Rheinmetall Sheds Its Civilian Skin and Turns to the Skies, but the Stock Remains 40% Below Its Peak

Rheinmetall exits civilian auto business with €350M Power Systems sale, unveils combat drones at ILA Berlin, yet shares drop 25% in 2026 amid market skepticism.

Rheinmetall is executing a twin-track strategy this week: jettisoning the last piece of its civilian past while putting its most advanced war-fighting technology on show at the ILA Berlin air fair. Yet neither the €350 million sale of the Power Systems automotive division nor the unveiling of drones and air-defence systems has managed to arrest a slide that has wiped a quarter of the company’s value since January.

The Düsseldorf-based group signed the deal to offload Power Systems to Aequita on 3 June 2026, marking the final exit from the civilian automotive business. The transaction, expected to close in the fourth quarter subject to regulatory approval, covers roughly 6,250 employees and brands such as Pierburg and Kolbenschmidt. The division generated around €2 billion in revenue in the 2025 financial year, but its low margins and the structural pressure from the auto industry had long weighed on the group’s overall profitability. Rheinmetall will also book an additional non-cash impairment of roughly €200 million on top of the €350 million already written down. “This is a historically significant step for the company,” chief executive Armin Papperger said.

Alongside the clean-up, the group is using the ILA Berlin stage to showcase exactly where the freed-up capital and management attention will now flow. From 10 June, the spotlight will be on networked systems that include the Ghost Bat combat drone, developed in partnership with Boeing, which Rheinmetall aims to deliver to the Bundeswehr as an unmanned wingman by 2029. The F-35 programme is also making visible progress: the new factory in Weeze has been producing since last summer, and the eighth centre fuselage section for the stealth fighter is now in production. Rheinmetall is contracted to build 400 of those components for Northrop Grumman. The air defence division, meanwhile, posted a 43% revenue increase in the first quarter of 2026 to €192 million, and its order backlog has swelled to more than €3 billion. Exhibits on the Berlin tarmac include the Skyranger 30 mounted on a Boxer wheeled armoured vehicle and a new loitering munition with a range of up to 100 kilometres, fully manufactured inside the EU.

The operating momentum is impossible to ignore. The group’s overall order intake remains strong, with recent wins including a €5.7 billion contract from Romania and a Bundeswehr order for military trucks worth more than €1 billion. Management has confirmed its full-year guidance of group revenue of up to €14.5 billion and an operating margin of around 19%.

Yet the market is looking straight through the headlines. The stock slipped to €1,195 on Thursday and has since edged lower to €1,186, leaving it down roughly 25% year to date and a full 40% below the record high struck in September 2025. The relative strength index sits at 39.1, and the shares are trading 26.93% below their 200-day moving average — classic territory for a stock in a confirmed downtrend.

The disparity between a bulging order book and a weakening share price suggests investors are demanding more than a cleaner corporate structure and a well-staged airshow. What is missing, for now, is the conversion of the technology pitch into binding, near-term large-scale contracts. The Neuss plant, formerly part of Power Systems, is slated to pivot to satellite and other defence production, illustrating how deep the transformation runs, but such shifts take time to show up in earnings.

For the employees at the three KS Huayu AluTech sites in Neckarsulm, Walldürn and Langenhagen — which will remain in Rheinmetall as a joint venture for now — the transition comes with a three-year job guarantee secured by IG Metall. Aequita has agreed to take on all staff from the sold units. But for investors, the guarantee that matters is the one that turns a stronger story into a higher share price. Until that arrives, the divergence between operational reality and stock-market sentiment is likely to persist.