EU 65% Rule Favors Threod

This rule turns domestic manufacturing from a nice to have into a hard procurement advantage. For a company like Threod, being based in Estonia and building core drone hardware in house means it can fit more easily inside EU backed buying programs, while Chinese systems are often excluded on security grounds and U.S. systems can bring export control friction that slows changes, approvals, and long term fleet support.

• The key mechanism is simple. Under the EU SAFE instrument, contracts must keep non EU, non EEA, non Ukraine components at 35% or less of end product cost, which is another way of saying at least 65% local content. That pushes ministries toward suppliers with European supply chains and control over design choices.
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• ITAR matters because buyers do not just want a drone airframe, they want freedom to modify payloads, software, radios, and support workflows without asking Washington each time. Recent EU rules explicitly stress that contractors must be able to adapt designs and remove third country restricted parts, which makes ITAR free architectures more valuable.
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• This is already creating a regional ladder. Threod reached an estimated $44M of revenue in 2024, while peers like KrattWorks and larger Polish group WB are also benefiting from the same Eastern European defense buildout. The pattern is that local drone makers can win national orders first, then expand across NATO as approved regional suppliers.
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The next step is a more self contained European drone stack, from airframes and sensors to autonomy software and munitions. As procurement shifts toward systems that are built in Europe and free of third country constraints, companies like Threod are positioned to move from niche surveillance vendors into repeat suppliers for larger multi country programs.