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Germany machine tool market

The VDW (German Machine Tool Builders鈥� Association) is expecting production output to fall by 18 % in 2020. 鈥淭his is something the sector hasn鈥檛 seen in a long time, following the boom of recent years鈥�. The decline in demand, already perceptible in the second half of 2018, really picked up speed in 2019, he went on to explain. The double-figure fall of more than one-fifth, he continued, had melted away the order backlog, and was now the determinant factor for developments in 2020.

The past year, by contrast, turned out much better than anticipated. 鈥淲ith a decrease of just 1 %, the production result came to almost 17 billion euros, nearly equalling the record level of 2018鈥�. The principal contributor here was domestic sales, which rose by 16 %. Conversely, exports were down by 9 %, a fall primarily attributable to a decrease of 11 % in deliveries to Asia and 16 % in deliveries to America. Here, the regional results are dominated in each case by the largest markets: China, at minus 13 %, and the USA, minus 15 %. Europe, the largest sales region, accounting for more than half of German exports, still performed comparatively well with minus 5 %.

The ongoing combination of a cyclical downturn, structural transformation in the automotive industry, turbulences motivated by trade policies, and last but not least the coronavirus as well, are dampening the propensity to invest all over the world. Investments in plant and equipment are set to rise by less than 1 % in the current year, according to Oxford Economics, the VDW鈥檚 forecasting partner. Only relatively small markets are in much better shape, like Vietnam, Thailand, Slovakia, Hungary, and Poland. But they are quite unable to compensate for the sluggishness of the major customer nations China, USA, Italy, or France. The consequence is a correspondingly substantial minus for all key statistics in the Germany machine tool industry during the current year: production, exports, imports, and consumption.

In the international rankings, the German machine tool industry has maintained its position in the top trio, since all other producer nations are struggling with similar developments to Germany鈥檚. Based on provisional data for the Top 20 producers, the VDW has calculated for 2019 a decrease in international production excluding parts and accessories of 3 % to 72.1 billion euros. In the top trio, only China, with 2 %, managed an increase. 鈥淚n comparison to previous growth rates, this is indeed a very modest figure,鈥� says Dr. Prokop, putting it in its due perspective. Japan in third place even lost 5 %. In terms of exports, Germany remains the world champion. Japan in second place saw a fall of 9 %, similar to Germany鈥檚, while Italy in third place suffered a fall of 2 %. In terms of consumption, finally, the world鈥檚 biggest market, China, reported a decline for the second time in succession, of 8 %, while the USA was likewise down on the preceding year, with a minus of 3 %. Only Germany, in third place, reported a rise, of 6 %.

鈥淔or large portions of the industrial sector in Germany, the lean period will continue for quite a long time鈥�. Industrial production output in Germany is set to fall once more. Investments in plant and equipment at the principal customer industries will show only a marginal increase. For machine tool consumption, following a slight decline in the preceding year, a minus of one-fifth is anticipated in 2020.

In terms of the Ifo Institute鈥檚 business climate and the Purchasing Manager Index from Markit, both of them early indicators for future developments, there are in many areas incipient signs of an upturn. This, however, is no more than a glimmer of hope, since many curves are still deep in the minus zone.

鈥淭his means that unlike in previous downturns a quick recovery cannot be anticipated,鈥� the machine tool industry does not expect order bookings to bottom out until the year鈥檚 second half, which will not, however, suffice for an upturn. So production output will only slowly recover and will take a while to regain the level of recent years.

Digitalization and sustainability are paramount issues in the machine tool industry

鈥淒ifficult times also offer an opportunity to re-invent yourself,鈥� says a confident Dr. Prokop. The biggest leverage will in the future be offered by digital networking. This, he said, is the enabler for new business models, a terrain on which a whole lot can still be achieved with appropriate creativity.

More efficiency in the production operation supports sustainable management and smooths the path into the circular economy. Significant factors here include control system technology and full-coverage inter-machine communication. Wireless access to information in realtime is a key factor for optimizing production processes, capacities, energy, and raw material consumption levels.

Now the machine tool industry, in particular, is a veritable flagship sector when it comes to sustainability. Machine tools made in Germany already rank among the most sustainable products currently available. 鈥淲e say this in all self-confidence,鈥� emphasizes the VDW鈥檚 Chairman. They excel in terms of lengthy useful lifetimes. For all components of the machine, spare parts are kept available for long periods. For the control system components, the vendors guarantee software updates for several generations. Machine tools tend to be completely overhauled and resold as pre-owned machines rather than be decommissioned. This leads to a second and sometimes even third machine life. When they are scrapped at the end of their useful lifetime, almost all the materials involved can be recycled or upcycled, since it鈥檚 primarily top-quality materials amenable to re-use that are employed. Finally, the machines鈥� productivity is extremely high. This means every single component is manufactured in an energy-economical, resource-efficient process.

Besides optimizing the machine components, the manufacturers concerned devote particular attention to energy consumption during the utilization phase. The raw materials used, and the power and media consumption levels, co-determine the CO2 balance of the production operation. This is why, for example, manufacturers are working on software with which waste and rejects can be further reduced. In conjunction with new hardware, moreover, media consumption levels can be downsized by up to 70 %.

The automotive industry and its component suppliers purchase a significant proportion of machine tool production output, between 35 and 40 %. 91视频官网ever, these deliveries are not destined solely for the drive train. The association has recently conducted a more differentiated analysis of this, which revealed that in 2019 about 60 % of total sales with OEMs and component suppliers were accounted for by engines and transmissions, 40 % by bodywork, and other system components. It emerged, however, that the order bookings in the power train category are currently showing a significant decline in volume.

It remains undisputed that the transition to new drive technologies will be a protracted process. The VDMA鈥檚 study on 鈥淒rives in Transition鈥� revealed in its latest update that by 2030 a good 20 % of vehicles, referenced to new registrations in Europe, the USA, and China, will be fully electrified. The three regions constitute about half of the international automobile market. The result means 64 % less value-added in the production process with an exclusively electric drive, but the growth of almost a quarter in the value-added for a hybrid drive.

This also leads to new opportunities for the machine tool industry, not least in the production of components for electric motors, the manufacture of components in the battery stack, or high-performance electronics.

鈥淭he facts that sales of battery-electric cars have stalled in China and the USA, the Chinese government has discontinued its subsidies, and hardly any electric vehicles are being bought in Germany despite financial support, however, permit justified doubts to be voiced as to whether concentration on a single technology is the right approach,鈥� warns Dr. Prokop. He reiterates the recommendation not to rule out any of the new technologies per se, and adds: 鈥淥ur concern must be to repeatedly urge that all modification measures be controlled with free-market-based instruments and the best CO2 avoidance options be sought on a technology-neutral basis.鈥�