Across Western Europe, factories that manufacture battle tanks are closing their doors – and the companies that operate them are closing their doors consolidate and crawl to stay alive. Here in the USA tank manufacturer General dynamics ((NYSE: GD) recently Hundreds of workers laid off Due to weak demand, Congress had to allocate $ 120 million to purchase tanks The army doesn’t want to Just to keep the factory going.
But in Russia they are building a 21st century super tank.
The T-14 Armata (“Армата”) tank is the tank in which Russia will roll into the 21st century. While the Russian Army has only bought 12 Armatas for testing so far, large-scale deliveries are expected to begin this year. Assuming field tests will be conducted over the next two years, Russia plans to replace 70% of its main armored force with Armatas by 2020.
What we know about the Armata tank
That corresponds to 2,300 Armata tanks produced over the next five years, which corresponds to a rate of more than 38 tanks per month – almost four times the last reported production rate at General Dynamics’ manufacturing facility in Lima, Ohio, Abrams.
The tank you see above is a computer generated image of Armata believed look. But according to ITAR-TASS, we will get our first glimpse into real life when Russia unveiled the Armata in the Victory Day parade on May 9th in Moscow’s Red Square. However, reports of the tank’s capabilities are already being filtered out. Despite the Russian Ministry of Defense insist that “no information about [Armata] can be revealed, “multiple sources Confirm that the tank has:
- Layered armor
- A remotely controlled, fully automatic 125mm main cannon that fires both cannon projectiles and laser-guided missiles
- A 30 mm cannon
- A 12.7 mm machine gun
Russian-language Gazeta.ru reported that the Armata’s chassis will form the basis for six armored vehicle configurations, from tanks to armored personnel carriers to military repair and recovery vehicles. The Armata Russian-language Wikipedia page notes that up to 10 Armata variants can be created.
These vehicles will weigh between 30 and 65 tons. So on the high end, the Armata could be 40% larger than the T-90 tanks it replaces – and roughly the size of the US M1A2 Abrams main battle tank.
What it means for investors
As big as an Abrams? It sounds like Russia is designing the T-14 Armata tank to pose a direct challenge to General Dynamics’ most famous product – but for General D, that may be a good thing. You see, here at The Motley Fool, we are as interested as anyone in keeping up with developments in the wide world of guns. But what we really enjoy is figuring out what these developments could look like Impact on investor portfolios.
In that regard, Russia’s potential to improve its game in tank technology has the potential to spark a new arms race in the dying tank industry. If the Armata tank is as good as it sounds, the US Army might also decide that it needs a better tank. After all, the original M1A1 Abrams main battle tank, although upgraded many times, dates back to 1980 (when it was first manufactured) and even 1972 (when the tank was first developed). If things turn out like this, it could give General Dynamics a significant boost in sales.
How Much Buoyancy? According to Deagel.comIn total, the US spent around $ 40 billion to build the Abrams tanks. Even today, with demand for tanks at an all-time low, S&P Capital IQ Data shows that General D’s combat systems division has annual sales of $ 6.1 billion for the company – with an operating profit margin of nearly 15%. A new round of tank innovations could push that number up.
Analogous innovations in armored personnel carriers, light tanks and other vehicles based on the Armata tank could stimulate new development and production rounds for these weapon systems in the USA and further increase the revenues at General Dynamics.
Is that how it will go? It all depends on whether the Armata tank lives up to its reputation. You can be sure that we will be closely monitoring developments for you and will visit the Victory Day Parade to test Russia’s new tank. For now, you just need to be aware that this new tank is “out there” – and prepare to invest accordingly.
This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.