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German machine tool industry ‘sees light at end of tunnel’

Posted on 17 Apr 2021 and read 1148 times
German machine tool industry ‘sees light at end of tunnel’The VDW (the Frankfurt-based German Machine Tool Builders’ Association), expects production in the German machine tool industry to grow by 6% to around 12.6 billion euros in 2021. At the association’s annual press conference, chairman Heinz-Jürgen Prokop said the improved mood in the economy is raising 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 USA, too, is providing a boost following US President Biden’s election victory. However, the prerequisites for companies regaining their confidence and investing are beating the Corona pandemic and sketching out a sensible roadmap for gradually emerging from lockdown.”

Dr Prokop said the automotive industry in particular, the largest customer for machine tools, is benefiting from the upswing in China, adding that the electronics, food processing, logistics and parts of the medical technology sector have continued doing good business during the crisis, and that this is set to continue.

“In Europe too, investments are expected to rise again by 10% after the major slump. The last two years have been very difficult for many reasons, but this restraint is now having a positive effect on the machine tool industry. Oxford Economics, the VDW’s forecasting partner, is predicting strong growth of 35% for orders in 2021. There were already indications of this in November and December; nevertheless, it won’t be easy to get back to pre-Corona levels.

“Orders fell by 30% in 2020 due to the Corona crisis, following a decline of a similar magnitude the year before. All other key figures also slipped deep into negative territory in 2020: production was down 31%, exports down 29% and domestic sales down 33%.

The hoped-for turnround in the current year is thus starting from a low level. In 2019, capacity utilisation was still at 88%, although the decline in orders caused this to fall to just under 72% in 2020 — comparable to the levels seen following the 2009 financial crisis.”

Dr Prokop says the German machine tool industry sees significant opportunities in the Green Deal and the 2050 climate protection targets. “With its Euro 7 standard, the EU 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 and encourage Europe to rely fully on electric mobility.”

However, he went on to say that heavy goods vehicles, mobile agricultural and construction machinery, the fire brigade and ships will continue to rely on internal combustion engines 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 technical progress because Euro 7 would kill all further investment in engine development.

“The VDW therefore supports the conclusions of a recently published VDMA position paper that calls for a technology offensive in favour of environment-friendly mobility, with organisations working together with industry to achieve climate neutrality, and to draw upon the strengths of companies in developing new technologies.

“Relying solely on electromobility would lead to an extreme increase in electricity demand, which could not currently be covered by renewable energy.”