Warship Manufacturer TKMS Forecasts Stronger Margins Amid Rising Defence Spending

SINGAPORE / BERLIN, Sept. 30, 2025 — German naval systems manufacturer ThyssenKrupp Marine Systems, or TKMS, projects its addressable market to triple by the end of the decade.

“This attainable market in electronics, drones, surface vessels and submarines is expected to double or even triple by the end of the decade,” Oliver Burkhard, CEO of TKMS, told CNBC on the sidelines of the Singapore Defense Technology Summit.

The surge comes after the German parliament approved a major fiscal package that includes changes to long-standing debt policies, enabling higher defense spending. Oliver said the move signals that Germany’s defense budget faces “more or less no limit anymore.”

Under the proposed reforms, defense and certain security expenditures above a set threshold would no longer be subject to the debt brake, a rule that caps federal borrowing and determines the structural budget deficit.

Oliver noted the unusual nature of the policy shift, citing comments by German Chancellor-in-waiting Friedrich Merz: “In view of the threats to our freedom and peace on our continent, the rule for our defense now has to be ‘whatever it takes.’”

“The Germans normally don’t say ‘whatever it takes,’ because [it’s] very irrational,” Oliver added. “We have KPIs, we have figures, we have argumentation, we have surveys, we have research. Based on these, then we say something, but we never said ‘whatever it takes,’ and ‘whatever it takes’ is more or less limitless.”

He said the special funding could reach 500 billion euros or more, a level “never been seen before since 1945.” For the defense industry, Oliver said this would likely accelerate project timelines and increase procurement.

Expanding Capacity and Partnerships

ThyssenKrupp Marine Systems, the warship division of German industrial conglomerate ThyssenKrupp, manufactures naval vessels and submarines. Oliver said the company is closely monitoring the shift in defense spending and evolving customer demands.

Asked about a potential shift toward unmanned naval drones, similar to those used in the Russia-Ukraine war, Oliver said the systems are better seen as “extensions” of current platforms, such as submarines accompanied by above- and below-water drones. “Customers may not order four submarines, but maybe two, with 50 autonomous vehicles,” he said.

Oliver acknowledged capacity challenges, “Everybody has higher budgets. Everybody wants to have it faster, and the demand is very strong.”

Infrastructure and Global Expansion

TKMS recently acquired a shipyard in Wismar, northern Germany, to produce vessels for Germany, Norway and Israel, alongside existing facilities in Kiel and Brazil. The company recognizes that domestic production alone may not meet rising demand, and partnerships will be key to its expansion.

Joint Ventures: Oliver highlighted a joint venture earlier in 2025 with India’s Mazagon Dock Shipbuilders. Through the partnership, TKMS will help design and engineer six submarines for the Indian Navy, which will be built in India.

Capacity Investments: The company’s investment in the Wismar shipyard and existing facilities is aimed at speeding up production timelines and increasing output, allowing TKMS to meet the rising global demand for naval platforms, including unmanned systems.

Spinoff and Investor Sentiment

TKMS is also preparing for a spinoff from its parent company ThyssenKrupp, with plans to list on the Frankfurt Stock Exchange. Oliver said, “We will try to do that by this calendar year.”

Investor Sentiment Appears Positive: ThyssenKrupp shares have surged 155% year-to-date as of March 19, a momentum Oliver said improves prospects for the spinoff.

Oliver emphasized that the German government’s increased defense funding is expected to accelerate procurement, with more projects likely to be fast-tracked. He noted that higher budgets and urgent timelines create both opportunities and challenges for the company’s production capabilities.

Outlook for Naval Technology

While TKMS continues to produce traditional submarines and surface vessels, Oliver sees unmanned platforms as a complement rather than a replacement. “It’s about extending the capabilities of our vessels,” he said. “Drones above and below the water increase operational flexibility and effectiveness for our customers.”

The CEO added that the combination of unlimited funding, technological adoption, and global partnerships positions TKMS for a period of significant growth. “We are entering a phase where the demand is unprecedented, and we have to scale responsibly to meet it,” he said.

With Germany’s defense budget now unconstrained by traditional debt limits, Oliver said the industry is entering uncharted territory. “Whether it’s 500 billion euros or even more, it’s a kind of special funding which has not been there, never been seen before since 1945,” he said.

The company’s strategy focuses on expanding production, securing partnerships, and integrating unmanned systems into its platforms, all while preparing for a market that could potentially triple by 2030.

We are entering a phase where the demand is unprecedented, and we have to scale responsibly to meet it.

Inputs from Saqib malik

Editing by David Ryder