Rheinmetall’s stock is reflecting investor confidence.. Year to date, shares have surged 92%, with a 19.95% gain in the past five days alone.

German defence companies seeking more capacity as Europe prepares to raise military spending are eyeing the ailing car industry, the first sign of a shift that could help revive the continent's biggest economy after two years of contraction.

The think-tank’s aim is to research ways to “encourage and facilitate private investment into European defence”. The approach to VanEck was made after President Donald Trump signalled a dramatic change in US policy on defence spending in Europe. The US has since suspended military aid to Ukraine.

The expectation of impending higher arms spending was one of the factors that led to the European aerospace and defense sector stock index to rise.

Rheinmetall plans to convert two automotive plants in Germany to produce defense equipment, responding to increased EU military spending due to U.S.-Russia tensions. The firm's market value has risen since Russia's invasion of Ukraine,

The move by Europe's top ammunition maker to repurpose two automotive plants highlights the impact of an expected surge in spending in the region.

The stocks of European defense companies soared Monday as investors anticipate massive increases in military spending by governments in the region amid its growing rift with the United States.

European shares neared record highs driven by defense stocks, after leaders agreed to increase defense spending and propose a Ukraine peace plan to the U.S. The STOXX 600 index rose 0.4%, while defense stocks surged.

Manufacturers of tanks, radar and weapons are aiming to ramp up production as Europe responds to U.S. pressure to take care of its own defences. Carmakers, for decades Germany's economic powerhouse, are meanwhile cutting jobs and shutting plants amid slowing demand and a creaking electric vehicle transition.