Foreign Defense Joint Ventures in Ukraine: Rheinmetall, KNDS, BAE and Others

Rheinmetall UDI: The Flagship Joint Venture

The clearest example of the "build in Ukraine" trend is Rheinmetall Ukrainian Defense Industry LLC — Rheinmetall UDI for short. The joint venture was registered on 18 October 2023, owned 51% by Rheinmetall Landsysteme and 49% by the state-owned Ukrainian Defense Industry (the holding formerly known as Ukroboronprom). The split keeps majority control with the German parent while giving the Ukrainian state a substantial direct stake and access to Rheinmetall's engineering, tooling and quality systems.

In June 2024 the venture opened a maintenance and repair hub inside Ukraine, designed to service the German-supplied equipment already in the field — Leopard main battle tanks, Marder infantry fighting vehicles, Fuchs armored personnel carriers, and the Skynex and Gepard air-defense systems. Doing this work in-country rather than trucking damaged hulls back to Germany can shave weeks off the turnaround for a vehicle, returning it to a unit far faster.

The ambitions go well beyond repair. In July 2024 Rheinmetall confirmed plans for an ammunition factory in Ukraine, with production expected within roughly 24 months of the announcement. The company has gone further still, saying it intends to operate at least four production plants in the country, spanning armored-vehicle assembly, ammunition, propellant and air-defense work. If realized in full, that would make Rheinmetall not just a supplier to Ukraine but a manufacturer based there.

KNDS: Repair and Local Spare Parts

KNDS — the Franco-German consortium behind the Leopard 2 main battle tank and the Caesar self-propelled howitzer — is following a similar path. Around January 2025 the group announced a joint venture in Ukraine focused on repair and maintenance and on the local production of spare parts for KNDS-supplied equipment. KNDS Deutschland, the former Krauss-Maffei Wegmann, is the entity opening the joint enterprise.

For systems as widely used in Ukraine as the Leopard 2 and Caesar, a local source of spare parts matters as much as the platforms themselves. Heavy use and battlefield damage create constant demand for barrels, optics, running gear and electronics. A Ukraine-based KNDS operation shortens the loop between a broken component and a working replacement, reducing the number of vehicles sitting idle while parts are shipped from Western Europe.

Because KNDS is a privately held, partly state-owned consortium rather than a listed company, its Ukrainian move is harder to track through markets than Rheinmetall's. But strategically it reinforces the same shift: keep the equipment fighting by maintaining and partly building it where it is used.

BAE Systems and Other Localizers

BAE Systems has also established a local presence in Ukraine, registering an entity and opening an office to support the British and Swedish-designed equipment now in Ukrainian service. That portfolio includes L119 and M777-related artillery, the CV90 infantry fighting vehicle and the Archer self-propelled howitzer. As with Rheinmetall and KNDS, the immediate goal is sustainment — keeping complex platforms serviceable closer to the front — with the longer-term option of local production.

The pattern extends beyond the big land-systems primes. Babcock and the Czechoslovak Group are among the firms exploring or establishing Ukrainian activity, and Turkey's Baykar — maker of the Bayraktar TB2 drone — is building a drone plant in Ukraine, one of the most concrete foreign manufacturing commitments to date. Across these companies the rationale converges on a single idea: build in Ukraine to cut repair turnaround, shorten supply lines and create sovereign capacity that does not depend on any one government's annual budget vote.

This is a structural change in how the war is being supplied. Where 2022 and early 2023 were dominated by transfers of existing stocks, the period from late 2023 onward has increasingly been about establishing industrial roots inside Ukraine itself — turning the country from a recipient of weapons into a co-producer of them.

Why Build Inside Ukraine

The economics and logistics both point the same way. Repairing a damaged Leopard or Marder in Ukraine instead of returning it to Germany removes a long round trip and a queue at overseas depots, returning equipment to combat far sooner. Local spare-parts production cuts the lead times that otherwise leave vehicles deadlined while components are sourced abroad.

Funding mechanisms reinforce the trend. The so-called Danish model channels partner-country money directly into Ukrainian defense production rather than buying finished systems on the open market — paying Ukrainian and joint-venture factories to manufacture inside the country. This is often faster and cheaper for many systems and it deepens the local industrial base. The scale of demand is large: Defense Minister Rustem Umerov indicated Ukraine aimed to spend a record figure of around US$35 billion on weapons production in 2025, a market big enough to justify foreign primes putting plants on the ground.

There are risks. Factories inside a country at war face the obvious threat of missile and drone strikes, which shapes where and how facilities are dispersed and hardened. Ownership structures must balance foreign control of sensitive technology against Ukrainian state participation. And the durability of these investments depends partly on the trajectory of the war. Even so, the direction of travel is clear, and each new joint venture makes the next one easier to justify.

Joint Ventures at a Glance

⚠ Statuses and dates reflect company and official announcements and may change as projects ramp up. The joint-venture entities are private and unlisted; this is not investment advice (Rheinmetall news, Kyiv Independent, Militarnyi, Defense News, The Gaze).