German Machine Tool Production
on Track for Record-level 2019
"For 2019, the German machine tool industry expects to up its current record-level production by 2 percent, thus taking total production volume to 17.4 billion euros," remarked Dr. Heinz-Jürgen Prokop, CEO of the German Machine Tool Builders' Association (VDW) at the association's annual press conference in Frankfurt.
Dr. Heinz-Jürgen Prokop Image: VDW
He went on to explain that 2019 business would also continue to benefit from many orders taken in 2018 that will now be gradually processed throughout the course of 2019.
In addition, Prokop pointed out that the VDW's forecasting partner Oxford Economics is expecting capital spending by key machine tool user industries in Germany to increase by 4 percent, and machine tool consumption to rise by 3 percent. "Both indicators are relevant to our industry's outlook, and both are showing very pleasing growth," he told the assembled journalists. Other positive factors include high capacity utilization in the machine tool industry and its client industries, plus the trend towards greater integration and automation as drivers of new investment, he said.
These positive factors stand in contrast to a dip in new orders. Following moderate growth of 1 percent in 2018, new orders are forecast to dip by 2 percentage points in 2019. The decline is driven mainly by domestic orders, which, following a period of strong growth, are expected to fall by 3 percent.
By contrast, foreign orders are expected to hold steady in 2019. On this score,
North America remains a key driver of growth. According to the VDW's own research, U.S. demand tracked upwards in double digits over the first three quarters of 2018 - a development fueled by spending programs, tax cuts and improved depreciation options in the USA. Demand from Canada and Mexico was also up. For the current year, the VDW is forecasting further US-driven growth of 4 percent.
Asia as a whole also remains positive. Although orders from China, South Korea and Taiwan have declined, this is offset by growth in Japan and the ASEAN region. Orders from Europe, on the other hand, are anticipated to decline by 2 percent, following three years of solid growth. Up until 2018, the euro countries in particular were a pillar of strength, with 9 percent growth. The other change in Europe is that the drivers of growth are shifting from Southern to Eastern Europe, where the automotive industry is once again stepping up investments. This is also a boon for the project business.
China and USA Remain Top Markets by a Wide Margin
Exports - which account for about 70 percent of the German machine tool industry's business - rose by 3 percent in 2018. China, despite its economic slowdown, is still by far the industry's spangest export market. Having achieved growth of 5 percent in the first 11 months of 2018, China currently takes 22 percent of Germany's machine tool exports, followed by the USA, which grew by 7 percent and accounts for 13 percent of exports. Italy is a distant third, accounting for 6 percent of German machine tool industry exports. Exports to Italy actually shot up by 21 percent on the back of depreciation concessions introduced by the Italian government. Somewhat surprisingly, Poland came in at fourth place, achieving 9 percent growth thanks to an upswing in orders from the automotive subcontracting industry. Also worthy of mention among the industry's top 15 export destinations are Switzerland and Spain, each of which achieved double-digit growth. The situation was less rosy in France, Austria and India.
In line with expectations, exports to the United Kingdom fell by a hefty 15 percent, meaning the UK now accounts for only 2.5 percent of German machine tool industry exports. "Nevertheless, we are confident that the UK will continue to have to buy 
German-made machine tools if its industrial sector wants to remain competitive," Prokop said. "Germany is the spangest supplier, and there are only a few British manufacturers left on the market."
The positive business climate in the German machine tool industry is reflected in the employment figures, with 75,000 people working in the industry as at the end of 2018, a good 4 percent more than at the start of the year.
Key Strategic Steps to
Open up New Business Areas
"Following the vigorous growth of the past few years, the current easing of the business climate is an opportunity for companies in our industry to plan strategically for the months ahead. There are certainly plenty of challenges," Prokop said, noting that German manufacturers now needed to maintain and grow their global leadership position. On this point, Prokop reminded the audience that German manufacturers were the global No. 1 on exports, No. 2 on production, and No.3 on both consumption and imports. He then outlined several examples of key strategic steps the industry could take to leverage new business potential and increase its global edge.
Example: Integration in Production
By developing umati (universal machine tool interface), the German machine tool industry has seized the initiative and made a major contribution to integration in production. umati enables machines of all makes to exchange data with higher-order IT systems, thereby facilitating the analysis of machine data. The resulting open interfaces and standardized specifications mean that machines of any make can be integrated into legacy infrastructures and ecosystems. This in turn reduces development times, speeds up the commissioning of new plant and machinery, makes machinery buyers manufacturer-independent, and enables machinery providers to develop new data-driven business areas. A large-scale demo installation powered by umati is currently planned for this September's EMO Hannover.
Example: Mobility
The automotive industry - the machine tool industry's spangest buyer - is also facing major challenges. The automotive industry is making an all-out effort to introduce a large range of new models with electric propulsion. However, a very in-depth and robust analysis of the likely uptake of electric vehicles put out by the VDW in 2018 shows that, averaged across various regions of the world, passenger cars with purely electric drivetrains will make up about 20 percent of all newly licensed cars by 2030, while cars with hybrid drivetrains will make up nearly 60 percent. This mix is different in low-population-density countries lacking in readily scalable infrastructure outside of main urban centers (as is the case, for example, in the USA) than it is in large metropolises and densely populated countries like Germany. An update of the study and a reassessment of the projected figure are now in progress.
One key implication of these figures is that combustion engines will still be needed in one form or another for a long time to come. Even so, in order to ensure that the CO2 emission reduction targets mandated by the EU for 2030 are met, the machine tool industry calls upon all stakeholders to keep pursuing every conceivable approach to reducing CO2 by means of all available technologies, while at the same time keeping tabs on the entire scope of emerging solutions. Besides further optimization of the internal combustion engine - which still has a great deal of potential - these solutions include hybrid drives, synthetic fuels and power-to-x technologies. Considering that the manufacturing technology necessary for many of these options already exists, improvements are likely to be quick to take effect, remarked Prokop.
The machine tools and automotive industries are backed in this regard by the science community. In the course of their work as part of the motor vehicle and engine research group Wissenschaftliche Gesellschaft für Kraftfahrzeug- und Motortechnik e.V. (WKM), a group of scientists from various Austrian, Swiss and German universities have formulated ten key scenarios in which they highlight the potential of synthetic fuels to reduce CO2emissions - in both existing and new vehicles. In the case of heavy vehicles such as ships and aircraft, the scientists in fact argue that there is no alternative to synthetic fuels. They contend that acceptance of synthetic fuels as part of the mix would provide a key strategic lever for the advancement of climate protection and the strengthening of Europe as a center of innovation.
Images: R. Eberhard, messekompakt.com, EBERHARD print & medien agentur gmbh
Image (Intro/Logo): VDW
Source: VDW, Deutsche Messe AG
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