German Machine Tool Industry Facing A Losing Streak

2023 Author : Hannah Pearcy | [email protected] . Last modified: 2023-06-05 00:21

After the past boom years, the VDW (Association of German Machine Tool Builders) is now forecasting a production decline of 18% for 2020. The decline in demand already started in the second half of 2018 and really picked up speed in 2019. The double-digit minus of more than a fifth has melted the order backlog and is now determining the development in 2020.

The past year went better than expected. With a decline of only 1%, the production result of almost 17 billion euros was almost at the record level of 2018. The main pillar was domestic sales, which rose by 16%. In contrast, exports fell by 9%. This is mainly due to the 11% drop in deliveries to Asia and 16% to America. Europe absorbs more than half of German exports and is the largest sales region. At minus 5%, it held up comparatively well.

Many companies expect short-time work

Imports have dropped by a tenth. Employment was down 3% at the end of the year. In addition, the Ifo Institute reported an increase in short-time working to more than 18% of companies. Twice as many companies expect this in the coming months. In order to avoid further staff cuts, the association calls for a rapid extension of short-time work from 12 to 24 months.

The association sees the main reasons for the subdued propensity to invest worldwide

• a cyclical economic downturn,
• the structural change in the automotive industry,
• turbulence motivated by trading strategy
• and the corona virus.

According to statements by Oxford Economics, forecast partner of the VDW, fixed asset investments should increase by less than 1% in the current year.

Germany holds the top position in the international ranking

In the international ranking, the German machine tool industry has maintained its position in the top trio, because all other manufacturing countries are struggling with similar developments as the Germans. In the top trio, only China grew by 2%. Japan in third place even lost 5%. Germany remains world champion in export.

No quick recovery expected

For large parts of the industry, the dry spell in Germany will continue longer, the association predicts. Industrial production in Germany will decrease again. Fixed capital investments in the main customer industries rise only marginally. After a slight decline in the previous year 2020, a decrease of one fifth is expected for machine tool consumption. Production will recover slowly and will take a while to return to the level of previous years.

Digitization and sustainability are top issues in the machine tool industry

The association regards digital networking as an enabler for new business models. More efficiency in production supports sustainable management and paves the way for the circular economy. The control technology and continuous machine communication are important. Wireless access to information in real time is a key to optimizing manufacturing processes, capacities, energy and raw material consumption.

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Umati

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When it comes to sustainability, the machine tool industry is a model industry, according to the association. Machine tools of German origin are characterized by a long service life. Spare parts have been available for a long time for all machine components. The suppliers guarantee software updates for the control components for several generations. Machine tools are generally overhauled and resold as used machines rather than being discarded. This leads to a second and sometimes third machine life. If they are scrapped at the end of their lives, almost all materials can be recycled or upcycled, because mainly high-quality materials that can be reused are used. After all, the productivity of the machines is high. This means that every single component is produced in an energy and resource efficient manner.

The key data

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To the program

In addition to optimizing machine components, the manufacturers also focus on the use of energy during the usage phase. The raw material used and the electricity and media consumption determine the CO2 balance of production. That is why manufacturers are working, for example, on software that will further reduce waste and waste. In combination with new hardware, media consumption can also be reduced by up to 70%.

Driving new drive concepts in the automotive industry open to technology

In addition, the structural changes in the automotive industry are far from complete. In particular, it is unclear which drive technology is used, to what extent and when and which makes the greatest contribution to CO2 reduction. Hybridization, full electrification and battery technology, fuel cells and synthetic fuels - everything is under discussion. The association is convinced that there must be differentiated solutions for different requirements.

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The automotive industry and its suppliers take a significant share of machine tool production, between 35 and 40%. In fact, these deliveries are not intended solely for the powertrain. The association has recently examined this in a more differentiated manner. According to this, in 2019 around 60% of sales with OEMs and suppliers came from engines and transmissions, 40% from bodywork and other system components. However, it can be seen that incoming orders in the Powertrain area are currently losing significant volume.

The latest update of the VDMA study "Drive in Change" showed that by 2030 a good 20% of vehicles will be fully electrified in relation to new registrations in Europe, the USA and China. The three regions represent about half of the international automotive market. The result means 64% less added value in the manufacturing process for pure electric drives, but almost a quarter increase in added value for hybrid drives. This also creates new opportunities for the machine tool industry, for example in the manufacture of components for electric motors, the manufacture of components in the battery stack or high-performance electronics.

The chairman of the VDE, Heinz-Jürgen Prokop, renewedly demands that no new technology per se should be closed and that the best CO ₂ avoidance options should be sought in a technology-neutral manner.