Machine tools as a market barometer

“Customs tariffs on electric cars” was the provocative topic that prompted German Economics Minister Robert Habeck to make a difficult trip to China at the end of June. Difficult, because although Habeck did not want to paint an uneven picture at home in Europe, he certainly wanted to avoid customs tariffs on Chinese electric cars with a view to the domestic economy. After all, the leading German manufacturers have large factories in China and are among the largest suppliers of electric cars from China to Europe. Another topic reverberated through the corridors of the Economics Ministry: the concern about retaliatory tariffs on vehicles with a combustion engine that are exported from Germany to China. This was also not a positive scenario for the German economy. The aim of Habeck’s shuttle diplomacy was to prevent the collapse of the already shrinking market. That is because he knows exactly how everything in Germany depends on car production.

The German machine tool industry is also heavily dependent on automotive manufacturers and their suppliers. Although the share decreased from 42 percent (2019) to 31 percent (2021), engine block milling, shaft turning and sheet metal forming are still the most important value-added activities of machine tool customers. As the German Machine Tool Builders’ Association (VDW) also indicated in its 2023 market report, the importance of the automotive OEM has decreased significantly compared to 2019, but it still remains the largest customer industry.

Here too, the search for trend reasons does not take long. For example, the German Machine Tool Builders’ Association (VDW) indicated that the main reason for the decline in the automotive sector was the transformation process in the industry with an increasing shift of investments towards electromobility. Given this situation, no one from the machine tool industry therefore needs a trade war with the largest sales market for its changing customer base.

Continuous diversification

This development is worth taking another look at in the biennial study of the customer structure of VDW member companies. In 2021, around 50 member companies took part in this study and reported a total of around 12,300 machines with a value of €4.6 billion. Even though the latest figures in the 2023 report are not yet available, the trend is clearly confirmed. Three years ago, it was clear what could be expected again this year: the German machine tool industry is broadening its base. The figures clearly show that the customer industries are much more diverse than a few years ago.

In 2019, the three largest customer groups – mechanical engineering, automotive manufacturers and automotive parts suppliers – accounted for a two-thirds share, while the corresponding figure was only 60 percent two years later. The automotive industry therefore accounts for around a third, while in 2019 it was still 42 percent. Mechanical engineering itself as a customer for machine tools has increased its share and has also diversified: machine tool manufacturing with a share of 5.3 percent, punching and cutting tools with just over 4 percent and drive technology with 1.3 percent are the next most important subsectors.

Exports at record level

Let’s look east again: If the pressure from China is increasing with regard to electromobility, what is the situation for machine tools? Measured in terms of production value or consumption value in the local currency Renminbi, China produced more machine tools than demanded for the first time last year. The country exported machine tools worth €7.3 billion to other countries, followed by Japan, which exported machine tools worth €6.3 billion. However, Germany still remains the world champion in machine tool exports with a value of almost €8 billion. An analysis of the absolute figures for the cutting and forming machines produced in the respective markets shows that China is by far the leader. With a production volume of more than €25 billion, China produces almost as much as Germany, Japan and the USA combined.

Although competition is increasing on the global market, it cannot be said that a trade war is looming in the cutting and forming technology sector. According to the VDW analysis, it was rather German, Swiss and Japanese manufacturers that also played a major role in ensuring that exports from China were at a record level last year.

A competitive comparison of regions showed that European countries and the US actually made up some ground: while China (- 2%), Japan (- 8%) and Taiwan (- 16%) showed a decline, production volume in Germany (+ 9%), the US (+ 8%), Italy (+ 6%) and Spain (+ 22%) was much higher last year than in 2022 – albeit sometimes at a much lower level.

Fluctuations in incoming orders

These figures should not hide the fact that 2024 and 2023 are “challenging times” in Germany, according to the VDW. The reason: many empty pages in order books. Influenced by high inflation last year, incoming orders from German machine tool manufacturers fell by a nominal 11 percent. An analysis of the 3-month average for incoming orders from the German machine tool industry shows a fluctuating curve: positive and negative fluctuations in the number of incoming orders increase and are felt over years instead of quarters. It is therefore not surprising that the German Minister of Economic Affairs is trying to keep the current downward curve shorter and flatter via shuttle diplomacy.

Table with the customer structure of the VDW member companies

The customer structure of the mechanical engineering industry is still largely dependent on the automotive industry – but with a much lower decline.

Automotive industry 31% (2019: 42%)
Mechanical engineering 29% (2019: 24%)
Manufacture of metal products 12.4% (2019: 7.5%)
Aerospace engineering 5.4% (2019: 6.7%)
Electrical industry 4.4% (2019: 3.0%)
Precision mechanics 1.9% (2019: 1.8%)
Medical technology 1.5% (2019: 1.2%)

Meeting point AMB 2024

More than 1,200 companies from 30 countries will be presenting their solutions for the metalworking industry at the AMB 2024 in Stuttgart. The fully occupied exhibition grounds in Stuttgart will be the setting for a wide range of topics from 10 to 14 September: machine tools and production lines with their control and drive systems will be presented, as will the associated tools and clamping systems. Automation solutions and measuring and testing systems will also be on display again. In the field of Industry 4.0, solutions relating to AI and intelligent networking, CAD/CAM applications and collaborative robotics will also be presented. A special show by the German Machine Tool Builders’ Association (VDW) and the German Engineering Federation (VDMA) on the umati (Universal Machine Technology Interface) initiative will highlight the advantages of open interface standards based on OPC UA. In the SmartFactory at Entrance East, machine interaction in a fully automated process chain will also be presented.

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