Global Machine Tool Power Shift: China Leads, India Gains Ground, Germany Stabilizes
After two years of subdued investment, Germany’s machine tool industry is beginning to show early signs of stabilization, even as the global competitive landscape undergoes a significant shift led by China’s rapid rise and India’s steady emergence.
In 2025, German machine tool orders declined by 3 percent overall, reflecting continued caution among domestic manufacturers. While international demand offered some relief with a 3 percent increase, domestic orders dropped sharply by 16 percent, underscoring the ongoing struggles of key sectors such as automotive and its supplier network. A modest recovery toward the end of the year, including a 4 percent rise in orders in the fourth quarter, suggests that the downturn may be easing.
At the same time, there is an ongoing shift in global power relations when it comes to the machine tool industry. This has become particularly apparent with the rapid expansion of Chinese industry. Machine production (without parts and accessories) in the People’s Republic of China reached a new record level of approx. 30 billion euro in 2025. A development that sees China further cement its dominance in mechanical engineering worldwide. Germany, on the other hand, once again missed the 10-billion-euro mark for production volume. Reaching 9.4-billion-euro, production only just exceeded the level of the 2020 and 2021 pandemic years. Overall, global production is still strongly focused on just a few countries. China, Germany and Japan together account for 58 percent of the machine tools produced worldwide, with 37 percent attributed to China, 12 percent to Germany and 10 percent to Japan. They are followed by the US and Italy with shares of 9 and 7 percent respectively.
Global market shifts
There are also noticeable shifts in international trade. The global export volume for machine tools reached around 41.4 billion euro in 2025, approx. 3 percent less than the previous year. Particularly striking here is the shift in positions at the top of the export rankings: China has outperformed Germany for the first time to become the world’s largest exporter. While German manufacturers delivered 10 percent less machinery abroad and recorded an export volume of 7-billion-euro, Chinese suppliers increased their exports by 13 percent and achieved a new record of 8.6 billion euro. At the same time, China is by far the largest sales market for machine tools worldwide. Market volume grew by 5 percent in 2025 to reach 25.2 billion euro, with around 32 percent of worldwide consumption attributed to the People’s Republic of China. It is followed by the US with 11.1 billion euro and a market share of 14 percent. Germany achieved a share of 5.7 percent and lies only slightly ahead of India with 5.4 percent.
The VDW experts are expecting another resurgence in the second half of the year. Yet it is not the classic automotive or mechanical engineering industries, alongside arms and aviation, that are driving growth. The machine tool industry is currently gaining substantially more from the electronics and semiconductor industry, as well as their value chains. “This can be attributed to the rapid growth of digitalization, the AI boom and the global expansion of data centers,” explains Dr. Markus Heering, Managing Director of the VDW.
Business with the US also remains stable, despite ongoing commercial uncertainties. Investments are likely to further increase there in the coming months. When it comes to demand from China, prospects have improved slightly thanks to a strengthening of investment in future technologies and the classification of machine tools as critical core technology in the government’s new five-year plan. “These changing geopolitical conditions are leading to an even stronger realignment of economic partnerships. Shown, for example, in the free trade agreements planned with India and the Mercosur,” says Heering.
