epa06601839 Australian Prime Minister Malcolm Turnbull talks to a group of soldiers from the 7th Brigade after inspecting a Boxer CRV armoured vehicle (at rear) at the Gallipoli Barracks in Brisbane, Australia, 14 March 2018. Turnbull announced a AUD $5 billion contract to build 211 of the light armoured vehicles at a new facility in Ipswich, west of Brisbane. EPA/DAN PELED AUSTRALIA AND NEW ZEALAND OUT
Australian Prime Minister Malcolm Turnbull talks to soldiers from the 7th Brigade after inspecting a Boxer CRV armoured vehicle (at rear) in Brisbane, Australia, after announcing a A$5bn contract to build 211 of the light armoured vehicles © EPA

German arms manufacturer Rheinmetall Landsysteme has beaten British rival BAE Systems to win a A$5bn ($3.9bn) contract to build more than 200 combat reconnaissance vehicles for the Australian defence forces.

The contract is part of a A$200bn upgrade to Australia’s military hardware over the next decade, which has enticed most of the world’s biggest defence contractors to establish operations in the country. Rheinmetall has promised to set up a manufacturing operation in Queensland to build most of the 211 Boxer CRV vehicles, which it will supply to the Australian army.

“The world-class vehicles will be manufactured and delivered by Australian workers, using Australian steel, under a contract with German contractor Rheinmetall,” said Malcolm Turnbull, Australia’s prime minister, in a statement.

He said the project would create up to 1,450 jobs over the 30-year life of the vehicles. Australian industry would secure two-thirds of the A$10bn investment required to buy and maintain the fleet, added Mr Turnbull.

The decision to select Rheinmetall follows a three-year tender and rigorous testing, which pitted the German company’s Boxer CRV against BAE’s AMV35. The Boxer CRV will now replace the Australian army’s ageing light armoured vehicle fleet.

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Australia has set a goal of becoming one of the world’s top 10 weapons exporters and is using the modernisation of its defence forces to attract global arms makers to invest. Several of the world’s biggest defence companies, including America’s Northrop Grumman and France’s Naval Group, formerly DCNS, are already setting up facilities in Australia as they position themselves to be beneficiaries of the defence budget boost.

Last week BAE, which employs 3,500 people at its Australian division, won a $1bn contract to upgrade Australia’s long range, high frequency, radar systems. The company is also shortlisted for a A$35bn contract to build Australia’s next generation of frigates.

BAE faces competition from Spanish and Italian shipbuilders, Navantia and Fincantieri.

Euan Graham, defence analyst at the Lowy Institute think-tank, said BAE probably had a better chance of securing the frigate contract.

“In that competition, BAE’s principal advantage lies in the strength of the global combat ship design as an anti-submarine platform. If the Australian navy is prioritising the anti-submarine mission, then the BAE bid stands a good chance of prevailing over its Spanish and Italian competitors,” he said. “That would also be good news for the broader Australia-UK defence relationship, by giving it a stronger defence industrial foundation.”

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