In 2021, after the Covid-19 crisis in 2020, the machine tool industry was able to recover significantly. Not only in Germany, but worldwide, orders increased significantly and in some places were even above pre-crisis levels. German machinery manufacturers were able to record an order increase of a whopping 59% and thus more than satisfactorily compensate for losses from the crisis year 2020. The excellent order situation continued in the first quarter of 2022. And then, at the end of February 2022, Russia's war of aggression in Ukraine began – with previously unimaginable consequences for the entire global economy.

Even if the share of the Russian market according to the German Machine Tool Builder's Association (VDW) in the total turnover of the German industry is less than 2%, the indirect effects of the war are severe. Sharply rising energy prices and disrupted supply chains are a particular burden on export-oriented German machinery manufacturers.
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VDW revises 2022-forecast downwards

The war in Europe and a weakening China, supply bottlenecks especially in electronics and chips, and significant price increases in all areas continue to put pressure on machinery manufacturers. Whereas at the beginning of 2022 the VDW was still assuming a production increase of 14% for 2022, the association revised the forecast to only 8%. Possible growth potentials are expected in 2023, but underpinned by a high degree of uncertainty. Not only the economy, but also society as a whole is currently undergoing structural change in several respects – which can result in growing business areas for the machine tool industry, but also in risks. The focus is of course on digitalisation, but changing mobility and climate protection are also areas in which the mechanical engineering sector must react.

Digitalisation as a chance

Industry 4.0 will continue to digitalise and network production in the coming years. For mechanical engineering, digitalisation means above all more efficient, decentrally controlled workflows and continuous process chains complemented by (digital) real-world mapping. Innovative new control concepts also ensure that the classic industry can keep pace with the new, growing demands. Here, too, networking, decentralisation, remote diagnosis via the Internet or reliable error detection down to the level of the field devices – sensors or actuators – are on the agenda. Designers and developers are supported by digital simulations and the use of virtual reality in the creation of highly accurate and cost-efficient manufacturing systems. Machine learning and self-optimising algorithms facilitate the optimisation of processes and workflows and focus on quality assurance. Digitalisation as a chance: Industry 4.0 can be a valuable module for the mechanical engineering industry to emerge from the crises.

The risk of mobility

If current energy prices do not speak in favour of it: The future belongs to electromobility. According to public opinion, the switch to the production of electric cars will lead to a decrease in production – after all, an e-motor only needs about 1/10 of the parts as a conventional combustion engine. However, a study of the Boston Consulting Group from 2020 has invalidated this opinion. According to the study, electric cars are almost as labour-intensive to produce as combustion engines. For electric cars, there are no exhaust systems or fuel lines to be installed, but inverters and charging units, battery coolers and high-voltage cables are. In summary, the switch to electromobility means that the effort required to build a complete e-car is almost as high as building a car with an internal combustion engine. However – and herein lies a risk, especially for German carmakers and suppliers – parts of the value chain will shift. The jobs are not lost, but they do migrate, namely from the German car manufacturer to the supplier from Asia.

Climate protection: Opportunity and risk

It almost seems paradoxical. The European Emissions Trading Scheme has increased the price for the emission of one tonne of CO2 from 20 euros to 70 euros in recent years, industry has accordingly focused on more climate-friendly energy production – and now comes an "energy war" with Russia, which is putting Europe in reverse gear when it comes to climate protection. The CO2 price will be squeezed in the next few years, coal as an energy source will become reputable again and the EU will be able to book a plus of 20 billion euros through the adjusted emissions trading. The plus is to be used to become less dependent on Russian energy sources. At the moment, however, the first priority for energy-intensive production companies in Germany is to "get through the winter and make sure that no masses of companies go bankrupt", as the CDU environmental politician Peter Liese recently made clear in an interview with SPIEGEL. On the one hand, the horrendous energy prices represent a maximum risk for the manufacturing industry – on the other hand, the energy crisis also offers a real opportunity. Because the use of energy- and resource-efficient machine tools not only counters the crisis – but also serves as the basis for ecologically improved products. The ecological transformation as a booster for German production companies: the next few years will be immensely exciting in this sector!

Sluggish growth in German machine tool production - Service business grows all the faster

In the VDV Market Report 2021 it becomes clear that above all the bottlenecks in the procurement of components such as electronic parts have slowed down German machine tool manufacturers. A thin increase in orders of only 2% was evident in pure machine production last year. No major plus is expected here for 2022 either. However, the situation is different in the area of service. The spare parts business and repairs recorded double-digit growth in 2021 – we are expecting a similar trend this year. It can be concluded from this that production companies extend the life cycle of the existing machinery and invest less in new machines.

Used machines: In demand like never before

The "Merker Industrial Valuations" took a close look at the impact of supply shortages, unforeseen market developments, the energy crisis and the Ukraine war. The experts illustrate the drama with a brief example. For instance, during the pandemic there was a sharp increase in online orders, which in turn led to an increased demand for cardboard packaging. This in turn led to a price increase for new corrugated board converting machines – by a staggering 70% between 2019 and 2022! For sellers of used machines, this means a considerable increase in value, for buyers, on the other hand, an upward adjustment of the budget. If an expansion of the machine park is currently planned, the purchase of used machines or machine parts is nevertheless the better option – especially when delivery deadlines are tight.

Buy or sell CNC machines - Platforms ensure fast availability

In the area of procurement, platforms such as Orderfox represent an extremely economical instrument, especially in times of crisis, through the use of artificial intelligence and global networks. Global purchasing can evade supply bottlenecks in certain regions – and above all significantly increase the availability of products that are currently in high demand, such as used machinery.

The year 2022 is difficult for manufacturing companies worldwide. And so far, there is no real relief in sight for the coming year either. This makes it all the more important for machine manufacturers, production companies and dealers to find and use alternatives to previous methods.

We are happy to assist you with our digital approaches to procurement. Why not give us a call right now and let us advise you on our options without obligation!

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