German machine tool industry sees 6% growth

7th May 2021

     

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German Machine Tool Builders’ Association (VDW) expects production in the German machine tool industry to grow by 6% to around €12.6-billion in 2021.

VDW chairperson Dr Heinz-Jürgen Prokop states that improvements in the economy raises the willingness to invest.

“After two years of great restraint, there is now a strong need to make up ground. The global Purchasing Managers’ Index and the German Ifo Business Climate for the capital goods industry are on course for growth.”

China is now the principal driving force behind the global economy. The US has also provided a boost following US President Joe Biden’s election victory.

He adds, however, that the prerequisites for companies’ regaining their confidence and investing is based on overcoming the pandemic and planning to gradually emerge from lockdown.

The automotive industry in particular is the largest customer for machine tools that is benefiting from the upswing in China. Electronics, food processing, logistics and parts of the medical technology sector having also been doing good business during the crisis.

In Europe, investments are expected to rise again by 10% after the major slump. The last two years have been difficult, however, the restraint is now having a positive effect on the machine tool industry.

VDW’s forecasting partner, global forecasting and quantitative analysis company Oxford Economics predicts a strong growth of 35% for orders in 2021. However, it will not be easy to get back to pre-corona levels, explains Prokop.

Owing to orders falling by 30% in 2020 as a result of Covid-19 and a decline of a similar magnitude the year before all other key figures were negatively impacted – production was down 31%, exports down 29% and domestic sales down 33%.

The hoped-for turnaround in the current year is thus starting from a low level.

In 2019, capacity usage was at 88%. The decline in orders caused this to fall to just under 72% in 2020. This is comparable to the levels seen following the 2009 financial crisis.

The yearly average of employee numbers fell by 4.5% to 70 000 men and women in 2020.

“Nevertheless, given the sharp decline in production, it’s obvious that companies are trying to keep their highly skilled employees for as long as possible. The instrument of short-time work remains useful and necessary here,” he says.

Prokop adds that despite the high losses, German manufacturers have performed well when compared internationally.

The German industry accounts for a 16% share of international production, ranking behind China but ahead of Japan. It also remains the world export champion, taking a 20% share, ahead of Japan and China.

Machine Tool Sector

Prokop explains that the German machine tool industry sees attractive opportunities in the Green Deal and the 2050 climate protection targets.

With its Euro 7 standard, executive branch of the European Union the European Commission is now planning to set the emissions limit for cars and trucks to zero by 2025.

“This will more or less exclude the internal combustion engine (ICE) and encourage Europe to rely fully on electric mobility.”

“In addition, experts state that it will not be technically possible for the project to achieve zero emissions in ICEs by 2025, or only at a very high cost,” he says.

Prokop points out that, modern combustion engines will be indispensable in the medium term for achieving the climate targets.

The engines are already yielding emission values that are 50% below the legal requirements.

Further, the use of hydrogen-based e-fuels that are generated with renewable energy can help achieve further major reductions in emissions, especially in existing vehicles.

Heavy goods vehicles, mobile agricultural and construction machinery, the fire brigade and ships will continue to rely on ICEs for some time to come because of the technical limitations to direct electrification.

Greater climate friendliness in these application areas can only be ensured with a functioning research environment and value chain for engine technology.

“An abrupt end to the combustion engine would slam the brakes on the technical progress because Euro 7 would kill all further investment in engine development,” explained Prokop.

If combustion engines were to be phased out, experts fear that half a million jobs would be at risk in Germany alone.

The VDW, therefore, supports the conclusions of a recently published German Printing and Paper Technology Association position paper that call for a technology offensive in favour of environment-friendly mobility.

The aim is for the organisations to work together with industry to achieve climate neutrality, and to draw upon the strengths of companies in developing new technologies, he notes.

In addition, as a result, many different technologies should be deployed to reduce exhaust gas and carbon emissions.

In the future, this will include the use of hydrogen and synthetic fuels in vehicles, and also further optimisation of the combustion engine, the use of fuel cell technology and a growing number of battery-powered vehicles.

“Relying solely on electromobility would lead to an extreme increase in electricity demand, which could not currently be covered by renewable energy. The European Union is called upon to launch a broad-based modernisation campaign and to provide the required framework.”

He concludes by mentioning that in the automotive industry, this would also support the transformation process in user industries such as the construction sector and agricultural machinery manufacturers.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

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