Hyundai Motor Group is consolidating its ground weapons businesses under Hyundai Rotem, bringing tank and artillery production together in a 358.4 billion won ($269.9 million) deal aimed at strengthening its competitiveness in the global defense market.

Hyundai Rotem said Monday it had acquired Hyundai WIA’s defense division, bringing production of the K2 Black Panther tank’s main gun in-house. Until now, Hyundai Rotem has manufactured the tank while Hyundai WIA supplied its 120-millimeter main gun.

The acquisition gives Hyundai Rotem greater control over the K2’s development and production, from the tank platform to its firepower systems, potentially lowering costs and strengthening its position in overseas defense bids.

According to a Hyundai Rotem official, the biggest benefit will come from closer technical collaboration on the tank’s main gun barrel, a core component of its firepower. Firepower is one of a tank’s three essential capabilities, alongside mobility and protection.

Previously reliant on Hyundai WIA for barrel supplies, Hyundai Rotem will now be able to integrate research and development more closely with manufacturing, reducing coordination barriers between the two companies.

Hyundai Rotem said the acquisition would “boost our global competitiveness by securing price competitiveness and increasing localized components for export orders.”

By bringing main gun production in-house, Hyundai Rotem could eliminate supplier markups previously paid to Hyundai WIA and lower manufacturing costs through streamlined R&D and production. The savings could give the company greater pricing flexibility when competing for major overseas defense contracts.

Regarding plans to increase localized production for export deals, the official said details would be finalized following the acquisition, adding that no decisions had been made on building overseas factories.

However, as key markets such as Poland, Romania and countries in the Middle East increasingly demand local manufacturing; technology transfers; and maintenance, repair and overhaul capabilities, industry insiders say Hyundai Rotem may eventually consider establishing artillery and barrel production facilities overseas.

Hyundai Rotem is already expanding localization efforts to establish Europe as a key manufacturing hub. Through a recent partnership with Poland’s state-owned defense firm Bumar-Labedy, it plans to jointly produce customized K2PL main battle tanks and recovery vehicles. Beyond assembly, the agreement includes integrating Polish components and involving local engineers directly in MRO services.

Hyundai Motor Group’s consolidation of its defense operations reflects a broader shift in the global defense market, where overseas buyers increasingly favor comprehensive, turnkey procurement packages that combine heavy weaponry, system integration and defense infrastructure under a single contract.

A similar strategy is emerging at Hanwha Group. Hanwha Aerospace’s reported pursuit of Korea Aerospace Industries reflects its ambition to build a defense business spanning land, air, sea and space. Combining KAI’s fighter jets and helicopters with Hanwha Aerospace’s engines, Hanwha Systems’ advanced radars and Hanwha Ocean’s naval vessels could allow the group to offer more comprehensive packages to foreign governments.

Industry analysts expect Hyundai Rotem’s acquisition to boost its medium- to long-term earnings.

“Excluding the 30 to 35 percent of Hyundai WIA’s defense sales that went straight to Hyundai Rotem, net revenue is set to grow by about 300 billion won,” Lee Sang-hyun, an analyst at BNK Securities, said. “Operating profit should also increase by around 50 billion won as the company takes over external sales and stops paying internal supplier markups.”

In the first half of this year, Hanwha Aerospace’s ground defense division generated 2.1 trillion won in revenue and 533 billion won in operating profit, achieving a 25.3 percent operating margin. Hyundai Rotem’s AD&RH division posted 918.9 billion won in revenue and 224.8 billion won in operating profit, with a comparable margin of 24.5 percent.

By Byun Hye-jin (hyejin2@heraldcorp.com)