Does Germany have a drone problem? Hensoldt, TKMS, Helsing, and NEO Battery Materials!

Drone alert in Germany: Billions invested incorrectly?

Not only are drone alerts at European airports and critical infrastructure becoming more frequent, but criticism of Germany's defense policy is also increasing. Industry representatives and security experts criticize the federal government for relying too heavily on traditional weapon systems such as tanks, while neglecting investments in drones and unmanned systems. Gundbert Scherf, co-founder of the Munich-based defense company Helsing, recently made this point particularly clear. He warned that modern warfare, as seen in Ukraine, has long been dominated by drones. Around 80% to 90% of casualties on both sides were due to drone attacks. Yet, Germany continues to invest billions in armored vehicles whose effectiveness is increasingly being called into question under new combat conditions.

Others are also sounding the alarm. Security expert Nico Lange criticized the German Armed Forces for procuring tanks without giving sufficient thought to protection and defense systems against drones. One industry manager even spoke of a budget ratio of "99 to 1" in favor of traditional systems. Economists such as Moritz Schularick and Niall Ferguson also warned that Germany was buying "the wrong weapons against Putin" and ran the risk of missing out on technological trends that will shape the wars of the future. While countries such as the US, the UK, and France are massively expanding their drone capabilities, the German budget for unmanned systems remains relatively modest.

The consequences of such an imbalance could be severe. Militarily, the German Armed Forces risks falling behind in future fields of operation if they continue to rely on expensive, maintenance-intensive technology that can hardly compete with swarms of low-cost drones. Economically, billions could be tied up in equipment whose tactical relevance is steadily diminishing. Strategically, experts warn that Germany is once again reacting too late to technological change – just as it did with digitalization and energy policy. Without a decisive change of course, the Bundeswehr may soon possess state-of-the-art tanks, yet lack the digital and unmanned backbone required for modern defense.

Hensoldt and Rheinmetall: Benefiting from proximity to politics

Major defense contractors such as Rheinmetall, RENK, and Hensoldt are investing in drone technology and other autonomous systems. Rheinmetall is attempting to position itself as a drone supplier. The Company is developing both small tactical reconnaissance drones and larger armed systems, while also working on drone defense solutions. A strategic partnership with the US company Anduril Industries is intended to accelerate its entry into the field of autonomously controlled aircraft and swarm technologies. This is Rheinmetall's response to the growing demand for drone platforms for reconnaissance, combat support, and precision strikes.

Hensoldt is also focusing on the increasing importance of unmanned systems, but with a stronger emphasis on sensor and defense technologies. With its Elysion C-UAS system, the Company has developed a modular solution that combines radar, radio, and optical sensors to detect and defend against drones at an early stage. Hensoldt is also working on the further development of electronic reconnaissance systems. In addition, a cooperation with drone manufacturer AVILUS GmbH was announced in October 2025. The two companies will jointly develop and market unmanned aerial systems (UAVs).

NEO Battery Materials: Batteries for Megatrends

The war in Ukraine has underscored the growing importance of drones in the military sector, whether in attack or defense, and that their importance will only accelerate. According to Grand View Research, the global drone industry revenue is expected to more than double to USD 87.6 billion by 2030. In addition, there are drones for civilian purposes - and NEO Battery Materials is benefiting from this trend. The Canadian company offers cost-effective, silicon-enhanced batteries that store more energy and charge faster. The growth prospects are excellent, as the number of robots and electric vehicles is also expected to increase significantly in the coming years. What do all these technologies need? That's right - batteries.

NEO Battery plans to cover all three major battery formats – pouch, cylindrical, and prismatic cells. For investors, an important milestone is the establishment of mass production: the Company is finalizing a lease of an operational, revenue-generating factory in South Korea. In the future, customized high-performance batteries for drones, robotics, AI electronics, energy storage systems, and e-mobility will be produced there. In September 2025, NEO already secured a multi-million-dollar order from an Asian drone manufacturer to supply batteries for industrial cargo drones. In addition, NEO plans to supply its advanced silicon anode materials to other battery manufacturers, thereby rapidly increasing revenue. A multi-year offtake agreement for 50 tons of silicon anode materials over an initial four-year term has already been signed with one manufacturer.

While a recent capital increase temporarily weighed on the share price, the transaction has now been completed, with NEO raising CAD 5 million to finance further expansion. Additional orders could provide fresh momentum for the stock.

TKMS: Share price slips

TKMS is the newest defense stock on the German capital market. However, after a successful stock market debut, the share price has now slipped below the EUR 80 mark. Even the prospect of major orders from India and Canada could not prevent the decline. Instead, investors appear to be following more conservative analyst opinions.

In its initial coverage of TKMS, Deutsche Bank issued a "Hold" recommendation. While the Company is well positioned in the maritime defense sector and offers growth potential, these prospects are already largely priced into the share price. Analysts see the fair value at EUR 75. Bernstein Research takes a similar view. In a favorable environment, the Company is on course for a turnaround. Nevertheless, analysts consider the euphoria surrounding the initial listing to be exaggerated and have set a price target of EUR 74. As of yesterday, TKMS shares were trading at around EUR 76.

Drones, robotics, e-mobility – NEO stands to benefit from several megatrends in the coming years. The Company is not just a development-stage startup but already has production capacities and secured orders. Rheinmetall also has a healthy order book, albeit more in the area of traditional military technology. A problem for Germany? TKMS could secure major new orders in the coming weeks, which could give the stock fresh momentum.