Mechanical engineering: In Germany, innovation is hampered by politics, energy costs are paralyzing the industry, and a shortage of skilled workers is hindering progress

The mood in the German mechanical engineering sector is currently subdued. Uncertainty about the future development of global trade and a tight order situation are weighing on the industry. Added to this are geopolitical risks and disadvantages of Germany as a business location. Many companies are anticipating declining sales. The German Engineering Federation (VDMA) is therefore calling on policymakers and unions to take action.

Here we analyze the current situation in the mechanical engineering sector, highlight the challenges and trends of the industry, and ultimately identify measures that could contribute to improving morale. The perspectives of companies, employees, and policymakers are taken into account.

Current mood in mechanical engineering

Various reports and analyses paint a negative picture of the current mood in the mechanical engineering sector:

• PwC's mechanical engineering barometer shows that sentiment is at a historic low and sales forecasts are slipping into negative territory.
• According to a survey by the VDMA, 37 percent of companies rate their situation as bad, while only 28 percent rate it as good.
• Almost 60 percent of the decision-makers surveyed expect an economic slowdown in Germany.
• The expansion investments of German machine manufacturers in Asia are losing momentum.
• Order intake and production in the industry are down sharply compared to last year. Particularly worrying is the fact that current sentiment is worse than during the coronavirus pandemic.
• However, there are also positive signs: Approximately one in three companies rates sales opportunities in the USA as good or very good.

Challenges in mechanical engineering

The German mechanical engineering industry is currently facing a variety of challenges:

Economic framework conditions

• Energy costs: Rising energy costs are putting a strain on companies.
• Laws: Stricter laws and regulations make business more difficult.
• Location disadvantages: Rising energy and personnel costs, as well as the regulatory environment in Germany, worsen competitiveness in international comparison. China's importance as a sales market is declining.

Global competition

• Competitive pressure: German machine manufacturers must reinvent their business models and products in order to survive in international competition, especially against Asian competitors.
• Country-specific factors: The competitiveness of German machine manufacturers is also influenced by country-specific factors affecting their competitors. For example, Japan is suffering from the consequences of the Fukushima nuclear disaster, and Swiss exports are hampered by the strong Swiss franc.

Digitization

• Digital transformation: Many companies have not yet fully implemented digital transformation and remain stuck in old structures. They lack consistent digitization of processes and a data-driven approach.
• Opportunities and challenges: While digitalization presents the industry with challenges, it also offers opportunities for increasing efficiency and developing new business models.

Further challenges

• Skills shortage: The lack of qualified skilled workers poses a major problem.
• Supply chains: Disrupted supply chains lead to production delays and higher costs.

These diverse challenges, particularly the combination of economic conditions, global competitive pressure, and slow progress in digitalization, are significantly contributing to the negative sentiment within the industry. To maintain competitiveness and improve sentiment, these challenges must be addressed.

Trends and innovations in mechanical engineering

Despite the challenges, there are also positive developments and trends in mechanical engineering:

• Industry 4.0: The ongoing digitalization and networking in production offers new opportunities.
• Sustainability: Sustainability and environmentally friendly materials are gaining in importance.
• New technologies: Hybrid lightweight construction, multi-material design and additive manufacturing are promising fields.
• New business models: In addition to the classic sale of machines, new business models such as leasing or subscription models are gaining in importance.

Best practice examples

Several companies in the mechanical engineering sector are demonstrating how to successfully address current challenges. Here are a few examples:

• Brückner Maschinenbau: The company was awarded a “best practice example” for energy efficiency in industrial processes at the Hannover Messe trade fair.
• Burkhardt+Weber: The machine manufacturer relies on customized solutions and high flexibility in production to meet its customers' requirements. Aichelin: In cooperation with ROI, the company has significantly reduced lead times and processing times for assembly and commissioning on the construction site through structured planning and optimized processes.
• Krones AG: The machine manufacturer is focusing on shifting transport from road to rail in order to optimally plan transport schedules, relieve road traffic and reduce CO2 emissions.
• IMRO Maschinenbau: The company uses state-of-the-art technologies such as 3D planning and simulation to optimize plant processes and deliver fast results to its customers.

These examples demonstrate that companies can succeed through innovation, customer focus, digitalization, and sustainability. They offer valuable inspiration for other companies in the industry.

Successful companies in mechanical engineering

There are a number of companies in the mechanical engineering sector that are successful despite the difficult conditions.

More information here:

• Successful mechanical engineering companies in Germany include Bosch, CLAAS, Dürr, Exyte, Festo, Krones, Voith, Zeiss and others

These companies distinguish themselves through various factors, such as innovation, customer focus, digitalization, and sustainability. They have recognized the challenges facing the industry and successfully developed strategies to overcome them. For example, they invest in research and development to bring new technologies to market and leverage the opportunities of digitalization to optimize their processes and develop new business models.

In a global comparison, 33 percent of worldwide mechanical engineering sales are attributable to China, 32 percent to Europe, 18 percent to Asia (excluding China) and 14 percent to North America.

Measures to improve the mood

To sustainably improve morale in the mechanical engineering sector, a coordinated approach by companies, employees, and policymakers is necessary. The most important measures are:

Pursue

• Driving innovation: Companies should invest more in research and development and bring new technologies and products to market.
• Leveraging digitalization: Digitalization offers opportunities for increasing efficiency and developing new business models.
• Promoting sustainability: Sustainable production processes and products strengthen competitiveness.
• Securing skilled workers: Companies should invest in the training and further education of their employees and create attractive working conditions.
• Promoting internationalization: Opening up new markets, such as Turkey, can help to reduce dependence on individual regions.

Employees

• Demonstrate flexibility: Employees should be prepared to adapt to new requirements and to pursue further training.
• Involve collective bargaining partners: The collective bargaining partners should be moderate in their approach to wage and salary development.

policy

• Improving framework conditions: Policymakers must improve the economic and political framework conditions for investment and innovation. This includes a competitive tax system, modern infrastructure, and a more flexible labor market.
• Reducing bureaucracy: Reducing bureaucracy relieves the burden on companies.
• Modernizing infrastructure: Investments in infrastructure strengthen Germany as a business location.
• Lower taxes: Lower corporate taxes and tax incentives for investment improve competitiveness.
• Launch funding programs: Targeted funding programs can support innovation and digitalization.

Related to this:

• What accounts for the current success of some companies in the mechanical engineering sector despite the economic crisis in Germany?

The mood in the German mechanical engineering sector is currently subdued

The industry faces major challenges, such as the global economic downturn, rising energy costs, increasing competitive pressure, and a shortage of skilled workers. At the same time, trends like Industry 4.0 and sustainability offer opportunities for the future.

To improve morale and safeguard competitiveness, businesses, employees, and policymakers must work together. Businesses must drive innovation, leverage digitalization, and promote sustainability. Employees should respond flexibly to new demands and pursue further training. Policymakers must improve the framework for investment and innovation, reduce bureaucracy, and invest in infrastructure.

Only through a joint approach can the German mechanical engineering sector emerge stronger from the crisis and maintain its position as one of the world's leading industries.

In an era where a company's digital presence determines its success, the challenge lies in creating an authentic, personalized, and far-reaching presence. Xpert.Digital offers an innovative solution that positions itself as the intersection of an industry hub, a blog, and a brand ambassador. It combines the advantages of communication and sales channels in a single platform and enables publication in 18 different languages. Cooperation with partner portals and the ability to publish articles on Google News and a press distribution list with approximately 8,000 journalists and readers maximize the reach and visibility of the content. This represents a crucial factor in external sales and marketing (SMarketing).

More information here:

• Authentic. Individual. Global: The Xpert.Digital strategy for your company

☑️ SME support in strategy, consulting, planning and implementation

☑️ Creation or realignment of the digital strategy and digitization

☑️ Expansion and optimization of international sales processes

☑️ Global & Digital B2B trading platforms

☑️ Pioneer Business Development

 

I would be happy to serve as your personal advisor.

You can contact me by filling out the contact form below or simply call me on +49 7348 4088 965 .

I'm looking forward to our joint project.

 

 

Xpert.Digital is a hub for industry focusing on digitalization, mechanical engineering, logistics/intralogistics and photovoltaics.

With our 360° Business Development solution, we support renowned companies from new business to after-sales.

Market intelligence, smarketing, marketing automation, content development, PR, mail campaigns, personalized social media and lead nurturing are part of our digital tools.

You can find more information at: www.xpert.digital - www.xpert.solar - www.xpert.plus