What German Defense Companies Stand to Gain from Manufacturing in India?

At the current production level, ~65% of defense equipment is manufactured domestically and the remaining 35% is met through imports, a significant departure from the earlier 65%-70% import dependency. This growth in domestic manufacturing also reflects upon the export of defense products. The country’s defense exports reached € 2.4 billion in FY 2024-25, up 12% over FY 2023-24 with exports to over 80 countries. The Government of India has taken several initiatives to promote defense manufacturing including allocation of € 68.5 billion to the defense sector in the Union Budget 2025 emphasizing on the indigenous manufacturing of critical defense equipment. Additionally, the Government has set up two Defense Industrial Corridors in Uttar Pradesh and Tamil Nadu to boost defense manufacturing. Till February 2025, 253 Memorandum of Understanding (MOU) were signed, with a potential investment of € 5.5 billion

To capitalize on this opportunity, multinational companies are actively competing for longstanding collaborations with Indian defense companies. Historically, defense firms from the US and France have partnered with Indian private and public sector companies. For example, French companies such as Dassault and Thales have partnered with Bharat Electronics Limited to produce components and integrated systems for fighter jets. Similarly, Airbus is working with Tata to set up local assembly lines for its C-295 military transport aircraft.

On the other hand, Germany and India’s partnership in defense manufacturing sector remains largely unexplored, even though German investments in India’s overall manufacturing sector is significant. Germany’s FDI in India totals € 13.2 billion till December 2024. 

However, in recent times, India and Germany have started underlining their willingness to intensify defense cooperation focusing on technology collaboration, manufacturing or co-production, and co-development of defense platforms and equipment. In February 2025, Hensoldt, a German manufacturer of sensor solutions for defense, security and aerospace applications signed MoUs with Samtel Avionics and Raphe mPhibr. This partnership aims to localize production of sensor and radar technology, transforming Hensoldt’s direct sales-based relationship models into long term partnerships.

India’s defense sector offers robust opportunities for both domestic market and regional exports. 

​Collaborations between German manufacturers which are known for their engineering prowess, and Indian manufacturers which have significant presence in terms of industrial infrastructure and market reach, will help them serve a sizeable domestic market demand as well as capitalize on India’s expanding export potentials in defense equipment.

India’s low-cost manufacturing of innovative defense equipment gives it a competitive edge, setting it apart from the Western countries. For instance, India has developed the Light Combat Aircraft (LCA) at much lower cost compared to similar combat aircraft in the US or Europe. One of the major contributors to India’s production efficiency is its highly skilled yet cost-competitive labor force. By leveraging India's cost-effective yet quality manufacturing environment, German firms can meet local demand and position themselves strategically amidst global supply chain shifts.

As India moves closer towards becoming a global defense manufacturing hub, the renewed and evolving partnerships with German firms could orchestrate an Indo-German defense partnership driven by innovation, self-reliance, and strategic collaboration.

We at Roedl & Partner, have been advising and assisting international companies by providing market intelligence and devising right market entry or expansion strategy- for pure commercial/trading setup or greenfield manufacturing plan or brownfield strategy. We have also supported international companies in strategy implementation by identifying business partners, customers, targets for company acquisition, suppliers or third-party manufacturers. You can refer to our strategy formulation and implementation services in detail by clicking this link: Rödl & Partner | Strategy advisory in India​