KNDS Ploughs €1bn into Auto Plant Conversion as Berlin Quarrels Over Stake Size Ahead of IPO

KNDS invests €1bn in ex-Mercedes factory for military output, eyes VW plant amid €23.5bn orders, but dual-listing IPO is mired in German-French government stake dispute.

The European armoured-vehicle giant KNDS is pushing ahead with an ambitious industrial expansion that will see a former Mercedes-Benz factory retooled for military production — even as the German government remains deadlocked over how much control it should take in the company ahead of its planned dual listing.

KNDS is deep in talks to acquire Mercedes-Benz’s plant in Ludwigsfelde, south of Berlin, where it intends to invest roughly €1bn in new production lines. Under a transitional arrangement, the site would first be partly leased, allowing military vehicles and civilian vans to be assembled side by side until Mercedes shifts its own output to Poland by 2030. Some 2,000 workers are expected to transfer to the defence contractor.

The urgency behind the move stems from overflowing order books. The group, which posted €3.8bn in revenue for 2024 and carries a backlog of around €23.5bn, needs capacity fast. In Britain, the government finalised a contract on 14 May 2026 for 72 RCH 155 wheeled howitzers — a system based on the Boxer chassis and the only artillery piece in the world capable of firing accurately on the move. The deal, worth nearly £1bn, is being handled through the OCCAR procurement agency and includes training and long-term maintenance. Key welding and drive-module assembly for the British order will be performed at KNDS’s Stockport facility.

Alongside the Ludwigsfelde project, the company is examining a potential takeover of Volkswagen’s plant in Osnabrück. VW confirmed it is in talks with several parties about the site’s future after current production cycles end in 2027. Both factory conversions would position KNDS for a possible mega-order from the Bundeswehr, which is considering buying up to 3,000 Boxer wheeled armoured vehicles.

Yet the path to the initial public offering — a dual listing in Paris and Frankfurt — is complicated by a political tug-of-war in Berlin over the size of the state’s future holding. Defence Minister Boris Pistorius and the SPD are pushing for a 40 percent stake for Germany and another 40 percent for France, effectively giving both governments joint control. The Chancellery favours a much lighter touch, modelled on the Airbus structure where the state holds around 11 percent. The Union party has floated a compromise of 30 percent each for Berlin and Paris.

The aim is to prevent either France from dominating tank production or non-European investors gaining access to sensitive technology. That concern is not hypothetical: the Czech industrial group Czechoslovak Group has expressed interest in buying into KNDS, and the company is itself circling the defence arm of Iveco (IDV), which is being sold separately from the wider Iveco group now in talks with India’s Tata. Rivals Leonardo and Rheinmetall are also in the hunt.

KNDS chief Jean-Paul Alary dismissed speculation on 15 May that the IPO might be delayed, insisting preparations remain on schedule and that discussions with stakeholders are constructive. Bankers have valued the group at between €16bn and €22bn, reflecting its pivotal role in Europe’s defence landscape.

With the Ludwigsfelde retooling and the UK artillery order now locked in, KNDS is betting that converting automotive plants into armour factories will give it the scale to meet soaring demand — provided Berlin can first settle its own internal battle over the company’s future shareholding.