Rheinmetall Invests €350 Million to Double Gunpowder Production in Bavaria

The scale of the operation is massive. Spanning roughly 90 hectares beneath the Bavarian Alps, the site is being transformed into one of Europe’s largest gunpowder plants. According to CNBC, the facility’s quiet, village-like surroundings mask its strategic importance as European governments surge defense spending to the highest levels since the Cold War.

The Nitrocellulose Choke Point and Supply Sovereignty

Gunpowder isn’t just a commodity; it’s a critical vulnerability. For years, Europe relied heavily on China for cotton linters—the short fibers left on cotton seeds after the longer fibers used to make textiles have been removed—which are used to create nitrocellulose, or guncotton. However, those exports have slowed in recent years. This scarcity created a bottleneck that threatened the continent’s ability to ramp up ammunition production.

Rheinmetall CEO Armin Papperger told CNBC’s Annette Weisbach at the Bavarian site on Wednesday, Without gunpowder, it's impossible to protect our people because at the end of the day, you need gunpowder for ammunition. He added, Without gunpowder, no warhead will go out of the barrel.

Papperger told CNBC that the company has mitigated this risk by securing its own supplies and building reserves, stating, At the moment, we have reserves for the next four years. To further decouple from volatile supply chains, the company is currently working to qualify wood-derived cellulose as a viable alternative to cotton linters.

Project Firepower: Capacity and Financials

The financial commitment is steep. Rheinmetall is investing approximately €350 million into the Aschau site alone. This investment isn’t just about machinery; it’s about human capital, as the company is nearly doubling its workforce at the location to 1,300 employees.

The production targets are aggressive. Within the next two years, the firm intends to lift propellant charge production to over one million units. Beyond the immediate 2028 goal of 4,200 metric tons, there is a long-term target of 20,000 tons of gunpowder annually by 2030.

Strategic Shifts in the European Defense Market

Currently, the continent relies on only a few propellant manufacturers, including Eurenco SA in France and Nammo AS in Norway and Sweden. Papperger emphasized the strategic significance of the expansion ahead of a groundbreaking ceremony with Bavaria Premier Markus Soeder and Deputy German Defense Minister Nils Schmid.

Self-sufficiency is crucial, particularly regarding the powder, which is produced by only a few manufacturers worldwide, Papperger stated. The Aschau site will thus make a decisive contribution to the national sovereignty and credible defense capabilities of Germany and Europe.

The company is also hedging against the evolution of warfare. While some investors have worried that AI-powered weapons and drones might make heavy tanks obsolete—contributing to a 35% year-to-date drop in Rheinmetall shares—Papperger remains unfazed. He views drones as an add-on that will generate more business, rather than replace legacy systems.

R&D and Global Expansion

The Aschau facility is not merely a factory; it will house a research and development center focused on advanced gunpowder. This includes high-energy smokeless propellants made with guncotton, which Papperger said can pack more energy into the limited space inside a shell than traditional black powder. This technological push is part of a wider strategy, as the company has also invested millions in gunpowder facilities across Switzerland and Spain.

By controlling the entire value chain—from the propellant to the bullet casing—Rheinmetall is positioning itself as the primary supplier for the German armed forces, NATO, and other EU customers. The project aims to ensure that the “choke point” of gunpowder does not compromise the national sovereignty or the credible defense capabilities of Europe.