New research reveals growing market for machine retrofits

New research from Siemens Financial Services (SFS) — A perfect (retro)fit: The retrofit revolution and its role in managing the production machine portfolio — has gathered opinion from 100-plus OEMs and vendors internationally to understand retrofit market demand, product offering and financing options.

While manufacturing respondents to the SFS report understand the benefits of digital transformation, the challenge is how to invest in that transformation without tying up precious capital — this is where flexible financing comes in.

For the manufacturer, each week without modernised capabilities is a week of lost revenues. In some cases, acquiring brand new replacement equipment can involve long lead times from the machine tool manufacturer. Therefore, according to the SFS research, manufacturers that wish to bridge the gap between the investment burden of digital transformation and its well-publicised benefits — efficiency, productivity, reduced cost-per-piece — often make the choice of retrofitting and modernising existing machines.

Respondents to the SFS study emphasised that retrofitting should be seen in the context of an OEM or vendor’s whole offering, with the whole machine portfolio carefully managed throughout the lifespan of the machines and through their upgrade and replacement cycles to optimise value and productivity.

Key findings
The SFS research project Talking Sustainability delivered a number of key findings about today’s manufacturing machinery retrofit market, an important component of circularity in the sector. Research confirmed that many manufacturing machine builders have a very established retrofit business. Three quarters of respondents offer retrofit options to their manufacturing clients, with a slight bias towards companies selling into international markets.

Respondents who gave an idea of the breadth of their retrofit business estimated that it represented between 5 and 30% of annual revenues. Furthermore, a selection of respondents noted that the margins of profit on retrofit projects are equal to those on sales of new machinery solutions.

Many respondents expect their retrofit business to grow over the rest of the decade. Moreover, a handful of the machine builders taking part in Talking Sustainability specifically noted that they were now designing machines with future retrofit in mind.

Financing solutions
Nevertheless, financing structures to specifically support retrofit sales are at an early stage of development, according to respondents. While two thirds state that integrated financing options helped them sell more sustainability-enabling equipment (of which the retrofit proposition is one), only a few pioneers are working with specialist financiers such as SFS to provide integrated retrofit financing solutions.

John Bolton, sales manager of industry finance at SFS, said: “Retrofit is definitely a growing segment, as OEMs and vendors seek to offer best value to their manufacturing customers, even though many will still prefer brand new models. The beauty of flexible finance is that it makes the transition to digitalised, more sustainable equipment affordable and cashflow friendly for manufacturing customers whether they opt for the new or the retrofit option.”

Over 100 machine builders were interviewed in 2024 — via a combination of qualitative and quantitative research methods. These machine builders were located around the world, including the USA, Europe, India and China. Respondents were asked their views on: the drivers of sustainability for manufacturing customers; the ways in which their machinery and technology enables sustainability for those manufacturing customers; the role of finance to ease investment in more sustainability-enabling machines.

The full report can be downloaded from the website: here.