Monday, February 17, 2025
elecrama banner

“German Machine Tool Industry Stays Strong Amid Challenges”

Subscribe to YouTube Channel

Subscribe to Mojo4Industry YouTube Channel and get Latest Industry Updates. Do press Bell Icon to get automated notifications whenever new video is uploaded.

Must Read

AutoFlipz starts operations in Delhi NCR

AutoFlipz starts operations in Delhi NCR AutoFlipz, automobile startup in the Aftermarket Repair Shops (ARS) launches its operations in Delhi...

Thyssenkrupp, Mazagon Dock Shipbuilders sign MoU to jointly build submarine

Thyssenkrupp, Mazagon Dock Shipbuilders sign MoU to jointly build submarine Thyssenkrupp AG’s marine arm and India’s Mazagon Dock Shipbuilders signed...

ABB India and PwC India Establish Strategic Alliance to Drive Digital Transformation

ABB India and PwC India Establish Strategic Alliance to Drive Digital Transformation ABB India, a global leader in automation and...

“German Machine Tool Industry Stays Strong Amid Challenges”

German Machine Tool Builders’ Association predicts production decline in 2025; India emerges as a key growth market

“The German machine tool industry considers itself to be in a very strong position among the international competition, despite the numerous challenges,” reports Franz-Xaver Bernhard, Chairman of the VDW (German Machine Tool Builders’ Association), Frankfurt am Main, at the association’s annual press conference.

For decades now, German manufacturers have been leading the field in terms of production and exports. In 2024, they ranked second behind China in production and tied with China for first place in exports. Even in these challenging times, they are continuing to invest around 3 percent of turnover in research and development. Available to take part in joint research projects is a large pool of top experts working at more than 50 internationally renowned research institutes within German universities. The highly trained and highly motivated employees are a further key factor behind the sector’s development. By November 2024, the sector had expanded its workforce slightly to around 65,300 employees. “This allows the companies to respond flexibly to any fluctuations in demand. It is a solution which has proven effective time and again in previous economic downturns,” says Bernhard, summing up.

Call for bold reforms
Nevertheless, the companies need support from the government. The new government must waste no time in setting the course after the federal elections at the end of February and put forward an effective roadmap for stronger economic growth, demands the VDW Chairman. Top priorities must include reducing bureaucracy, driving forward digitalization, lowering energy costs and taxes, improving education and overhauling the infrastructure. “The Supply Chain Duty of Care Act, the Corporate Social Responsibility Directive (CSRD), the Cyber Resilience Act and the European Deforestation Regulation to name but a handful are putting unbearable pressure on companies,” says Bernhard, describing the situation. Depending on the size of the company, they have to spend between 1 and 3 percent of their turnover on documentation – money that is then not available for investment.

Decline in production expected in 2025
The crisis in the automotive industry and the uncertainties in the two major customer markets, the US and China, are weighing heavily on the sector. Consumption of machine tools fell by 18 percent in 2024 in Europe, the main consumer market. The two largest markets, Germany and Italy, lost 12 percent and 28 percent respectively. China stagnated, the US market shrank by 7 percent.

According to estimates by Oxford Economics, VDW’s forecasting partner, 2024 saw a 4 percent fall in the production of machine tools in Germany to around EUR 14.8 billion. A year earlier, however, the industry had posted a sizable 9 percent increase in production in Germany to EUR 15.4 billion. In addition, output at the sector’s foreign production sites grew disproportionately by 13 percent to EUR 3.8 billion. This accounted for a quarter of the global machine production by German manufacturers.

Exports had fallen 5 percent by October 2024. Within the Triad, Europe declined most sharply, by 16 percent. America, on the other hand, was clearly the main driving force, increasing by 17 percent. After a long time in second position, the US overtook China as the most important sales market, growing by a fifth. By contrast, exports to China, the second largest customer, fell by 12 percent. India is now the sixth largest sales market. Exports rose by a sizable 36 percent. Thanks in part to the strong export business with South Korea, Asia remained almost unchanged at the previous year’s level.

The general economic climate is expected to improve slightly in 2025 with falling interest rates, normalization of inflation and a revival of private consumption. Incoming orders, an early indicator of future developments, fell significantly last year, having dropped 22 percent by November. However, most recently there have been signs that the slump could be bottoming out. Domestic sales fell by a tenth, while foreign sales were down by 27 percent, almost three times as much. The decline is spread across the entire Triad.

Even if the demand for machine tools stabilizes and there is a slight improvement in the general economic climate, production is set to decline significantly. The VDW is expecting production to decrease by 10 percent to EUR 13.3 billion.

Potential in diversification of markets and customer sectors
Around half of German exports go to the country’s European neighbors. Europe’s 450 million consumers enjoy considerable purchasing power, meaning that the continent remains a relevant and attractive sales market which is poised to see recovery in industrial investment. The German manufacturers are well established, have a very good reputation and benefit from the close geographical proximity to their customers. “We should seek to exploit this potential even more effectively in the future,” recommends the VDW Chairman.

The EU Commission is keen to support the development of competitive industries in the digital sector, for example. The main priority is on the development of a circular and crisis-proof economy that prioritizes research and innovation. Production is to be stimulated by investment in the modernization and replacement of equipment.

Investment activity within Europe is broadly diversified. The aviation and defense industries in the UK, France and Germany are investing particularly dynamically. Spain, Italy and Portugal are investing heavily in the expansion of solar energy and in hydrogen and battery production. Wind energy dominates in Scandinavia, the UK and the Netherlands. Further tax credits for investments in industry are expected in Italy. Demand is therefore expected to revive somewhat in the current year.

The shortage of skilled workers and the resulting importance of raising productivity are driving investment in engineering. The automotive industry and its suppliers in Eastern Europe in particular are currently benefiting from the rise of electric vehicles. International OEMs are building up capacities in Poland, Hungary, Romania and Slovakia. Eastern Europe is particularly attractive as an industrial location due to the lower wage levels and the plentiful availability of labor. As a result, there is growing demand for manufacturing technology.

Potential markets
India has long been seen as a market with great future potential. German machine tool exports have grown very strongly by over 60 percent in the past two years. The largest industrial sector in particular – metal production and processing – is planning to invest heavily in its own expansion by 2030. The automotive industry is also developing. India is now the fourth largest manufacturing country in the world. Engineering is a major customer sector there, too. Food and packaging machinery, construction and mining machinery, power plant technology and plastics machinery are the main products manufactured in the country. The Indian energy industry is also prioritizing renewable energy.

Subscribe to our Newsletter

Keep up with the latest industry news by subscribing to our industry news update. This way, you'll always be in the know about what's happening in your field, and you can stay ahead of the competition.

http://en.battery-expo.com/
- Advertisement -
mojo4industry podcast episodes click here to listen

Tech Talks

00:02:53

Industry News | 18 Dec 2022 | mojo4industry | mojonews

Industry News | 18 Dec 2022 | mojo4industry | mojonews 📰 Maharashtra clears Rs 70,000 cr investment projectsMaharashtra Government has...
- Advertisement -

More Stories on mojo4industry