Military Drones Could Be Defense Industry’s Bubble, Rheinmetall CEO Warns

Military drones may not deliver the long-term growth many expect, Rheinmetall CEO Armin Papperger cautioned this week, saying the UAV market could become the defense sector’s biggest bubble, according to a report in The Wall Street Journal.

The comments came during the Defence and Security Equipment International fair in London, where Papperger voiced doubts that drone sales will sustain the explosive trajectory seen since Russia’s invasion of Ukraine. His warning stands out given Rheinmetall’s position as Europe’s fastest-growing arms manufacturer by market value.

Skepticism on UAV Market Growth

Papperger argued that the UAV business is not as big as many think and may be overhyped.

“I’m personally not convinced that the UAV business is as big as a lot of people think,” he said. “I believe that the UAV business could be a big bubble.”

Since 2022, demand for drones has surged, with major defense firms such as Lockheed Martin and Anduril, along with startups, entering the space. Yet Papperger said falling drone prices and rapid advances in counter-drone technology could undercut long-term demand. Short-range drones now cost around €1,000 ($1,080) per unit, while long-range systems are closer to €2,500 ($2,700), he noted.

Production Scale vs. Market Reality

Rheinmetall currently projects drone sales of between €120 million and €140 million ($129–150 million) this year. While internal simulations show it could eventually hit €1 billion ($1.08 billion) in annual sales by 2030, Papperger admitted that governments have not signed enough contracts to support that scale. “You have to produce a lot to make 1 billion [euros in sales],” he said, stressing that no country needs hundreds of thousands of UAVs in its arsenal.

The German defense giant is instead betting more heavily on traditional air defense systems, such as its Skyranger turrets, which can be mounted on armored vehicles. European governments could order up to 1,500 Skyranger units by 2030, according to Rheinmetall, with Germany alone potentially acquiring 650–700 systems.

Broader Strategy Beyond Drones

Despite caution on UAVs, Rheinmetall remains on an aggressive growth track. Its market capitalization has ballooned from €4.2 billion ($4.6 billion) before the Ukraine war to over €86 billion ($101 billion) today.

The company aims to expand its share of the European defense market from 5% to as much as 27% by 2030, fueled by rising defense budgets in Germany and across Europe. Future plans include divesting its civilian business, acquiring smaller manufacturers, and possibly expanding into naval and space systems.

“We don’t want to go into developments,” Papperger said. “What we want to do is to buy companies, to buy the expertise that they have, and to buy their network and also the market that they have.”

DroneXL’s Take

Rheinmetall’s skepticism highlights an important question for drone professionals: is today’s UAV boom built on sustainable demand, or will rapid price declines and counter-drone technologies erode long-term viability? While drones have proven decisive in Ukraine, their role in future conflicts may be less dominant than many assume.

For the commercial and defense drone sectors alike, this signals the need for diversification, innovation, and realistic expectations about market scale. What do you think — is Papperger right to call the UAV surge a bubble, or is he underestimating the staying power of drone warfare? Share your perspective in the comments below.