure 8: German Defense Capital Expenditure Breakdown (%), 2012–2016 ........................................................................................................... 28
Figure 9: German Defense Capital Expenditure for Army (US$ million), 2007–2011................................................................................................. 29
Figure 10: German Defense Capital Expenditure for Army (US$ million), 2012–2016 .............................................................................................. 30
Figure 11: German Defense Capital Expenditure for Air Force (US$ million), 2007–2011 ........................................................................................ 31
Figure 12: German Defense Capital Expenditure for Air Force (US$ million), 2012–2016 ........................................................................................ 32
Figure 13: German Defense Capital Expenditure for Navy (US$ million), 2007–2011 ............................................................................................... 33
Figure 14: German Defense Capital Expenditure for Navy (US$ million), 2012–2016 ............................................................................................... 34
Figure 15: German Defense Capital Expenditure for R&D (US$ million), 2007–2011 ............................................................................................... 35
Figure 16: German Defense Capital Expenditure for R&D (US$ million), 2012–2016 ............................................................................................... 36
Figure 17: ICD Research Terrorism Heat Map ............................................................................................................................................................. 38
Figure 18: ICD Research Terrorism Heat Index ........................................................................................................................................................... 39
Figure 19: Benchmarking with Key Markets – 2007–2011 vs 2012–2016 .................................................................................................................. 43
Figure 20: Benchmarking with World‘s Largest Defense Spenders – 2011 and 2016 ............................................................................................... 45
Figure 21: Benchmarking with Large Defense Spenders as Percentage of GDP – 2011 .......................................................................................... 45
Figure 22: German Defense Imports by Supplier Country (%), 2005–2010 ............................................................................................................... 49
Figure 23: German Defense Imports by Category (%), 2005–2010 ............................................................................................................................ 49
Figure 24: German Defense Exports (US$ Million), 2005–2010 ................................................................................................................................. 50
Figure 25: Global Top Ten Arms Suppliers(%), 2005–2010 ........................................................................................................................................ 51
Figure 26: Top German Arms Importers by Country (%), 2005–2010 ........................................................................................................................ 52
Figure 27: German Defense Exports by Category (%), 2005–2010 ............................................................................................................................ 53
Figure 28: Industry Dynamics – Porter‘s Five Forces Analysis ................................................................................................................................... 54
Figure 29: Rheinmetall – Revenue Trend Analysis (EUR Million), 2005–2009 .......................................................................................................... 90
Figure 30: Rheinmetall – Operating Profit Trend Analysis (EUR Million), 2005–2009 ............................................................................................... 90
Figure 31: Rheinmetall – Net Profit Trend Analysis (EUR Million), 2005–2009 .......................................................................................................... 91
Figure 32: German Business Confidence Index, 2008–2010 ...................................................................................................................................... 92
Figure 33: The Frankfurt Stock Exchange (FWB) Market Capitalization, 2003–2009 ................................................................................................ 93
Figure 34: German FDI Inflows by Sector, 2003–2008 ................................................................................................................................................ 94
Figure 35: German Deployment of Credit by Sector, 2003–2009 ............................................................................................................................... 95
Figure 36: German GDP Value at Constant Prices, 2003–2015 ................................................................................................................................. 96
Figure 37: German GDP Per Capita at Constant Prices, 2003-2015 .......................................................................................................................... 97
Figure 38: German GDP at Current Prices, 2003–2015 .............................................................................................................................................. 98
Figure 39: German GDP Per Capita at Current Prices, 2003–2015 ........................................................................................................................... 99
Figure 40: German GDP Split by Key Industries, 2003 Vs 2009 ............................................................................................................................... 100
Figure 41: German Agriculture Net Output at Current Prices (Local Currency), 2003–2015 ................................................................................... 101
Figure 42: German Agriculture Net Output at Current Prices (US Dollar), 2003–2015 ............................................................................................ 102
Figure 43: German Agriculture Net Output at Current Prices (% of GDP), 2003–2015 ........................................................................................... 103
Figure 44: German Manufacturing Net Output at Current Prices (Local Currency), 2003–2015 ............................................................................. 104
Figure 45: German Manufacturing Net Output at Current Prices (US Dollar), 2003–2015 ...................................................................................... 105
Figure 46: German Manufacturing Net Output at Current Prices (% of GDP), 2003–2015 ...................................................................................... 106
Figure 47: German Mining, Manufacturing and Utilities Net Output at Current Prices (Local Currency), 2003–2015 ............................................ 107
Figure 48: German Mining, Manufacturing and Utilities Output at Current Prices (US Dollar), 2003–2015 ............................................................ 108
Figure 49: German Mining, Manufacturing, Utilities Output at Current Prices (% of GDP), 2003–2015 ................................................................. 109
Figure 50: German Construction Net Output, at Current Prices (Local Currency), 2003–2015 ............................................................................... 110
Figure 51: German Construction Net Output, at Current Prices (US Dollar), 2003–2015 ........................................................................................ 111
Figure 52: German Construction Output, at Current Prices (% of GDP), 2003–2015 .............................................................................................. 112
Figure 53: German Crude Steel Production, 2003–2015........................................................................................................................................... 113
Figure 54: German Crude Oil Consumption, 2003–2015 .......................................................................................................................................... 114
Figure 55: German Inflation Rate, 2003–2015 ........................................................................................................................................................... 115
Figure 56: German Fiscal Deficit as a percentage of GDP, 2003–2015 ................................................................................................................... 116
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List of Figures
Figure 57: German Trade Balance as a percentage of GDP, 2003–2009 ................................................................................................................ 117
Figure 58: German Exports as a Percentage of GDP, 2003–2015 ........................................................................................................................... 118
Figure 59: German Imports as a Percentage of GDP, 2003–2015 ........................................................................................................................... 119
Figure 60: German Exports Growth, 2003–2015 ....................................................................................................................................................... 120
Figure 61: German Imports Growth, 2003–2015........................................................................................................................................................ 121
Figure 62: German Exchange Rate US$-EUR (Annual Average), 2003–2009 ........................................................................................................ 122
Figure 63: German Exchange Rate (End of Fiscal ), 2003–2009.............................................................................................................................. 123
Figure 64: German Airports and Ports, 2009.............................................................................................................................................................. 124
Figure 65: German Railways, 2009 ............................................................................................................................................................................ 125
Figure 66: German Passenger Vehicle Production, 2003–2015 ............................................................................................................................... 126
Figure 67: German Commercial Vehicle Production, 2003–2015 ............................................................................................................................. 127
Figure 68: German Automotive Components Exports, 2003–2015 ........................................................................................................................... 128
Figure 69: German Automotive Components Imports, 2003–2015 ........................................................................................................................... 129
Figure 70:German Passenger Vehicle Exports, 2003–2015 ..................................................................................................................................... 130
Figure 71: German Commercial Vehicle Exports, 2003–2015 .................................................................................................................................. 131
Figure 72: German Passenger Car Penetration (per 1000 people), 2003–2015 ...................................................................................................... 132
Figure 73: German Total Installed Capacity for Electricity Generation, 2003–2015 ................................................................................................. 133
Figure 74: German Installed Capacity for Conventional Thermal Electricity Generation, 2003–2015 ..................................................................... 134
Figure 75: German Electricity Production, 2003–2015 .............................................................................................................................................. 135
Figure 76: German Installed Capacity for Hydro-electricity Generation, 2003–2015 ............................................................................................... 136
Figure 77: German Installed Capacity for Renewable Electricity Generation, 2003–2015 ...................................................................................... 137
Figure 78: German Electric Power Consumption, 2003–2015 .................................................................................................................................. 138
Figure 79: German Electricity Exports, 2003–2015 ................................................................................................................................................... 139
Figure 80: German Electricity Imports, 2003–2015 .................................................................................................................................................... 140
Figure 81: German Healthcare Expenditure, 2003–2015 .......................................................................................................................................... 141
Figure 82: German Healthcare Expenditure as a Percentage (%) of GDP, 2003–2015 .......................................................................................... 142
Figure 83: German Per Capita Healthcare Expenditure, 2003–2015 ........................................................................................................................ 143
Figure 84: German R&D Expenditure as a percentage of GDP, 2003–2015 ........................................................................................................... 144
Figure 85: German Internet Subscribers, 2003–2015 ................................................................................................................................................ 145
Figure 86: German Broadband Internet Subscribers, 2003–2015............................................................................................................................. 146
Figure 87: German Personal Computer Usage (per 100 people), 2003–2015 ......................................................................................................... 147
Figure 88: German Mobile Phone Penetration (per 100 people), 2003–2015 .......................................................................................................... 148
Figure 89: German Size of Labor Force (in 15–59 Age Group), 2003–2015 ............................................................................................................ 149
Figure 90: German Unemployment Rate, 2003–2015 ............................................................................................................................................... 150
Figure 91: German Annual Disposable Income, 2003–2015 ..................................................................................................................................... 151
Figure 92: German Annual Per Capita Disposable Income, 2003–2015 .................................................................................................................. 152
Figure 93: German Consumer Expenditure on Food, 2003–2015 ............................................................................................................................ 153
Figure 94: German Annual Per Capita Consumer Expenditure on Food, 2003–2015 ............................................................................................. 154
Figure 95: German Urban and Rural Population, 2003–2015 ................................................................................................................................... 155
Figure 96: German Females as a Percentage of Population, 2003–2015 ................................................................................................................ 156
Figure 97: German Males as a Percentage of the Population, 2003–2015 .............................................................................................................. 157
Figure 98: German Mean Age of Population, 2003–2015 ......................................................................................................................................... 158
Figure 99: German Median Age of Population, 2003–2015 ...................................................................................................................................... 159
Figure 100: German Population Density, 2003–2015 ................................................................................................................................................ 160
Figure 101: German Population Distribution by Age, 2003–2015 ............................................................................................................................. 161
Figure 102: German Male Population Distribution by Age, 2003–2015 .................................................................................................................... 162
Figure 103: German Female Population Distribution by Age, 2003–2015 ................................................................................................................ 163
Figure 104: German Number of Households, 2003–2015 ......................................................................................................................................... 164
Figure 105: Global Terrorism Heat Map, 2011 ........................................................................................................................................................... 165
Figure 106: German Transparency Index, 2003–2009 .............................................................................................................................................. 166
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List of Tables
LIST OF TABLES
Table 1: German Defense Expenditure, 2007–2011.................................................................................................................................................... 19
Table 2: German Defense Expenditure, 2012–2016.................................................................................................................................................... 20
Table 3: German Defense Expenditure as a Percentage of GDP, 2007–2011 .......................................................................................................... 22
Table 4: German Defense Expenditure as a Percentage of GDP, 2012–2016 .......................................................................................................... 23
Table 5: German Defense Budget Split Between Capital and Revenue Expenditure, 2007–2011............................................................................ 25
Table 6: German Defense Budget Split Between Capital and Revenue Expenditure, 2012–2016............................................................................ 26
Table 7: German Defense Capital Expenditure Breakdown (%), 2007–2011 ............................................................................................................. 27
Table 8: German Defense Capital Expenditure Breakdown (%), 2012–2016 ............................................................................................................. 28
Table 9: German Defense Capital Expenditure for Army (US$ million), 2007–2011 .................................................................................................. 29
Table 10: German Defense Capital Expenditure for Army (US$ million), 2012–2016 ................................................................................................ 30
Table 11: German Defense Capital Expenditure for Air Force (US$ million), 2007–2011 ......................................................................................... 31
Table 12: German Defense Capital Expenditure for Air Force (US$ million), 2012–2016 ......................................................................................... 32
Table 13: German Defense Capital Expenditure for Navy (US$ million), 2007–2011 ................................................................................................ 33
Table 14: German Defense Capital Expenditure for Navy (US$ million), 2012–2016 ................................................................................................ 34
Table 15: German Defense Capital Expenditure for R&D (US$ million), 2007–2011................................................................................................. 35
Table 16: German Defense Capital Expenditure for R&D (US$ million), 2012–2016................................................................................................. 36
Table 17: ICD Research Terrorism Index ..................................................................................................................................................................... 40
Table 18: Benchmarking with Key Markets – 2007–2011 vs 2012–2016 ................................................................................................................... 42
Table 19: Benchmarking with World‘s Largest Defense Spenders – 2011 and 2016................................................................................................. 44
Table 20: Key Foreign Players and Operations in the German Defense Industry ...................................................................................................... 58
Table 21: Heckler & Koch – product focus ................................................................................................................................................................... 59
Table 22: Heckler & Koch – Recent Contract Wins ..................................................................................................................................................... 60
Table 23: MAN Nutzfahrzeuge – product focus ........................................................................................................................................................... 61
Table 24: MAN Nutzfahrzeuge – alliances ................................................................................................................................................................... 62
Table 25: Eurocopter – product focus ........................................................................................................................................................................... 63
Table 26: Eurocopter – Alliances .................................................................................................................................................................................. 64
Table 27: Eurocopter – Recent Contract Wins ............................................................................................................................................................. 64
Table 28: ESG Elektroniksystem- und Logistik – product focus .................................................................................................................................. 65
Table 29: ESG Elektroniksystem- und Logistik – Alliances ......................................................................................................................................... 66
Table 30: ESG Elektroniksystem- und Logistik – Recent Contract Wins .................................................................................................................... 66
Table 31: Diehl Stiftung – product focus ....................................................................................................................................................................... 67
Table 32: Diehl Stiftung – Alliances .............................................................................................................................................................................. 68
Table 33: Diehl Stiftung – Recent Contract Wins ......................................................................................................................................................... 68
Table 34: ThyssenKrupp Marine Systems – product focus ......................................................................................................................................... 69
Table 35: ThyssenKrupp Marine Systems – Alliances ................................................................................................................................................. 70
Table 36: ThyssenKrupp Marine Systems – Recent Contract Wins............................................................................................................................ 70
Table 37: Thales Deutschland – product focus ............................................................................................................................................................ 71
Table 38: Thales Deutschland – Alliances ................................................................................................................................................................... 73
Table 39: Thales Deutschland – Recent Contract Wins .............................................................................................................................................. 74
Table 40: EADS – product focus ................................................................................................................................................................................... 75
Table 41: EADS – Alliances .......................................................................................................................................................................................... 76
Table 42: EADS – Recent Contract Wins ..................................................................................................................................................................... 76
Table 43: Airbus Military – product focus ..................................................................................................................................................................... 77
Table 44: MBDA – product focus .................................................................................................................................................................................. 79
Table 45: MBDA – Alliances ......................................................................................................................................................................................... 81
Table 46: MBDA – Recent Contract Wins .................................................................................................................................................................... 81
Table 47: Eurofighter Jagdflugzeug – product focus.................................................................................................................................................... 82
Table 48: Eurofighter Jagdflugzeug – Recent Contract Wins ...................................................................................................................................... 83
Table 49: Rheinmetall AG – product focus ................................................................................................................................................................... 84
Table 50: Rheinmetall – Alliances................................................................................................................................................................................. 89
Table 51: Rheinmetall – Recent Contract Wins ........................................................................................................................................................... 89
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Introduction
1 Introduction
1.1 What is this Report About?
This report offers insights into the market opportunities and entry strategies adopted by foreign original
equipment manufacturers (OEMs) to gain a market share in the German defense industry. In particular, it
offers in-depth analysis of the following:
Market opportunity and attractiveness: detailed analysis of the current industry size and growth
expectations during 2012–2016, including highlights of the key growth stimulators. It also
benchmarks the industry against key global markets and provides detailed understanding of
emerging opportunities in specific areas
Procurement dynamics: trend analysis of imports and exports, together with their implications and
impact on the German defense industry.
Industry structure: five forces analysis to identify various power centers in the industry and how
these are expected to develop in the future.
Market entry strategy: analysis of possible ways to enter the market, together with detailed
descriptions of how existing companies have entered the market, including key contracts, alliances,
and strategic initiatives.
Competitive landscape and strategic insights: analysis of the competitive landscape of the
defense industry in Germany. It provides an overview of key defense companies (both domestic and
foreign), together with insights such as key alliances, strategic initiatives, and a brief financial
analysis.
Business environment and country risk: a range of drivers at country level, assessing business
environment and country risk. It covers historical and forecast values for a range of indicators,
evaluating business confidence, economic performance, infrastructure quality and availability, labor
force, demographics, and political and social risk.
1.2 Definitions
For the purposes of this report, the following timeframes apply:
Review Period: 2007–2011
Forecast Period: 2012–2016
The following are definitions of military expenditure:
Revenue expenditure includes troop training, institutional education, construction and maintenance
of various undertakings. It also covers the salaries, allowances, pensions, transportation, food,
insurance, welfare benefits and miscellaneous expenditures pertaining to all unit allowances for
training, contingency and other grants for officers, non–commissioned officers, enlisted men and
contracted civilians.
Capital expenditure (capex) covers research and development (R&D), procurement, maintenance,
transportation and storage of weaponry and other equipment. It also includes expenditure on aircraft
and aero engines, heavy and medium vehicles, naval equipment and expenditure on the purchase of
land, construction, plants and machinery
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Introduction
The following are definitions of defense categories:
Military hardware refers to the broad range of machinery, systems, equipment and weapons used
by defense forces.
Air defense systems are defined as all measures designed to nullify or reduce the effectiveness of
hostile air action. They include ground and air-based weapon systems, associated sensor systems,
command and control arrangements and passive measures. This may be to protect naval, ground
and air forces wherever they are positioned, but does not include missile defense systems.
Missile defense systems are systems, weapons, or technologies involved in the detection,
tracking, interception and destruction of attacking missiles.
Naval defense systems are used to protect sea lanes, ferry troops, or attack other navies, ports, or
shore installations. They include surface ships, amphibious ships, submarines, and seaborne
aviation.
Homeland security (HLS) involves the protection of a country‘s civilians and critical infrastructure
from natural or man-made disaster. Its margins extend to border and maritime patrol, customs
checks in ports and airports, search and rescue operations, disaster recovery, combating terrorism
and cyber attacks.
The following are miscellaneous definitions:
Indirect offsets involve both barter and counter trade deals, investment in the buying country, or the
transfer of technology unrelated to the weapons being sold.
Direct offsets is defined as an arrangement wherein the purchaser receives work or technology
directly related to the weapons sale, typically by producing the weapon system or its components
under license.
Multipliers are additional credits assigned over and above the market value provided to offsets for a
technology, product or service being offered.
Command, control and communications and intelligence system (C3I) refers to an information
system employed by a military‘s top command to direct its forces. This system provides the military
with information on various parameters associated with executing a strategy during a military
exercise. The parameters include reconnaissance and surveillance, troop positions, inventory levels
and weather conditions. The communication system enables the transfer of images and videos
captured by surveillance systems and data and voice between the command and control center. In
addition, the system aids in joint operations between the army, navy and air force.
Maintenance, repair and overhaul (MRO) involves the servicing of a defense system with the
objective of restoring it to a state where it can perform its intended function. It could be routine
maintenance, replacement of faulty spare parts or checking the entire system to ensure smooth
functioning.
Airborne early warning and control systems (AEW&C) are airborne radar systems used by the
military to detect the movement of aircraft in its airspace. Used at high altitudes, they are used in
both defensive and offensive air operations and have the ability to help distinguish between civilian
and military aircraft.
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Introduction
1.3 Summary Methodology
ICD Research‘s dedicated research and analysis teams consist of experienced professionals with a
background in industry research, and consulting in the defense sector. The following research methodology
is followed for all databases and reports
1) Secondary Research
The research process begins with exhaustive secondary research to source reliable qualitative and
quantitative information related to the defense market. The secondary research sources that are typically
referred to include, but are not limited to:
Industry associations
National government documents and statistical databases
Company websites, annual reports, financial reports, broker reports, investor presentations
Industry trade journals and other literature
Internal and external proprietary databases
News articles, press releases and webcasts specific to the companies operating in the market
2) Primary Research
ICD Research conducts hundreds of primary interviews a year with industry participants and commentators
in order to validate its data and analysis. A typical research interview fulfils the following functions:
Provides first-hand information on market size, market trends, growth trends, competitive landscape,
and future outlook
Helps to validate and strengthen secondary research findings.
Further develops the analysis team‘s expertise and market understanding.
Primary research involves e-mail interactions, telephonic interviews and face-to-face interviews for
each market category, division and sub-division across geographies.
The participants who typically take part in such a process include, but are not limited to:
Industry participants: CEOs, VPs, business development managers, market intelligence managers
and national sales managers.
External experts: investment bankers, valuation experts, research analysts and key opinion leaders
specializing in defense markets
3) Conventions
Currency conversions are performed on the basis of average annual conversion rate format
calculations.
All the values in tables, with the exception of compounded annual growth rate (CAGR) and
compounded annual rate of change (CARC) are displayed to one decimal place; therefore, growth
rates may appear inconsistent with absolute values due to this rounding method.
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Introduction
1.4 ICD Research Terrorism Index
The ICD Research Terrorism Index classifies countries across the world into one of the following categories
based on the risk of terrorism:
Worst affected
Highly affected
Moderately affected
Some risk
Low risk
It takes into account the total number of terrorist incidents, the total number of people affected by these
attacks, and the presence of foreign terrorist organizations in a country. Based on these parameters, the
terrorism index is developed using a weighted average scorecard.
1.5 About ICD Research
ICD Research is a full-service market research agency and premium business information provider,
specializing in industry analysis in a broad set of B2B and B2C markets. Our products and services help
companies make better decisions, win business and position themselves more effectively.
ICD Research‘s areas of expertise include online research, qualitative and quantitative research, industry
analysis, custom approaches, and actionable insights. ICD Research has access to over 500 in-house
analysts and journalists, and a global media presence in over 30 professional markets, enabling us to
conduct unique and insightful research via our trusted business communities.
1.6 About Strategic Defense Intelligence
This report is one of a series that is available to subscribers of our premium research platform — Strategic
Defense Intelligence. Strategic Defense Intelligence provides a stream of continuously updated customer
and competitor intelligence as well as detailed research reports providing an unrivalled source of global
information on the latest developments in the defense industry.
Strategic Defense Intelligence's unique monitoring platform tracks global defense activity for over 2,500
companies and 65 product categories in real-time in a highly structured manner - giving a comprehensive
and easily-searchable picture of all defense industry activity. The site features: daily updated analysis,
comment and news; company and customer profiles; defense spending, tenders and contracts; product and
technology intelligence; a research and analysis database giving you access to industry and competitor
reports to inform your business and market planning as well as fully customizable tools, including instant
personalized report generation and custom alerts.
For a free demonstration please contact us at sales@strategicdefenceintelligence.com
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Executive Summary
2 Executive Summary
In terms of defense expenditure, Germany is one of the top ten countries in the world and is a
lucrative market for foreign OEMs
With few internal or external threats, German defense policy is largely aligned towards the prevention
and containment of crises and conflicts. Despite this, the country‘s defense expenditure which valued at
US$44.1 billion in 2011, allocates as much as US$14.6 billion on the procurement of military hardware.
Furthermore, the country has a mature domestic sector, capable of fulfilling both local and export
requirements. Nevertheless, Germany‘s participation in peacekeeping activities and in the development
of advanced military transport aircraft is expected to support the growth of its defense industry over the
forecast period.
With no exclusive organizations focused on fighting terrorism, Germany‘s homeland security expenditure
is largely concerned with the security of its borders and the international threat of terrorism. Indeed,
while Germany is expected to procure biometric identification systems to prevent illegal immigration by
increased efficiency in border patrol, attractive opportunities are forecast to emerge in the areas of
unmanned aerial vehicles (UAVs), all-terrain vehicles, satellite radar systems and, if it were to pull out of
its ongoing A400M development program, military transport aircraft.
The German armed forces are one of the world's most technologically advanced and best-equipped
militaries. However, the growth of the national defense budget has drastically reduced over the last two
years due to a reduction in gross domestic product (GDP), and the country‘s defense expenditure as a
percentage of GDP is now one of the lowest among NATO countries. Germany‘s contribution towards
the European debt crisis has further limited its resources, resulting in a cap on its defense budget for the
next four years.
Globally, Germany is the third-largest defense exporter, with minimal imports
Globally, Germany is the third-largest exporter of arms, exporting to 51 countries and, with a value of
US$2.1 billion, accounting for 10% of the total global arms transfers in 2010. Germany is a leading
exporter of ships, which accounted for 47% of German arms exports during the review period. Globally,
Greece is the largest recipient of German defense exports.
With a mature domestic defense industry, Germany imports a limited amount of defense products, which
are primarily systems for use in global peacekeeping initiatives such as UAVs and all-terrain vehicles.
During the review period, the majority of German imports are expected to be satellite radar systems to
enhance its EU-level network centric warfare capability.
Germany promotes 100% foreign participation in its defense industry
Germany is one of the few countries in the world that allows 100% foreign direct investment (FDI) in its
defense industry. Consequently, the country does not impose any offset criteria on defense transactions
and does not scrutinize investments by foreign companies, coupled with this Germany‘s highly skilled
labor force only adds to the attractiveness of its defense industry. Many foreign OEMs have successfully
established subsidiaries, merged with existing German companies to form a conglomerate, or have
formed joint ventures (JV) with domestic firms in order to enter the market.
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Executive Summary
Budget cuts and limited exports to non-EU countries are key challenges
As a result of the European debt crisis and Germany‘s contribution to the US$145 billion Greek recovery
package, the Germany Ministry of Defense (MoD) may have to cut its defense budget and military
procurement plan as part of the federal budget plan taking place over the next four years. Indeed, the
ministry may have to implement cuts in the procurement of helicopters, heavy-lift military transport
aircraft, tanks and jet fighters. The improvement of the armed forces in the context of budgetary cuts is
another key challenge.
Apart from exporting to South Korea and some countries in the EU, Germany exports a limited amount
of defense goods to the largest global defense importing countries. As a leading submarine and battle
tanks manufacturer, Germany will seek to improve the marketing of its defense systems in these
countries in order to increase its exports over the forecast period.
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Market Attractiveness and Emerging Opportunities
3 Market Attractiveness and Emerging Opportunities
As Germany has few external threats, its defense policy is focused towards the prevention and
containment of crises and conflicts. Despite this, Germany has the sixth-largest defense expenditure in
the world as well as an established domestic defense industry, due to its promotion of 100% FDI.
Consequently, the German defense industry is able to satisfy both its domestic and export requirements.
The German armed forces are one of the most technologically advanced and well-equipped militaries in
the world. However, the growth of Germany‘s defense budget has drastically reduced in the last two
years due to a reduction in the country‘s GDP, and consequently, its defense allocation as a percentage
of GDP is one of the lowest among NATO countries. Nevertheless, the country is currently involved in
several joint defense developments with other countries, which, combined with its peacekeeping
initiatives, are set to drive growth in defense expenditure over the forecast period.
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Market Attractiveness and Emerging Opportunities
3.1 Defense Market Size Historical and Forecast
In 2011, the German defense market valued US$44.1 billion, with US$14.6 billion spent on the
procurement of military hardware, and US$29.5 billion spent on the training, maintenance, repair and
overhaul of existing systems. However, the country‘s defense budget is forecast to marginally decline
over the forecast period, due to economic pressures associated with the European debt crisis. Indeed,
the Ministry of Finance has set an annual defense budget limit of US$43 billion over the forecast period.
Fortunately for Germany, the country is home to several large defense OEMs, which completely satisfy
its defense requirements.
3.1.1 German annual defense expenditure to reach US$44.4 billion by 2016
With a forecast defense expenditure of US$44.2 billion in 2012, Germany has the sixth-largest defense
expenditure in the world. However, while defense expenditure grew at a CAGR of 3.17% during the
review period, this is expected to only increase marginally over the forecast period, to reach US$44.4
billion by 2016, due to constraints arising from the European debt crisis. Cumulatively, Germany is
projected to spend US$221.4 billion on defense over the forecast period.
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Market Attractiveness and Emerging Opportunities
The following table and figure show the German defense expenditure during the review period:
Table 1: German Defense Expenditure, 2007–2011
Year US$ Billion % Growth
2007 38.9 11.1
2008 43.3 11.3
2009 43.5 0.4
2010 41.3 -5.0
2011 44.1 6.7%
CAGR 2007–2011 3.17%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 1: German Defense Expenditure, 2007–2011
50 14%
Defense Expenditure Growth Rate (%)
45 12%
Defense Budget (US$ Billion)
40 10%
35 8%
30 6%
25 4%
20 2%
15 0%
10 -2%
5 -4%
0 -6%
2007 2008 2009 2010 2011
Capital expenditure Revenue expenditure Defense Expenditure Growth %
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
The following table and figure show German projected defense expenditure over the forecast period:
Table 2: German Defense Expenditure, 2012–2016
Year US$ Billion % Growth
2012 44.2 0.1%
2013 44.2 0.1%
2014 44.3 0.1%
2015 44.3 0.1%
2016 44.4 0.1%
CAGR 2012–2016 0.14%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 2: German Defense Expenditure, 2012–2016
50
Defense Expenditure Growth Rate (%)
45
Defense Budget (US$ Billion)
40
35 1.05%
30
25
20
15
10
5
0 0.05%
2012 2013 2014 2015 2016
Capital expenditure Revenue expenditure Defense Expenditure Growth %
Source: Ministry of Finance, Germany and ICD Research analysis / © ICD Research
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Market Attractiveness and Emerging Opportunities
3.1.2 Defense expenditure driven by factors such as security of EU, peacekeeping initiatives and
A400M development program
Germany is the pioneer of a newly-established EU protection force and has, accordingly, placed
multinational preventive security measures at the center of its defense policy. With the exception of
evacuation and rescue missions, German defense forces will only engage in armed operations with
allies or UN, NATO or EU partners. Consequently, future spending will be allocated largely for the
provision of military core capabilities.
Germany‘s overseas peacekeeping operations range from the prevention of international terrorism to
missions of humanitarian assistance. In order to facilitate these missions, the country focuses on the
development of its command and control capability, intelligence collection and reconnaissance, mobility,
effective engagement, support, sustainability, survivability and protection. Over 7,000 Germany military
personnel are currently posted on missions abroad, such as anti-piracy missions in the Gulf of Aden, the
internal security of reconstruction of Afghanistan, the naval protection of Lebanon against trafficking, and
military security in Kosovo. Consequently, the German demand for defense systems such as armored
personnel carriers, helicopters and battle tanks has increased. In addition, Germany imports defense
systems such as all-terrain vehicles, UAVs and surveillance systems for use in peacekeeping missions.
In addition, Germany is currently co-developing the Airbus A400M, a four-engine turboprop military
transport aircraft, with seven other countries. However, while Germany has already invested US$2.6
billion into the program to procure 60 A400Ms, the program has incurred significant cost overruns and
long delays in delivery; therefore, while Airbus has requested additional funding from participating
countries to ensure the completion of the development, Germany is considering its exit from the
program. Subsequently, Germany may be forced to procure military transport aircraft from other
manufacturers as a temporary solution.
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Market Attractiveness and Emerging Opportunities
3.1.3 Defense expenditure as a percentage of GDP expected to decrease
During the review period the average German defense expenditure as a percentage of GDP was 1.2%,
one of the lowest among NATO countries. Furthermore, as a result of the European debt crisis,
Germany is expected to register a reduction in GDP growth over the forecast period, which is expected
to result in a defense allocation of just 1.1% of the nation‘s GDP by 2016.
The following table and chart shows the German defense expenditure as a percentage of GDP during
the review period:
Table 3: German Defense Expenditure as a Percentage of GDP, 2007–2011
Year Defense expenditure as a percentage of GDP
2007 1.17%
2008 1.19%
2009 1.31%
2010 1.26%
2011 1.23%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 3: German Defense Expenditure as a Percentage of GDP, 2007–2011
1.35%
Defense Expenditure as% of GDP
1.30%
1.25%
1.20%
1.15%
1.10%
1.05%
2007 2008 2009 2010 2011
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
The following table and chart shows the German defense expenditure as a percentage of GDP over the
forecast period:
Table 4: German Defense Expenditure as a Percentage of GDP, 2012–2016
Year Defense expenditure as a percentage of GDP
2012 1.20%
2013 1.18%
2014 1.15%
2015 1.13%
2016 1.11%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 4: German Defense Expenditure as a Percentage of GDP, 2012–2016
1.22%
Defense Expenditure as% of GDP
1.20%
1.18%
1.16%
1.14%
1.12%
1.10%
1.08%
1.06%
1.04%
2012 2013 2014 2015 2016
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
3.2 Analysis of Defense Budget Allocation
3.2.1 Majority of defense budget allocated for the acquisition of advanced technology and equipment
During the review period Germany allocated an average of 32% of its defense expenditure on capital
expenditure, a trend which is expected to continue over the next five years. Conversely, revenue
expenditure received an average of 68% of the total defense budget during the same period, as
Germany spends a significant portion of its defense budget on the salaries of its large troop force and
the maintenance of its existing defense systems. However, over the forecast period revenue expenditure
is set to decline due to reductions in troop size and the decommissioning of some of its defense
systems. Despite this, revenue expenditure is expected to maintain its 67% share, as Germany will also
concentrate on reducing its arms procurement over the same period.
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Market Attractiveness and Emerging Opportunities
The following table and chart displays the German defense budget share of capital and revenue
expenditure during the review period:
Table 5: German Defense Budget Split Between Capital and Revenue Expenditure, 2007–2011
Year Capital expenditure share Revenue expenditure share
2007 30% 70%
2008 32% 68%
2009 33% 67%
2010 34% 66%
2011 33% 67%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 5: German Defense Budget Split Between Capital and Revenue Expenditure, 2007–2011
120%
100%
Defense Budget Split (%)
80%
60%
40%
20%
0%
2007 2008 2009 2010 2011
Capital expenditure Revenue expenditure
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
The following table and chart displays the German defense budget share of capital and revenue
expenditure over the forecast period:
Table 6: German Defense Budget Split Between Capital and Revenue Expenditure, 2012–2016
Year Capital expenditure share Revenue expenditure share
2012 33% 67%
2013 33% 67%
2014 33% 67%
2015 33% 67%
2016 33% 67%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 6: German Defense Budget Split Between Capital and Revenue Expenditure, 2012–2016
120%
100%
Defense Budget Split (%)
80%
60%
40%
20%
0%
2012 2013 2014 2015 2016
Capital expenditure Revenue expenditure
Source: Ministry of Finance, Germany and ICD Research analysis / © ICD Research
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Market Attractiveness and Emerging Opportunities
3.2.2 Air force receives largest capital expenditure allocation
In 2011, Germany allocated 26% of its capital expenditure budget for defense on the procurement of air
force systems, a trend which is expected to continue over the forecast period. The percentage allocation
for the army sustained at 12% during the review period, due to demand for surveillance and armored
vehicles for peacekeeping missions. However, R&D is expected to record a reduction from 12.9% in
2007 to 10.8% in 2011 and is projected to continue at the same levels until 2016, due to the
government‘s efforts to merge defense firms to form conglomerates, which can research independently
of the state. Similarly, the naval budget is expected to account for 5% of the nation‘s total defense
expenditure.
The following table and figure show German capital expenditure on defense during the review period:
Table 7: German Defense Capital Expenditure Breakdown (%), 2007–2011
Year Army Air Force Navy R&D Others
2007 12.1% 24.6% 4.1% 12.9% 46.4%
2008 12.1% 20.4% 3.8% 12.2% 51.5%
2009 12.3% 26.6% 5.6% 11.3% 44.3%
2010 11.6% 26.5% 5.5% 10.9% 45.5%
2011 12.1% 25.7% 5.5% 10.8% 45.9%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 7: German Defense Capital Expenditure Breakdown (%), 2007–2011
100%
Allocation of Capital Expenditure (%)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2007 2008 2009 2010 2011
Army Air Force Navy R&D Others
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
The following table and figure show German capital expenditure on defense over the forecast period:
Table 8: German Defense Capital Expenditure Breakdown (%), 2012–2016
Year Army Air Force Navy R&D Others
2012 12.1% 25.7% 5.5% 10.8% 45.9%
2013 12.1% 25.7% 5.5% 10.8% 45.9%
2014 12.1% 25.7% 5.5% 10.8% 45.9%
2015 12.1% 25.7% 5.5% 10.8% 45.9%
2016 12.1% 25.7% 5.5% 10.8% 45.9%
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 8: German Defense Capital Expenditure Breakdown (%), 2012–2016
100%
Allocation of Capital Expenditure (%)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012 2013 2014 2015 2016
Army Air Force Navy R&D Others
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
3.2.3 Capital expenditure for army is expected to increase
The share of capital expenditure allocated for the army is set to increase from US$1760.7 million in 2011
to US$1773 million in 2016; due to overall reductions in the defense budget the increase in army share
will be minimal. In particular, the army will face cuts in the purchase of battle tanks and armored
personnel carriers.
The following table and chart shows the German capital expenditure budget for the army during the
review period:
Table 9: German Defense Capital Expenditure for Army (US$ million), 2007–2011
Year Defense expenditure for army(US$ million)
2007 1420.1
2008 1699.4
2009 1764.2
2010 1616.8
2011 1760.7
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 9: German Defense Capital Expenditure for Army (US$ million), 2007–2011
2000
1800
1600
Capital Expenditure - Army
1400
(US$ million)
1200
1000
800
600
400
200
0
2007 2008 2009 2010 2011
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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The following table and chart shows the German capital expenditure budget for the army over the
forecast period:
Table 10: German Defense Capital Expenditure for Army (US$ million), 2012–2016
Year Defense expenditure for army(US$ million)
2012 1763.1
2013 1765.6
2014 1768.1
2015 1770.6
2016 1773.0
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 10: German Defense Capital Expenditure for Army (US$ million), 2012–2016
1774
1772
Capital Expenditure - Army
1770
(US$ million)
1768
1766
1764
1762
1760
1758
2012 2013 2014 2015 2016
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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3.2.4 Capital expenditure of air force is expected to decrease
In 2011, Germany allocated US$3739.6 million for air force expenditure, of which almost 50% is
allocated for the procurement of helicopters from Eurocopter. By 2016, air force capital expenditure is
expected to value US$3765.9 million.
The following table and chart shows the German capital expenditure budget for the air force during the
review period:
Table 11: German Defense Capital Expenditure for Air Force (US$ million), 2007–2011
Year Defense expenditure for air force (US$ million)
2007 2892.5
2008 2861.5
2009 3819.1
2010 3678.8
2011 3739.6
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 11: German Defense Capital Expenditure for Air Force (US$ million), 2007–2011
4500
4000
Capital Expenditure - Air Force
3500
3000
(US$ million)
2500
2000
1500
1000
500
0
2007 2008 2009 2010 2011
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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The following table and chart shows the German capital expenditure budget for the air force over the
forecast period:
Table 12: German Defense Capital Expenditure for Air Force (US$ million), 2012–2016
Year Defense expenditure for air force (US$ million)
2012 3744.9
2013 3750.1
2014 3755.3
2015 3760.6
2016 3765.9
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 12: German Defense Capital Expenditure for Air Force (US$ million), 2012–2016
3770
3765
Capital Expenditure - Air Force
3760
(US$ million)
3755
3750
3745
3740
3735
3730
2012 2013 2014 2015 2016
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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3.2.5 Naval capital expenditure is set to increase
In 2011, Germany allocated 5.5% of its capital expenditure budget, or US$806.1 million, for naval
expenditure; however, this is expected to increase to US$811.8 million by 2016, due to reductions in
naval procurements to reduce the number of excess naval systems on commission, therefore, naval
expenditure will have a minimal increase over the forecast period.
The following table and chart shows the German capital expenditure budget for the navy during the
review period:
Table 13: German Defense Capital Expenditure for Navy (US$ million), 2007–2011
Year Defense expenditure for navy (US$ million)
2007 477.0
2008 529.7
2009 808.9
2010 770.2
2011 806.1
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 13: German Defense Capital Expenditure for Navy (US$ million), 2007–2011
900
800
Capital Expenditure - Navy
700
600
(US$ million)
500
400
300
200
100
0
2007 2008 2009 2010 2011
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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The following table and chart shows the German capital expenditure budget for the Navy over the
forecast period:
Table 14: German Defense Capital Expenditure for Navy (US$ million), 2012–2016
Year Defense expenditure for navy (US$ million)
2012 807.3
2013 808.4
2014 809.5
2015 810.7
2016 811.8
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 14: German Defense Capital Expenditure for Navy (US$ million), 2012–2016
813
812
Capital Expenditure - Navy
811
(US$ million)
810
809
808
807
806
805
2012 2013 2014 2015 2016
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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3.2.6 R&D expenditure is expected to increase
While Germany allocated US$1571.5 million for the R&D of new defense systems in 2011, its promotion
of the conglomeration of defense firms will reduce the reliance on state-funding for R&D, which will
increase minimal expenditure to US$1575.9 million by 2016.
The following table and chart shows the German capital expenditure budget for the R&D during the
review period:
Table 15: German Defense Capital Expenditure for R&D (US$ million), 2007–2011
Year Defense expenditure for R&D (US$ million)
2007 1521.3
2008 1714.0
2009 1619.1
2010 1508.6
2011 1571.5
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 15: German Defense Capital Expenditure for R&D (US$ million), 2007–2011
1750
Capital Expenditure - Research and
1700
Development (US$ million)
1650
1600
1550
1500
1450
1400
2007 2008 2009 2010 2011
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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The following table and chart shows the German capital expenditure budget for R&D over the forecast
period:
Table 16: German Defense Capital Expenditure for R&D (US$ million), 2012–2016
Year Defense expenditure for R&D (US$ million)
2012 1567.1
2013 1569.3
2014 1571.5
2015 1573.7
2016 1575.9
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
Figure 16: German Defense Capital Expenditure for R&D (US$ million), 2012–2016
1578
Capital Expenditure - Research and
1576
Development (US$ million)
1574
1572
1570
1568
1566
1564
1562
2012 2013 2014 2015 2016
Source: Ministry of Finance, Germany and ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
3.3 Homeland Security Market Size and Forecast
3.3.1 Homeland security budget US$4.8 billion for 2010
The German Ministry of the Interior is responsible for internal security and civil protection against
disasters and terrorism. To effectively safeguard its homeland, the ministry has established a joint Anti-
Terrorism Center to act as an information-sharing and analytical forum for all German police and
intelligence agencies involved in the fight against terrorism.
Consequently, the country allocated US$4.8 billion towards providing internal security in 2010, and is set
to increase its spending over the forecast period. Indeed, since the 9/11 attacks on the US, the German
budget for homeland security has been as high as 60% of the Ministry of the Interior‘s budget. In
addition, Germany is expected to spend US$145.9 (EUR107 million) on the provision of civil protection
and disaster relief.
3.3.2 Preventive defense measures used to counter terrorism threat
Germany has faced a low threat of terrorism during 2005–2010 and falls under the ―some risk‖ category
in the ICD Research Terrorism Index, with a global rank of 66.
However, as Germany is part of the Eurozone, it could be perceived as under threat from anti-western
terrorist organizations. Consequently, over the forecast period the Ministry of the Interior is expected to
focus on preventive intelligence and defense measures in order to combat terrorist threats.
Indeed, the government is currently developing a joint database system for police and intelligence
services, and has also signed an agreement with the US for sharing information on travelers flying
between the two countries, which facilitate the exchange of personal information of travelers and
biometric identification details. The agreement comes after Germany pioneered the development, test
and introduction of biometric identification systems, using fingerprints, the iris of the eye and face
recognition in its border checkpoints to curb illegal immigration. As a result of the need for increased
border security, opportunities are expected to emerge for foreign OEMs specializing in biometric
identification.
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Below is the ICD Research Terrorism Heat Map, which displays the threat level faced by countries
across the world:
Figure 17: ICD Research Terrorism Heat Map
Germany
Worst affected Highly affected Moderately affected Some risk Low risk
Source: ICD Research analysis © ICD Research
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Calculated from the number of terrorist incidents and the number of people affected worldwide, the ICD
Research Terrorism Index gives Germany a score of 0.1.
The following chart shows the ICD Research Terrorism Index Score of the countries worst affected by
terrorism:
Figure 18: ICD Research Terrorism Heat Index
Germany 0.1
Iran 1.2
Gaza Strip 1.4
Lebanon 1.4
Philippines 1.6
Congo, Democratic Republic 1.6
Israel 1.7
Sudan 1.8
Colombia 1.9
Thailand 2.3
Nepal 3.0
Somalia 4.4
India 5.1
Afghanistan 9.4
Pakistan 9.5
Iraq 32.2
0 5 10 15 20 25 30 35
ICD Research Terrorism Index Score
Index score classification: >4 - Worst affected, between 4 and 1 - Highly affected, between 1 and 0.5 - Moderately affected,
between 0.5 and 0.1 - Some risk, and <0.1 - Low risk
Source: ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
3.3.3 Germany has a moderate threat of terrorism
According to ICD Research Terrorism Index, Iraq, Pakistan, Afghanistan, Somalia and India are the
countries worst affected by terrorism. Based on the index, Germany has a score of 0.1, which implies a
relatively low level of terrorism in the country.
The terrorism index is calculated on the basis of the following factors:
The number of terror attacks that the country has faced historically.
The total number of people victimized.
The number of foreign terrorist organizations operating in the country.
Table 17: ICD Research Terrorism Index
Rank Country Terrorism score
1 Iraq 32.2
2 Pakistan 9.5
3 Afghanistan 9.4
4 India 5.1
5 Somalia 4.4
6 Nepal 3.0
7 Thailand 2.3
8 Colombia 1.9
9 Sudan 1.8
10 Israel 1.7
11 Congo, Democratic Republic 1.6
12 Philippines 1.6
13 Lebanon 1.4
14 Gaza Strip 1.4
15 Iran 1.2
16 Sri Lanka 1.2
17 Russia 1.2
18 Algeria 1.0
19 Yemen 1.0
20 Turkey 0.9
21 West Bank 0.6
22 Chad 0.6
23 Syria 0.6
24 Egypt 0.5
25 Nigeria 0.5
26 United Kingdom 0.5
27 Greece 0.5
28 Malaysia 0.5
29 Indonesia 0.4
30 Spain 0.4
31 Jordan 0.3
32 Uzbekistan 0.3
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Rank Country Terrorism Score
33 Bangladesh 0.3
34 France 0.3
35 Ethiopia 0.3
36 Burma 0.3
37 Mali 0.3
38 Libya 0.2
39 Tajikistan 0.2
40 Saudi Arabia 0.2
41 Kenya 0.2
42 Morocco 0.2
43 Ireland 0.2
44 Singapore 0.2
45 Central African Republic 0.2
46 Niger 0.2
47 Georgia 0.2
48 Peru 0.2
49 Senegal 0.2
50 Venezuela 0.1
66 Germany 0.1
Source: ICD Research analysis © ICD Research
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Market Attractiveness and Emerging Opportunities
3.4 Benchmarking with Key Global Markets
3.4.1 German defense budget growth expected to be negligible over the forecast period
While the German defense budget grew at a CAGR of 3.17% during the review period, the growth rate
is expected to fall to near zero levels over the forecast period, due to reductions in the federal budget.
However, the defense expenditures of Brazil, Russia, India and China are expected to grow at a faster
rate than the majority of other countries in the world.
The figure below benchmarks the growth of German defense budget with key global markets:
Table 18: Benchmarking with Key Markets – 2007–2011 vs 2012–2016
Country CAGR 2007–2011 CAGR 2012–2016 Budget in 2011
(US$ Billion)
US 6% 4% 708
China 18% 10% 92
Russia 10% 20% 51
Japan 10% 3% 60
France 2% 3% 59
UK 2% -3% 60
Saudi Arabia 8% 5% 48
Germany 3% 0% 44
Brazil 13% 20% 33
India 13% 13% 37
Italy -2% 4% 27
South Korea 2% 8% 29
Israel 2% 5% 13
Ukraine -1.7% 9% 2
Source: National Defense Agencies and ICD Research analysis © ICD Research
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Figure 19: Benchmarking with Key Markets – 2007–2011 vs 2012–2016
25.00%
Russia
20.00%
Defense expenditure -
Brazil
CAGR 2012–2016
15.00% India
China
10.00%
UkraineSouth Korea
5.00% France US Japan
Italy
Israel Saudi Arabia
0.00% Germany
-10% -5% 0% 5% 10% 15% 20% 25%
-5.00% UK
-10.00%
Defense expenditure - CAGR 2007-2011
Note: Bubble size represents 2011 defense expenditure (US$ billion)
Source: ICD Research analysis / / © ICD Research
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Market Attractiveness and Emerging Opportunities
3.4.2 Germany’s rank of the sixth-largest defense spender set to decline
In 2011, Germany allocated US$44.1 billion towards its national defense budget — the sixth-largest
military expenditure in the world. However, while the US and China are expected to continue as the
dominant global defense spenders, the German Ministry of Finance has capped its defense budget for
the next four years. Consequently, Germany‘s global rank is expected to fall over the forecast period.
The figure below compares the expenditure of the top ten countries with the largest defense expenditure
in 2011 and 2016:
Table 19: Benchmarking with World’s Largest Defense Spenders – 2011 and 2016
Country Budget in 2011 (US$ Billion) Budget in 2016 (US$ Billion)
US 708 688
China 92 147
UK 60 48
Japan 60 70
France 59 67
Russia 51 126
Saudi Arabia 48 62
Germany 44 44
India 37 68
Italy 27 27
Ukraine 2 3
Source: ICD Research analysis / /© ICD Research
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Figure 20: Benchmarking with World’s Largest Defense Spenders – 2011 and 2016
US 688
708
China 147
92
Russia 126
51
Japan 70
60
India 68
37
France 67
59
Saudi… 62
48
UK 48
60
Germany 44
44
Italy 27
27
Ukraine 3
2
0 100 200 300 400 500 600 700 800
2016 2011 Figures in US$ billion
Source: ICD Research analysis / /© ICD Research
3.4.3 Germany allocates 1.2% of its GDP for defense expenditure
In 2011, the German defense budget allocation was just 1.2% of its GDP, which is one of the lowest
among developed countries and NATO members.
The figure below benchmarks German defense expenditure as a percentage of GDP against the world‘s
largest defense spenders.
Figure 21: Benchmarking with Large Defense Spenders as Percentage of GDP – 2011
Italy 0.9%
Germany 1.2%
Brazil 1.3%
China 1.3%
India 2.0%
Australia 2.1%
France 2.1%
UK 2.4%
South Korea 2.5%
Russia 2.7%
United States 4.7%
Israel 5.4%
Saudi Arabia 8.6%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Source: ICD Research analysis / / © ICD Research
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Market Attractiveness and Emerging Opportunities
3.5 Market Opportunities: Key Trends and Growth Stimulators
3.5.1 Demand for heavy lift helicopters to increase
Germany engages the CH-53G Mittlerer Transporthubschrauber helicopter for its medium and heavy-
load requirements. However, the country is has arranged to procure advanced heavy lifting helicopters
to replace its aging fleet, at an estimated cost of US$685 million. The upgrade is due for completion in
2013 and is expected to last until 2030. The modernization program will entail the following:
Airframe fatigue modifications
New communications and data transmission capabilities
Improved navigation and civilian-standard flight management system
Automatic flight control system with four-axis-autopilot and automatic hovering
Forward-looking infrared to improve night mission options
New EloKa electronic warfare system for self-protection
An additional internal fuel tank to extend range to 1,200 km
In addition to these modernizations, Germany and France signed a joint declaration in 2007 to establish
a heavy lift helicopter program, which will design helicopters to carry personnel, light armored vehicles
and cargo, with high performance under extreme conditions, including high temperatures and high
altitudes. The project is known as Helicoptère de Transport Lourd (HTL) in France, and Future Transport
Helicopter (FTH) in Germany.
3.5.2 Increased spending on Interactive Defense and Attack System for Submarines weapons
In 2009, Germany allocated funding for the production of Interactive Defense and Attack System for
Submarines (IDAS) submerged-launch precision weapons. The system is under joint development by
the ARGE IDAS consortium, which comprises ThyssenKrupp Marine Systems' Howaldtswerke-Deutsche
Werft (HDW) division, Diehl BGT Defense and Kongsberg Defense & Aerospace (KDA). The system is
intended to provide precision attack capability against surface and onshore targets, and as a self-
defense capability against anti-submarine warfare (ASW) helicopters. The current plan is to retrofit IDAS
into German Type 212A submarines. As a part of this project, four Howaldtswerke-Deutsche Werft boats
have already been commissioned, while two more are expected to be introduced into service by 2013.
Even though the contact value of the entire project has not been disclosed, the estimated shares of
participating firms are as follows:
Diehl BGT Defense, Überlingen: 40%
Howaldtswerke Deutsche Werft (HDW), Kiel: 40%
Norway‘s Kongsberg Defense & Aerospace, Kongsberg: 20%
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Market Attractiveness and Emerging Opportunities
3.5.3 Demand for medium-altitude long-endurance (MALE) UAVs will increase
As a result of Germany‘s engagement in military missions in Afghanistan, the nation‘s demand for UAVs
has increased, creating opportunities for foreign OEMs in this field. In 2009, Germany entered into a
contract with Rheinmetall Defense to provide intelligence, surveillance and reconnaissance (ISR)
capabilities through the deployment of a UAV system. The government will lease the UAV system for
one year, with the option of a two year extension. Compared to the UAV systems currently in service
with the German military, this system is capable of covering a substantially larger area, with high-
performance sensors capable of providing reconnaissance data in harsh weather conditions.
Furthermore, Germany is expected acquire advanced technology MALE UAVs over the forecast period.
Indeed, the German government had announced plan to procure the European Aeronautic Defense and
Space Company‘s (EADS) Talarion UAV, but then shifted preference to Saateg‘s AA Male drones.
However, it is not clear how much funding will be allocated for the procurement, or the timeframe of the
purchase.
3.5.4 Germany plans to procure armored vehicles will increase business opportunities
In April 2010, Germany sent 150–200 armored vehicles to fortify its troops in Afghanistan, following the
deaths of three German soldiers in an ambush by the Taliban. As a consequence of its presence in
Afghanistan, Germany has increased its procurement of armored vehicles in the last two years,
procuring 44 all-protected battle damage repair vehicles from Krauss-Maffei Wegmann. The country has
also announced its preference for armored vehicles with remote controlled KMW-FLW 100 light weapon
station capabilities, which will enable the gunner to operator it from the shielded interior and during high
speed driving in difficult terrain. It is expected that the country will procure more armored vehicles over
the next three years.
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Defense Procurement Market Dynamics
4 Defense Procurement Market Dynamics
Germany is the third-largest exporter of defense systems in the world, accounting for 10% of the total
global volume of arms transferred during the review period. The country exports to more than 51
countries, the majority of which are European. Ships accounted for 47% of the exports during the review
period. In addition, Germany also exports armored vehicles, engines for aircrafts, corvettes and
submarine systems, which are sought after due to their efficient and durable design.
However, as Germany has an established domestic defense industry that caters to the majority of its
military requirements, imports are minimal and mainly consist of a network centric warfare capability and
missile systems. Additionally, the country imports UAVs and all-terrain vehicles for its participation in
NATO peacekeeping initiatives.
All the figures in this section are based on trend indicator values (TIV) expressed in US$ million at
constant (1990) prices. Although figures are expressed in US$, TIVs do not represent the financial value
of goods transferred. Rather, TIVs are an indication of the volume of arms transferred during the review
period.
4.1 Import Market Dynamics
4.1.1 Network centric warfare capability for peacekeeping initiatives drive defense imports
As Germany has developed a mature domestic defense industry, it is able to satisfy the majority of its
defense requirements internally. Therefore, German imports are largely in areas in which it lacks the
technology, or surveillance systems, to support its peacekeeping initiatives. For example, Germany
imports satellite radar systems from Sweden and France — who are considered pioneers in the field —
that are superior to its domestic land-based radars as they function in all weather and light conditions.
In order to further reduce its dependence on imports, Germany has announced plans to expand its
network centric warfare and communication capabilities through the procurement of satellite radars and
other air-based radar systems. In addition to domestic development, the country also aims to collaborate
with other EU countries such as the UK and France, in order to enhance its rapid response capabilities
in the event of a military crisis in the EU.
4.1.2 Netherlands and the US are Germany’s main arms suppliers
During the review period, the Netherlands was the largest arms supplier to Germany, which imported its
used anti-submarine warfare (ASW) aircraft, P-3 CUP Orion. The Netherlands accounted for 46% of the
total arms imported by Germany during the review period. In fact, the US$250 million ASW aircraft deal
with the Netherlands accounted for 35% of Germany‘s total arms procurement during the same period.
The Netherlands were closely followed by the US, which accounted for 31% of German arms imports
during the review period, which largely consisted of missile systems. Indeed, Germany procured
components for a wide range of missiles, such as surface-to-air and surface-to-surface missiles, to be
assembled in Germany.
Correspondingly, missile systems accounted for 40% of German arms imports during the review period,
and were also supplied by Israel and Sweden. In addition to aircraft and missiles, the country also
imported satellite radar systems from France and Italy to improve its network centric warfare capability,
and UAVs and all-terrain vehicles ATVs for deployment in Afghanistan as part of its NATO peacekeeping
efforts.
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Defense Procurement Market Dynamics
The following chart shows the breakdown according to country of defense imports in 2005–2010:
Figure 22: German Defense Imports by Supplier Country (%), 2005–2010
Others
13%
France
10% Netherlands
46%
US
31%
Source: SIPRI and ICD Research Intelligence analysis © ICD Research
The following chart shows the breakdown according to category of defense imports in 2005–2010:
Figure 23: German Defense Imports by Category (%), 2005–2010
others
9%
Sensors
11% Aircraft
40%
Missiles
40%
Source: SIPRI and ICD Research Intelligence analysis © ICD Research
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Defense Procurement Market Dynamics
4.2 Export Market Dynamics
4.2.1 Superior defense technology and strong trade relationships with other countries will continue
to drive defense exports
Germany is a leading global exporter of technically advanced and sought after armored vehicles, ships,
submarines and engines. The country has an established a domestic defense industry, with many
systems under joint development with the US and other EU nations. The country maintains high levels of
transparency in terms of arms exports, and strictly complies with all the policies governing the sale of
arms, including arms embargos imposed by the UN and the EU, which had led Germany to develop
good trade relationships with many economically powerful countries.
Furthermore, the government maintains strict control on the export of arms, with decisions only being
taken after careful consideration of external, security and human rights aspects. Moreover, the
government grants licenses for small-arms exports only after receiving a declaration on the end-use of
the arms, and maintains a country-by-country arms exports list, highlighting the volume of transfer to
increase transparency. In addition, to prevent the resale of arms, Germany follows the export principle of
‗new for old‘, in which old arms have to be destroyed when new arms are supplied. The country also
follows a restrictive policy on the export of armaments to countries outside of the EU, NATO or NATO-
equivalent countries such as Australia, New Zealand, Switzerland and Japan.
4.2.2 Germany’s arms exports grew during 2005–2010
German arms exports grew at a CAGR of 2.4% during 2005–2010, to reach US$2.5 billion in 2010
despite the effects of economic recession. Furthermore, with the A400M military transport aircraft
program entering into the production stage, and plans to decommission and resell many of its defense
systems, German exports will continue to grow over the forecast period.
The following chart shows German exports by financial value during the review period:
Figure 24: German Defense Exports (US$ Million), 2005–2010
3500
3000
Defense Exports (in US$mn)
2500
2000
1500
1000
500
0
2005 2006 2007 2008 2009 2010
Source: Ministry of Defense, Germany and ICD Research analysis © ICD Research
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Defense Procurement Market Dynamics
4.2.3 Germany is the third-largest arms exporter globally
German arms exports grew strongly during the review period, making it the third-largest arms exporters
in the world after the US and Russia, accounting for 10% of all global arms exports.
The figure below shows the top ten arms suppliers in the world during the review period.
Figure 25: Global Top Ten Arms Suppliers(%), 2005–2010
Global Top 10 Arms Suppliers
Germany
10% France
9%
UK 4% Netherlands 3%
Italy 2%
Russia 25%
Spain 2%
China 2%
Israel 2%
Others 11%
US 30%
Source: SIPRI and ICD Research analysis © ICD Research
European countries were the main importers of German arms during the review period, with Greece and
Turkey holding the largest individual market shares of 13% each. However, Malaysia emerged as the
largest importer of German defense products in 2010, with a 13% share in the market. Germany has
strong trade relations with many countries, and has exported to 51 countries in the past five years.
Over the forecast period, German defense exports are expected to increase as a consequence of
domestic advancements in naval diesel engines, submarines and armored vehicles; while the US and
Russia will focus on advancements in aircraft and missiles.
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Defense Procurement Market Dynamics
The figure below shows the top importers of German arms during the review period:
Figure 26: Top German Arms Importers by Country (%), 2005–2010
Austria
6%
Italy
Malaysia 5%
6%
Others
31%
Spain
7%
South Korea
8%
Greece
14%
South Africa Turkey
11% 12%
Source: SIPRI and ICD Research analysis © ICD Research
4.2.4 Ships and armored vehicles are the main exported defense products
During the review period ships and armored vehicles accounted for 73% of German defense exports.
Indeed, Germany exported 1700 armored vehicles to 21 countries during the review period, of which
over 1100 were pre-used. Battle tanks, such as the Leopard, are sought after by Greece, Brazil, Peru
and Indonesia. The country also benefits from advancements in shield technology, wherein it exports the
metal used in the manufacture of armored vehicles to nations keen to build armored personnel carriers.
In addition to exporting domestic goods, Germany also exports license agreements for the technology
and critical components to develop defense systems abroad. In particular, the technology and
components to assemble Germany‘s type-214 U-boat submarines and accompanying shipyards are one
of the most popular naval systems in the world.
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Defense Procurement Market Dynamics
The figure below shows the main German defense exports by category during the review period:
Figure 27: German Defense Exports by Category (%), 2005–2010
Air Defence Artillery Sensors Others
Systems 2.7% 2.0% 0.1%
3.1%
Missiles
5.3%
Engines
5.5%
Ships
Aircraft 46.8%
8.7%
Armoured
Vehicles
26.0%
Source: SIPRI and ICD Research analysis © ICD Research
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Industry Dynamics
5 Industry Dynamics
5.1 Five Forces Analysis
German defense requirements are almost entirely fulfilled by the country‘s domestic defense industry,
which has developed through foreign direct investment, joint development with other EU nations, and the
mergers and acquisitions (M&As) of its domestic defense firms with foreign OEMs. The Federal Office of
Defense Technology and Procurement (BWB) is the sole authority on defense procurements in
Germany, and promotes foreign investment, barring the stringent competition laws present in other
defense industries around the world.
The following sections provide a Porter‘s five forces analysis of the German defense industry.
Figure 28: Industry Dynamics – Porter’s Five Forces Analysis
Barrier to Entry
Low
Bargaining Power of Supplier Intensity of Rivalry Bargaining Power of Buyer
Low Low High
Threat of Substitution
Low
Source: ICD Research analysis © ICD Research
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Industry Dynamics
5.1.1 Bargaining power of supplier: low
The bargaining power of defense suppliers in Germany is assessed as low, as the government is the
sole buyer of defense products. Germany has around 122 defense system manufacturers which are
largely funded by the government, reducing their bargaining power.
5.1.2 Bargaining power of buyer: high
The Federal Office of Defense Technology and Procurement is responsible for all German defense
procurements. The army, navy and air force proposes the required systems to the BWB, which then
allocates funds and decides on a supplier. As a federal agency, BWB is the sole buyer of defense
systems in Germany and consequently bargaining power is assessed as high.
5.1.3 Barrier to entry: low
The barrier to entry in the German defense industry is assessed as low. The government supports FDI
across all fields of defense and imposes no restrictions on the extent to which investments are made, as
long as investors adhere to economic law. Consequently, several large defense corporations have
established subsidiaries in the country, which the German government then encourages to consolidate
into unified conglomerates. Additional foreign OEMs have entered the industry by forming JVs with
German defense firms for collaborative defense development. Subsequently, Germany has one of the
most attractive defense industries for foreign OEMs.
5.1.4 Intensity of rivalry: low
The intensity of rivalry in the German defense industry is assessed as low, as most of its domestic
defense requirements are fulfilled to by national firms. In addition, the majority of defense goods are
supplied by large domestic defense corporations, each catering to a different set of requirements of the
armed forces, reducing competition. Furthermore, anti-competitive regulations in Germany are some of
the most stringent in the EU, which has additionally lowered the intensity of rivalry.
5.1.5 Threat of substitution: low
The threat of substitution in the German defense industry is low due to lack of viable alternatives for a
particular system in the domestic sector. However, as Germany moves towards the expansion of its
defense industry for the protection of the EU, the threat of substitution could marginally increase over the
forecast period to ensure that its defense systems are interoperable with those of other EU nations.
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Market Entry Strategy
6 Market Entry Strategy
6.1 Market Regulation
6.1.1 Investment policy promotes 100% FDI in the defense industry
Germany encourages an open economy and promotes investment in all areas of its defense industry,
allowing foreign nationals and corporations to own 100% of a German defense firm. There is no
regulatory body to monitor national security concerns in foreign defense investment, it imposes no offset
obligations on defense transactions, and its highly skilled labor force makes it one of the most attractive
markets for foreign defense OEMs. However, if required, the government can establish an ad hoc review
committee to examine the terms of transactions involving the foreign acquisition of a German defense
company, and its possible national security implications.
6.2 Market Entry Route
6.2.1 Foreign defense OEMs form large conglomerates to enter the market
In order to develop its domestic defense systems, the German government encourages firms
specializing in defense technologies to consolidate with similar companies to form large conglomerates.
In fact, the largest European aerospace corporation, EADS, resulted from a merger between the
German company, Daimler Chrysler, the French company, Aérospatiale-Matra, and the Spanish firm,
CASA. EADS is currently the holding company of the leading global helicopter manufacturer,
Eurocopter, the leading missile manufacturer, MBDA, and the leadings manufacturer of military transport
aircraft, Airbus. Furthermore, Rheinmetall, a leading guns and artillery manufacturer, has evolved
advanced metal research for the manufacture of arms through its acquisition of key European defense
firms, Mauser, STN Atlast and Stork PKV.
6.2.2 Foreign OEMs establish subsidiaries or form JV to enter the industry
As the German government promotes 100% FDI in its defense industry, many foreign OEMs prefer to
establish subsidiaries to enter the industry. For example, a French defense electronics company, Thales,
established a subsidiary in Germany in 1993, which contributed 9% to its global revenue in 2008.
Since 2006, Thales has also entered into JVs with two other German firms, Diehl Aerospace and
Junghans Microtec. Indeed, many foreign OEMs choose to enter the industry through joint development
programs, in which the OEM collaborates with a German partner to combine the complementary skills of
the two companies. In the Medium Extended Air Defense System (MEADS) project, the US‘s Lockheed
Martin, Italy‘s MBDA and Germany‘s LFK are jointly developing a new missile system, with each country
contributing different technologies.
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Market Entry Strategy
6.3 Key Challenges
6.3.1 The European debt crisis will negatively affect defense procurements
As a result of the European debt crisis and subsequent budget cuts, the German MoD is expected to
reduce its expenditure on military aircraft and other arms contracts over the next four years. The budget
cut, which is projected to value US$12 million, will result in reductions in the procurement of helicopters,
heavy lift military transport aircraft, tanks and jet fighters. Specifically, Germany will reduce its orders of
Puma tanks by 120, and 40 respective NH-90 naval helicopters and Tiger multi-role attack helicopters.
In addition, the MoD has announced plans to substantially reduce the size of its troop force by
temporarily suspending its national conscription program, in order to make further cuts.
6.3.2 Modernization of military through downsizing existing systems and personnel
Over the forecast period the German MoD is expected to focus on the suspension of national
conscription and restrict defense procurements to core military hardware only. Furthermore, Germany‘s
intention to align its defense capabilities with those of the EU coupled with the decommissioning of its
existing defense systems, including 15 Transall cargo aircraft, 100 Tornado jet fighters and a significant
number of frigates from its navy, may also pose challenges to defense suppliers.
6.3.3 German arms exports to large defense markets outside EU are minimal
With the exception of South Korea, Germany exports only a small amount of defense goods to the
leading global defense importers, such as India, the UAE and Saudi Arabia. Furthermore, Germany is
unable to export arms to China, the world‘s leading arms importer, due to the arms embargo placed on
the country by the EU in 1989.
As a leading submarine and battle tanks manufacturer, Germany is expected to make attempts to
improve the marketing of it defense systems to the leading arms importing countries, in order to expand
its clientele.
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Competitive Landscape and Strategic Insights
7 Competitive Landscape and Strategic Insights
7.1 Competitive Landscape Overview
The German defense industry consists of both domestic and international conglomerates, as the country
promotes 100% FDI in its defense industry and encourages the merger and acquisition of defense firms,
in order to develop complimentary skills and offer a larger range of systems. Several foreign OEMs have
entered the market through collaborations with domestic companies, the establishment of subsidiaries,
or by mergers with established defense firms to jointly development defense systems.
German defense requirements are almost entirely catered for by its domestic defense industry, which
then exports a substantial proportion of its produce to 51 countries. The intensity of rivalry is assessed
as low, due to stringent competitive laws, while its liberal policies and skilled defense labor force attracts
the investment of several foreign OEMs. Furthermore, while Germany houses market leaders in the
fields of submarines, naval ships, armored vehicles, helicopters and battle tanks, the country has also
pioneered the development of unique engines for aircraft and ships.
7.1.1 Foreign OEMs have strong collaborations with domestic defense firms
Table 20: Key Foreign Players and Operations in the German Defense Industry
Supplies from Joint venture or alliance
Company Year of establishment
overseas with German firm
Thales 1990
EADS 2000
MBDA 2001
Lockheed Martin 2006
Airbus SAS 2001
Source: Company website, annual report and ICD Research analysis ©ICD Research
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Competitive Landscape and Strategic Insights
7.2 Key Domestic Companies
7.2.1 Heckler & Koch: overview
Heckler and Koch is a private German company that produces small arms systems to meet the security
demands of the military, police and special forces in NATO and NATO-allied nations. The company uses
an approach that produces customized equipment tailored to the requirements of individual customers
and operations.
Heckler & Koch was established in 1948 as an engineering division to manufacture items such as
bicycle and sewing machine components. In 1991, the company was sold to a large British defense
group, British Aerospace. British Aerospace then restructured Heckler & Koch and sold it to private
investors.
7.2.2 Heckler & Koch: products and services
The key products offered by the company include:
Table 21: Heckler & Koch – product focus
Products Services
Self-loading pistols NA
P30/P30S
P30L/P30LS
P2000
P2000SK
USP
USP compact
USP expert
USP tactical
USP SD
P8
P10
MK23
Submarine guns
MP7A1
UMP
MP5A
MP5SD
MP5N
MP5K
MP5SFA
Assault rifles
G36 & G36V
G36K and G36KV
G36C
HK416C
HK416
HK417
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Competitive Landscape and Strategic Insights
Machine guns
MG4
MG4 E
MG4 KE
Grenade launchers
AG-C/EGLM
XM320 (GLM/SAM GLM)
GMG
AG36
HK69 A1
Special purpose weapons
PSG1A1
MSG90A1
P2A1
Source: Company website, annual report and ICD Research analysis / © ICD Research
7.2.3 Heckler & Koch: recent announcements and strategic initiatives
July 2010: The company announced the development of an advanced version of the HK416 assault
rifle, the HK416C, with a new concept of shoulder support and innovative buffer system.
7.2.4 Heckler & Koch: alliances
Not available
7.2.5 Heckler & Koch: recent contract wins
Table 22: Heckler & Koch – Recent Contract Wins
Date Contract value Client Description
The Federal Police ordered for 30000 P30 pistols with
Federal Police of an option to buy another 5000 units. The first
November 2008 NA
Germany consignment of pistols was delivered in 2009 and is due
for completion in 2011.
Source: Company website ©ICD Research
7.2.6 Heckler & Koch: financial analysis
Not available
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Competitive Landscape and Strategic Insights
7.2.7 MAN Nutzfahrzeuge: overview
MAN Nutzfahrzeuge is a company specialized in the development and construction of commercial and
military vehicles. The vast experience of the company enables it to offer a range of protected military
trucks with adaptive armored protection to provide easy mobility and crew safety. The company‘s
products can also be integrated into various network centric support systems.
MAN Nutzfahrzeuge is a subsidiary of MAN group, a leading supplier of commercial vehicles and
transport solutions. The company has four production locations in Germany: Munich, Nuremberg,
Salzgitter and Plauen.
7.2.8 MAN Nutzfahrzeuge: products and services
The key products offered by the company include:
Table 23: MAN Nutzfahrzeuge – product focus
Products Services
Medium mobility truck systems NA
HX series high mobility truck systems
SX series extreme mobility truck systems
Armoring
Integrated armored cabin
Ballistic and mine qualification
Services
Integrated logistic support (ILS)
Technical support services
Configuration data management
Technical documentation
Training
Source: Company website, annual report and ICD Research analysis / © ICD Research
7.2.9 MAN Nutzfahrzeuge: recent announcements and strategic initiatives
January 2010: MAN Nutzfahrzeuge and Rheinmetall formed a JV to assemble military wheeled
vehicles. The new company is known as Rheinmetall MAN Military Vehicles GmbH (RMMV), and was
formed to provide complete solutions for military vehicles, covering both armored and unarmored,
command and role specific vehicles for international customers.
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Competitive Landscape and Strategic Insights
7.2.10 MAN Nutzfahrzeuge: alliances
Table 24: MAN Nutzfahrzeuge – alliances
Alliances Partner company Year formed Strategic objectives and focus area
Product focus: armored and unarmored, command and
JV Rheinmetall AG 2010 role specific vehicles.
Market focus: international markets.
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.11 MAN Nutzfahrzeuge: recent contract wins
Not available
7.2.12 MAN Nutzfahrzeuge: financial analysis
Not available
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Competitive Landscape and Strategic Insights
7.2.13 Eurocopter: overview
Formed in 1992, Eurocopter is a wholly-owned subsidiary of EADS, with three locations in Germany.
The company is a leading manufacturer of civil and military helicopters, including the Tiger and NH90
helicopters which are widely regarded as the best in the market.
7.2.14 Eurocopter: products and services
The key products offered by the company include:
Table 25: Eurocopter – product focus
Products Services
Helicopters NA
FENNEC
EC635
EC645
Panther
COUGAR
NH90
Tiger
Source: Company website, annual report and ICD Research analysis / © ICD Research
7.2.15 Eurocopter: recent announcements and strategic initiatives
June 2010: Eurocopter announced the debut of its new multi-role EC645 military helicopter at the 2010
Eurosatory exhibition. The EC645 is a militarized version of Eurocopter‘s EC145, which is widely used
for homeland security, search and rescue operations, and paramilitary law.
June 2010: The Turkish Ministry of Transport and Eurocopter confirmed a contract for two EC145
helicopters at the ILA trade fair in Germany. The helicopters are expected to be deployed for airport
security and corporate transportation needs. They are expected to be delivered in the fourth quarter of
2010.
June 2010: The company announced the debut of its NH90 in the Forward Air MedEvac (medical
evacuation) configuration for the first time at the ILA 2010 exposition in Berlin. This advanced multi-role
helicopter is designed in response to the request from the German MoD to increase the safety of the
NH90 to transport wounded women.
May 2010: The company formed a collaboration with renowned automobile manufacturer, Mercedes-
Benz, to develop a special edition of the EC145 twin-engine turbine helicopter with a high-end interior,
which was unveiled at the 2010 European Business Aviation Convention and Exhibition in Geneva,
Switzerland. The helicopter is specially designed for high-end business and VIP operators.
April 2010: The company announced its intention to invest EUR1.3 billion during 2010–2014 in R&D.
The company also announced its plans to invest an additional EUR1 billion to improve its
competitiveness, continue its expansion and extend its customer support and services globally.
March 2010: Eurocopter was awarded a contract to supply seven AS 365 NS helicopters to Pawan
Hans, the largest civil helicopter operator in India. This purchase will increase the number of the existing
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Competitive Landscape and Strategic Insights
fleet of Dauphins to 33 and will be used to transport personnel and VIPs to offshore platforms, and for
shuttle flights between drill barges.
February 2010: The US Customs and Border Protection Force has entered into a contract with
Eurocopter to buy six light enforcement helicopters over the course of 2010. The helicopters will be used
for homeland security and border security purposes.
7.2.16 Eurocopter: alliances
Table 26: Eurocopter – Alliances
Alliances Partner company Year formed Strategic objectives and focus area
Product focus: to manufacture passenger and cargo doors for the A350 XWB
Collaboration Airbus 2010
airliner.
Joint ventures Pawan Hans 2010 Product focus: for training to better serve the Dauphin fleet operating in India.
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.17 Eurocopter: recent contract wins
Table 27: Eurocopter – Recent Contract Wins
Date Contract value Client Description
To provide two EC145 helicopters for homeland
Turkish Ministry of
June 2010 NA security, search and rescue operations, and
Transport
paramilitary law
Para public and To supply seven helicopters, including two EC135s,
private operators two AS350B3s, an EC130 B4, an EC120 and an
March 2010 NA
from Argentina and AS350 B390, for various rescue missions and
Chile commercial operations.
March 2010 NA Pawan Hans To supply seven AS 365 N3 helicopters.
Air Methods To procure 12 helicopters, including eight EC130s
February 2010 NA
Corporation and 4 AS350B3s to be delivered in 2010.
To supply six light enforcement helicopters over the
US Customs and
February 2010 NA course of 2010 to be used for homeland security and
Border Protection
border protection purpose.
To provide four helicopters, including two AS350B3,
February 2010 NA Vinacopter
an EC135 and an AS355NP.
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.18 Eurocopter: financial analysis
Not available
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Competitive Landscape and Strategic Insights
7.2.19 ESG Elektroniksystem- und Logistik: overview
ESG Elektroniksystem- und Logistik (ESG) is a company specialized in the development, integration and
operation of electronic and IT systems for the military, public authorities and private companies. The
company was formed in 1992 through the merger of Hungarian firearms company, FEG and ESG. The
company caters to the automobile, aerospace, defense, telecommunications, industrial goods and
commercial vehicles industries, and supports the management of large IT projects by allowing
customers access to new technology.
7.2.20 ESG Elektroniksystem- und Logistik: products and services
The key products offered by the company include:
Table 28: ESG Elektroniksystem- und Logistik – product focus
Products Services
Navy systems NA
Military systems: command, control and weapon
deployment systems
Simulation: network enabled capabilities (NEC) and testing
Civil systems: vessel traffic management
Training servicing rooms
Aviation
Tailor-made avionics and IT systems for the military
Vetronic systems
Electronic systems for ground based surveillance
Electronic systems for weapons development
Weapon systems for the army
Army support or logistics during the service life of the
system
Generic system demonstrators
Complex electronic systems
Associated command control
Efficient diagnostic and document systems
Interactive electronic technical documentation (IETD)
Computer based training (CBT)
Technical logistical support services (TLB)
Source: Company website, annual report and ICD Research analysis / © ICD Research
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Competitive Landscape and Strategic Insights
7.2.21 ESG Elektroniksystem- und Logistik: recent announcements and strategic initiatives
May 2010: The company announced the successful development of its training platform, CHARLY, for
the prevention of post-traumatic stress disorder (PTSD). The training program was developed for the
German armed forces. ESG has now been commissioned to further develop the prototype for serial
production, adapt it for the medical services rapid deployment forces, execute practical tests and
evaluation, and prepare a concept for its adaptation for other target groups.
March 2010: The company was commissioned by the Federal Office of Defense Technology and
Procurement to develop a cockpit procedure trainer (CPT) for the Sea Lynx MK88A on-board helicopter.
Training started in April 2010.
7.2.22 ESG Elektroniksystem- und Logistik: alliances
Table 29: ESG Elektroniksystem- und Logistik – Alliances
Alliances Partner company Year formed Strategic objectives and focus area
Automotive System Product focus: accelerated growth and execution of
Takeover 2010
Integrators, LLC (ASI) its plan for international expansion in automotive.
Product focus: technical study for the development of
concepts for a border surveillance infrastructure, a
Collaborative technical Thales, EADS, SELEX- secure communication network, and a pre-frontier
2009
study SI intelligence picture of the border within the
framework of a European border surveillance
system.
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.23 ESG Elektroniksystem- und Logistik: recent contract wins
Table 30: ESG Elektroniksystem- und Logistik – Recent Contract Wins
Date Contract value Client Description
A three year deal to provide process coaching for the
March 2010 NA BMW component development process based on
capability maturity model integration (CMMI).
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.24 ESG Elektroniksystem- und Logistik: financial analysis
Not available
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Competitive Landscape and Strategic Insights
7.2.25 Diehl Stiftung: overview
Diehl Stiftung, formed in 1902, is a private, German company and one of the most important suppliers of
the German army and NATO forces. The company is divided into four divisions: metal, controls, defense,
aero systems and metering.
The company‘s defense division develops missiles, ammunition, tank tracks, vehicle maintenance,
systems and sub-systems for leading aircraft manufacturers around the world.
7.2.26 Diehl Stiftung: products and services
The key products offered by the company include:
Table 31: Diehl Stiftung – product focus
Products Services
Defense NA
Ammunition
Artillery rockets
Fuses
Guided missiles
Infrared and multimode seekers
Self protection systems
Surveillance and warning systems
System repair
System tracks and suspensions including drive sprockets,
bogie wheels, support rollers and roller guides
Training systems
Upgrading and retrofitting of tracked and wheeled vehicles
Aero systems
Cabin and utility systems
Cockpit and display systems
Flight and engine control equipment
Source: Company website, Annual Report and ICD Research analysis / © ICD Research
7.2.27 Diehl Stiftung: recent announcements and strategic initiatives
January 2009: The company announced that the first RBS 15 MK3 missile was assembled in Germany
and successfully tested in December 2008. SAAB Systems is in agreement with Diehl Stiftung to jointly
develop, produce and sell the missiles for installation on German K130 class corvettes.
October 2008: The company successfully entered an agreement with Austrian company, Scribal, the
world leader in unmanned helicopters to develop the CAMCOPTER® S-100 for the German armed
forces. The company successfully landed the unmanned machines on the deck of the K130 corvette.
May 2008: The company announced that it had successfully tested the submarine missile IDAS from a
submerged submarines.
March 2008: The company successfully demonstrated its new IRIS-T short range air defense SLS
system during a successful live firing at the South African OTB Test Range. The test was successfully
conducted in front of government officials from seven nations.
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Competitive Landscape and Strategic Insights
7.2.28 Diehl Stiftung: alliances
Table 32: Diehl Stiftung – Alliances
Alliances Partner company Year formed Strategic objectives and focus area
Market focus: to strengthen Diehl‘s commitment
JV India Forge Ltd 2010
towards Indian customers.
Product focus: to strengthen the design development
JV Thales 2006
and manufacture of avionics and cabin systems
Product focus: to combine expertise in ammunition
JV Thales 2006 electronics and precision mechanics to emerge as a
leading fuse supplier.
Product focus: to introduce the CAMCOPTER® S-
100 into the German armed forces ship integration,
JV Schiebel 2005 equipment with electro-optical infrared sensors and
manage the entire logistics, spare parts and
maintenance operation.
Product focus: to Design, develop, produce and
JV Saab Systems Bofors 2003
market RBS 15 MK3 missiles.
Product focus: to launch the integration and
verification phases of the RBS 15 MK3 anti-ship
missile project. The agreement covers production,
JV Saab Bofors Dynamics 2002 deliveries, maintenance and future upgrades for the
Swedish and German navies, and the export market.
Diehl assembles and tests the missiles, while Saab
is the system coordinator.
Source: Company website, annual report and ICD Research analysis ©ICD Research
7.2.29 Diehl Stiftung: recent contract wins
Table 33: Diehl Stiftung – Recent Contract Wins
Date Contract value Client Description
July 2009 NA Saudi Arabia To supply IRIS-T air-to-air missiles
US$210 million German defense To supply of 311 numbers of multi-purpose light
Jun 2009
(EUR154 million) force guided missile system (MELL).
South African air To supply IRS-T air top air missiles.
May 2008 NA
force
JUNGHANS Microtec, a subsidiary of the corporate