Opportunities for European collaboration in armoured vehicles Marta Kepe, Julia Muravska, Richard Flint, Lucia Retter, Antonia Ward, Nathan Ryan For more information on this publication, visit www.rand.org/t/RR2903 Published by the RAND Corporation, Santa Monica, Calif., and Cambridge, UK R® is a registered trademark. © Copyright 2019 European Defence Agency The present study was ordered by the EDA. The contractor who has undertaken the study remains responsible for its content. RAND Europe is a not-for-profit research organisation that helps to improve policy and decision making through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the sponsor. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org www.randeurope.org Cover image: NATO North Atlantic Treaty Organization (CC BY-NC-ND 2.0) 11 Project objectives and approach vehicles as well as mine-resistant and ambush-protected armoured vehicles RAND Europe was commissioned by the (MRAPs). European Defence Agency (EDA) in October In order to identify the potential collaboration 2017 to conduct a study on collaborative opportunities, RAND Europe performed a opportunities relating to armoured vehicles high-level overview of supply and demand among participating Member States (pMS) elements related to current and future trends of the EDA and partner countries.1 The in armoured vehicle servicing, research and overarching goal was to support the EDA’s work development (R&D) and procurement (see in identifying new collaboration opportunities Figure 1), while respecting the fact that throughout the full life-cycle of armoured armoured vehicle choice is impacted by such vehicles (excluding main battle tanks – MBTs). factors as the potential adversary profile, This study constitutes part of a wider EDA intended mission set, deployability and terrain, effort to develop European defence capabilities as well as other political and strategic factors. and promote armaments cooperation. The study considered three categories of Overview of the armoured vehicles: methodologies used • Armoured tracked vehicles: Tracked vehicles (excluding MBTs) configured for During the study, RAND Europe employed any mission module. a selection of methodologies that included literature review, questionnaire design, an • Armoured wheeled vehicles: Wheeled expert workshop with the participation of the 6x6 and 8x8 vehicles configured for any EDA pMS representatives and the development mission module. of cost models, as shown in Figure 2. • Protected transport vehicles: A combination of lighter 4x4 armoured Figure 1: Key supply and demand factors Current European fleets European equipment programmes European equipment plans SUPPLY DEMAND Key manufacturers Key system suppliers Key defence industry consolidation trends Key technology developments SOURCE: RAND Europe 1 The study considered EDA partner countries Norway, Serbia and Switzerland, following the EDA’s recommendation. 2 Opportunities for European collaboration in armoured vehicles Figure 2: Overview of methodologies used during the study Overview of European armoured vehicles landscape Overview of Overview of key demand trends and fleets non-European Cost model armoured vehicles development Overview of key industrial suppliers landscape Literature review Literature Cost model Collaborative Database update review design Government questionnaire design Industry questionnaire design METHODOLOGY SOURCE: RAND Europe Study context security guarantees and assistance, along with concerns about the political cohesiveness Europe is experiencing an increase in of the EU and NATO, incentivise investing in investment in land capabilities after more national capabilities. Lastly the change in than a decade of limited spending in this defence-budget trends comes at a time when area. The overall growth in defence spending the military capabilities of many European in Europe has been influenced by economic countries have been reduced. This resulted and security factors. The economic situation from force posture trends in post-Cold War in Europe and globally has been improving Europe that predominantly focused on out-of- since the 2008 Eurozone crisis. At the same area operations rather than territorial defence. time, the rise of immediate security threats Force readiness and the number of personnel to the east and south of Europe, involvement was reduced and capabilities downscaled in conflicts in the Middle East, the increasing due to the perception of peace dividend, while blurring of the divide between internal and reallocating some of the defence funding to external security threats – which have been other areas of the economy was inspired by the exacerbated by terrorist attacks and migration potentially resulting economic benefits. – as well as a decrease in global stability The EU Global Strategy stipulates the has resulted in the perception that there continued need to develop full-spectrum land is a need to strengthen European security. capabilities, reiterating the importance of Furthermore, increasing uncertainty about defence collaboration through the development the ability to rely on non-European allies for of the Permanent Structured Cooperation 3 Figure 3: Comparison of EDA pMS and partner countries’ armoured vehicle fleets with top ten glob- al armoured vehicle fleet holders (# of vehicles) 76,740 38,266 31,052 28,960 10,354 6,375 5,560 3,997 3,596 3,092 3,067 EDA pMS Russia US India China Egypt Saudi Republic Singapore Democratic United and partner Arabia of Korea People’s Arab countries Republic Emirates of Korea SOURCE: RAND Europe analysis of IISS data on security and defence (PESCO).2 PESCO Main findings provides a mechanism for the EU member states to develop and deploy defence The EDA member states and partner capabilities jointly. On 6 March 2018, the countries hold a significant part of global armoured vehicle fleets European Council approved the first set of 17 projects under PESCO, with Italy-led The EDA participating member states (pMS) collaborative development of an armoured and partner countries’ combined fleet of vehicle family amongst them.3 Although the armoured vehicles is second in quantity only results of this endeavour remain to be seen, to that of Russia and slightly exceeds the this development provides an encouraging combined US fleet (see Figure 3). At the same indication of member states’ intent and interest time, the EDA pMS and partner countries to cooperate in the area of land capabilities. form a substantial region in terms of the overall defence expenditure, accounting for approximately 16 per cent of the overall defence spending in 2017.4 2 Council of the EU. 2018. Council Decision Establishing the List of Projects to be Developed under PESCO. 1 March. As of 6 May 2018: http://data.consilium.europa.eu/doc/document/ST-6393-2018-INIT/en/pdf 3 This project has been joined by Greece and Slovakia. 4 IISS. 2018. The Military Balance. International Institute for Strategic Studies. 4 Opportunities for European collaboration in armoured vehicles Figure 4: EDA pMS and partner countries’ armoured vehicle fleet, by vehicle type 31% Armoured tracked vehicles 45% Armoured wheeled vehicles Protected transport vehicles 24% SOURCE: RAND Europe analysis of open-source data The current landscape of European countries that own the same vehicle families armoured vehicle fleets reveals a large in all three vehicle categories. These broad number of vehicle families, while also parameters coincide with an overcapacity illustrating considerable degree of overlap within the European defence industry relative to the size of the European market and the lack Against the background of increasing defence of industrial cooperation, consolidation and spending in Europe (3.6 per cent in real terms supply-chain integration. in 20175), the last five years have seen a number of EDA pMS focus on enhancing their The European armoured vehicle land capabilities, investing in armoured vehicle supply landscape is characterised by procurement, upgrade, and, to a lesser extent, fragmentation and overcapacity development. According to the open-source analysis performed as part of this study, the The study team has identified a total of timelines and requirements of a number of 18 armoured vehicle manufacturers in the these initiatives are broadly aligned. reviewed European countries (see Table 1), although only 16 have vehicles in serial Despite this, there is a considerable degree of production or have preserved serial production fragmentation in the armoured vehicle holdings capabilities.7 Among these, eight companies of EDA pMS – of approximately 37,000 vehicles export to international markets (outside of the in total, there are up to 47 different families of EDA pMS and partner countries), meaning that tracked vehicles6 and over 35 different families the majority of the manufacturers are focused of wheeled vehicles. At the same time, there is on domestic and to a lesser extent, regional, also a considerable degree of overlap among 5 IISS. 2018. The Military Balance. International Institute for Strategic Studies. 6 Includes tracked vehicles in roles that include bridge-laying, engineering and other specialist roles. 7 Despite their merger, Krauss-Maffei Wegmann and Nexter are presented separately for greater granularity. 5 Table 1: Examples of armoured vehicle manufacturers in EDA pMS and partner countries Manufacturer Category of vehicles Manufacturer Category of vehicles AMZ Kutno Wheeled, protected Nexter (KNDS) Tracked, wheeled, protected BAE Systems Tracked, wheeled, Rheinmetall Defence Tracked, wheeled protected Bumar Labedy Tracked Patria Wheeled Gamma Tech. Corp Wheeled, protected Romarm Tracked, wheeled, protected GDELS Tracked, wheeled, Rosomak SA Wheeled, protected protected Huta Stalowa Wola Tracked, wheeled Supacat Wheeled, protected Iveco Tracked, wheeled, VGGS (ACMAT, Panhard, Wheeled, protected protected Renault Trucks) KMW (KNDS) Tracked, wheeled, Yugoimport-SDPR Tracked, wheeled, protected protected MSM Group Wheeled Zetor Engineering Tracked, wheeled, protected SOURCE: RAND Europe analysis markets. It is also important to highlight the which is a difficult undertaking considering transatlantic industrial links of the European Europe’s relatively limited defence budget armoured vehicle suppliers. Specifically, while size. This saturation has already led to a General Dynamics European Land Systems major step towards industrial consolidation (GDELS) has its production in Europe, it is (e.g. the merger of KMW and Nexter in 2016). in fact the result of the US-based General Although the planned divestiture of the Volvo Dynamics acquisition of a series of European Governmental Sales was aborted in late 2017, armoured vehicle manufacturers. Similarly, it illustrated the existence of a rationale and while BAE Systems is a UK-headquartered an appetite for further consolidation among original equipment manufacturer (OEM), its manufacturers. European manufacturers production line for the M113 is in the United already cooperate on the design and States, and it was created as a result of BAE’s manufacture of vehicles, although cooperation acquisition of the US-based FMC Corporation in between national players remains more 2005, which designed and originally produced widespread. At the same time, while nationally the vehicle. based supplier links are dominant, there is some cross-border supply-chain integration. Thus, EDA pMS have twice the number of armoured vehicle manufacturers than the US, and face the need to focus on export markets in order to sustain their revenue, 6 Opportunities for European collaboration in armoured vehicles There is a balanced interest in all three have current plans for the procurement of vehicle types, with slightly higher level of armoured tracked personnel carriers, six interest in tracked armoured vehicles countries are to procure armoured recovery vehicles and five countries have plans to buy The overview of European demand-and- infantry fighting vehicles (IFVs) and armoured supply programmes and plans shows that engineering vehicles.8 there is currently a balanced interest in the procurement of the three vehicle categories Notable development activity may be observed considered in the study, with 19 current in this vehicle category aimed at both the procurement programmes and future European and the export market. Examples procurement plans identified for wheeled include the development of the ASCOD 2 by armoured vehicles and 17 each for the GDELS in 2013, the Puma IFV by the German- categories of tracked armoured vehicles and based PSM Group in 2014, the Lynx IFV by protected transport vehicles. The trend of Rheinmetall in 2016, the Borsuk amphibious replacing tracked vehicle fleets with wheeled tracked vehicle by Poland’s Huta Stalowa Wola vehicles, which started in the late 1990s, is no and the DCL Renove armoured recovery vehicle longer clear-cut, as the change in the strategic by Nexter (initial operational capability planned environment in Europe has heightened in 2020). governments’ demand for the superior level Armoured wheeled vehicles: This is the of protection combined with firepower that second-largest category of vehicles present tracked vehicles offer in comparison to in Europe (see Figure 4) and the focus of wheeled vehicles. Industry has reacted to this the most activity with regard to current and demand signal. planned procurement plans. Fifteen countries Significant modernisation, upgrade and have programmes or plans to buy armoured procurement activities may be observed in the personnel carriers (APCs), six to buy IFVs, five tracked and wheeled vehicle categories, while to buy armoured recovery vehicles and four to the ongoing and planned activities in protected buy armoured engineering vehicles. Although transport vehicles are focused on procurement. some R&D activities have also been identified, In particular: this category shows fewer modernisation and upgrade plans and programmes, possibly Armoured tracked vehicles: Considering the because some of the most widely used large European holdings of armoured tracked vehicles in this category are either relatively vehicles (42 per cent of the total European new or belong to the Russian/Soviet-made armoured vehicle fleet), and the fact that this BTR vehicle family that may be up for category of vehicles has the highest number replacement with Western platforms, or whose of different vehicle families (approx. 47) and modernisation and upgrade by the original a large number of aged vehicles (e.g. BMP manufacturer would not be feasible due to and M113), a number of European countries political concerns. are implementing programmes aimed at modernising and upgrading older platforms While there has been notable export activity in (e.g. BV-206, CV-90, M113 and BMP-1). this vehicle category, both within and beyond Furthermore, at least eight European countries Europe, some R&D activity has also been highlighted. Examples include the development 8 Here and elsewhere in the document: RAND Europe analysis of CODABA and open-source information. 7 of the Rosomak 2 (Poland’s version of the owner – France. Furthermore, the vehicles in Patria) and GDELS’ recently completed this category are comparatively newer than development of the Piranha V as the future those in the other categories.10 At the same 8x8 AIFV9 of the Spanish Army. Although this time, there appears to be increasing interest in vehicle segment is characterised by a relatively the procurement of these vehicles. Seventeen higher level of industrial fragmentation, some European countries have current programmes industrial integration is occurring. For example, or future plans for the procurement of Rheinmetall is collaborating with the Romanian protected transport vehicles: eight countries ROMARM in order to jointly develop and have programmes or plans to buy armoured produce an 8x8 wheeled vehicle, which will utility vehicles, and seven are interested in the incorporate elements of both the Rheinmetall- procurement of protected patrol vehicles and KMW Boxer and the Romanian Saur. reconnaissance vehicles. Although overlapping R&D programmes were not identified, it Protected transport vehicles: This category was observed that both the UK and Italy are is smaller in terms of share of the overall interested in vehicle development in this European fleet (24 per cent), and has fewer category. identified current and planned activities in upgrade, modernisation, procurement and Table 2 shows a summary of the identified development. In addition, this category is indicative levels of current and planned activity characterised by one very dominant fleet in each vehicle category. Table 2: Summary of European armoured vehicle landscape Tracked armoured Wheeled armoured Protected transport Factors vehicles vehicles vehicles Modernisation and Significant current and Some current and N/A upgrade planned activity planned activity Significant current and Significant current and Significant current and Procurement planned activity planned activity planned activity Significant R&D activity Some R&D activities Low level of R&D R&D present identified activities Additional collaboration Potential for cooperation Potential for cooperation Potential for cooperation possibilities (to those in divestment of aged/ in divestment of aged/ in storage of unused identified in the study) obsolete platforms obsolete platforms mine-resistant vehicles Heightened government Continued government Continued government interest in last five Overall trend in Europe interest, significant interest, competitive years, future investment expert activity expected supplier landscape expected SOURCE: RAND Europe analysis 9 Armoured infantry fighting vehicle. 10 However, vehicles in this family – particularly mine-resistant vehicles – generally have a shorter lifespan. 8 Opportunities for European collaboration in armoured vehicles A number of demand and supply factors country on factors shaping the armoured may lead to increased collaboration in vehicle requirement, such as the potential armoured vehicles in Europe adversary, mission set, deployability and terrain, as well as any political and economic European tracked, armoured and protected considerations. Collaborative approaches transport vehicle fleets are fragmented, with to maintenance, repair and overhaul (MRO) numerous vehicle families observable for would need to take account of differences each vehicle category. However, EDA pMS and in maintenance and repair philosophies and partner nations also have a number of vehicle timelines. types in common, including ageing platforms that are being, or are soon to be, replaced. The project team identified a non-exhaustive list of factors that may be relevant to the Notwithstanding these observations, any future potential for future collaboration in armoured collaborative activities on joint procurement, vehicle maintenance, repair, overhaul and R&D and upgrade would need to consider the upgrades, as well as R&D and procurement. potentially differing views of each participating They are listed in Table 3. Table 3: High-level summary of key factors that may influence potential collaboration in armoured vehicles Demand factors Supply factors Shared overall defence and security threats that 18 armoured vehicle manufacturers currently exist fall into two groups: concern about conventional in Europe, with 16 of them having vehicles in serial conflict and concern about hybrid and domestic production, indicating over-capacity in the supplier security threats base Most of the armoured vehicle families are Some industrial consolidation has occurred, paving currently present in the fleets of two or more the way for further industrial integration, although European countries cross-border mergers remain challenging Groups of countries with broadly aligned vehicle European armoured vehicle manufacturers have procurement plans and programmes have experience in collaboration and cross-border emerged supply-chain integration, although nationally-based suppliers links remain dominant A number of European countries own large European original equipment manufacturers (OEMs) fleets of older generation vehicles that will need have shown flexibility in responding to the evolving upgrade/replacement requirements of European (and global) armed forces Some collaboration formats (e.g. via the EDA, NATO and OCCAR (Organisation for Joint Armament Cooperation), as well as bilateral cooperation) are in place SOURCE: RAND Europe analysis