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BAE’s Hägglunds is increasing capacity as it gears up for a huge joint order from several of the region’s armies

In the forests of northern Sweden a trio of armoured vehicles growl around a test track, proving their capabilities for Europe’s armed forces ahead of a possible future fight with Russia. 

BAE Systems Hägglunds, a subsidiary of Britain’s biggest defence group that makes the vehicles in nearby Örnsköldsvik, is reaping the benefits of Europe’s rearmament drive following Russia’s full-scale invasion of Ukraine four years ago.

The company is gearing up for a multibillion-dollar joint purchase from Sweden, Finland, Norway, Lithuania and the Netherlands for about 500 of its latest CV90 infantry fighting vehicles that would almost double its order book.

The joint purchase is meant to reduce cost and strengthen collaboration across Europe, whose fragmented procurement has come under scrutiny since the war in Ukraine.

Hägglunds managing director Tommy Gustafsson-Rask said the urgent need to re-arm was driving many governments to accept greater standardisation in equipment than before.

“Given the security situation, our customers want their gear yesterday . . . They are prepared to do a trade-off,” he said, adding: “As one army chief said to me, ‘if it’s good for the Dutch army chief, it’s good for me’.”

A contract, which Gustafsson-Rask expects to be signed in the third quarter, would add to an order backlog of 600, with the last to be delivered in 2032. The company is also building more of its BvS10 all-terrain vehicles. 

How to deliver on these orders is a top priority; the company does not disclose exact numbers but says it is expanding to produce five times as many vehicles as before the Ukraine war. It produced about 50 in 2020.

BAE has invested $300mn over the past five years to expand output at Hägglunds, with a further $150mn planned over the coming two years.

Production capacity — including new assembly features in customer nations — has surged 400 per cent since 2021 and headcount has more than tripled to 2,600, making Hägglunds by far the biggest employer in a town of just 56,000. Sales have increased from about $200mn in 2020 to $1.1bn last year, with the CV90 programmes accounting for the majority. 

Hägglunds customers still have some flexibility in the final specification of the vehicles. Örnsköldsvik assembles the chassis of the CV90s and does the core welding and structural work but different turrets and components such as weapon systems can be added by customer nations locally to meet specific requirements. Some manufacturing is also outsourced. 

At the Örnsköldsvik facility this week, two workers were manipulating and bending a mine protection plate that will go underneath the CV90 chassis using a powerful hydraulic press. The company currently runs it in two eight-hour shifts but could go up to three if needed. 

Money is also being spent on 3D printing — Hägglunds has teamed up with Swedish defence champion Saab to develop a “micro factory” concept, in which the technology can be used on the front line for the rapid manufacture of vehicle spare parts.

The expansion marks a significant change since the years after the cold war, when customers were thin on the ground and the company was cutting capacity. Things started to change, however, with the 2014 Russian annexation of Crimea, said Gustafsson-Rask.

“That was the turning point, the switch, and Europe started to think again.”

Sash Tusa, analyst at Agency Partners, said Hägglunds had been a “slow burn success for 30 years” but was now “big enough to move the needle slightly for BAE” — which reported revenues last year of £30.7bn ($41bn). 

The company’s flexibility in export competitions and ability to “offer the customer what they need in terms of local assembly or workshare” was key to its success and ability to deliver on its order backlog, Tusa added. 

The success of the CV90, whose earliest variants entered service with the Swedish army in the early 1990s, stands in sharp contrast to the UK’s troubled Ajax programme, a contract won by US defence group General Dynamics at BAE’s expense that has been beset by delays and cost overruns.

Gustafsson-Rask said he was open to talking to the UK government if it ever decided it was interested in buying the CV90. “They can always come and talk to us.”

Given the company’s large order backlog, Gustafsson-Rask said Hägglunds would probably have to consider “new business models” such as licensed production in case new customers were interested. 

The war in Ukraine and the proliferation of drones on the battlefield have led some to question the role of armoured vehicles.

Detecting and responding to drones has become an increasingly pressing issue. Estonia last month withdrew from the prospective group purchase of new CV90s, saying it favoured prioritising its air defences and would instead upgrade its existing fleet of the vehicles. 

Nick Reynolds, research fellow for land warfare at the Royal United Services Institute, said “there is a narrative in some parts of the defence commentariat that armoured vehicles will not be relevant in future”.

Although the counter-drone technology that can protect vehicles “has lagged behind advances in drone technology up until now, the belated realisation of the importance [of counter-drone systems] has spurred a great deal of R&D and investment,” he added. 

Gustafsson-Rask said the loss of Estonia would only have a “marginal” impact on the overall size of the CV90 contract. The company has also been able to put to use the learnings from the battlefield in Ukraine; Sweden donated 50 older CV90s to Kyiv. The latest variants of the CV90s boast anti-drone technology including surveillance, jammers and active protection systems.

While drones were “here to stay”, he said, so were infantry fighting vehicles. “If you want to win the war, you need infantry fighting vehicles and main battle tanks because you need to control the ground and take the ground.”

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