German machine tool industry posts a strong year for exports in 2023

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Last year, the German machine tool industry sold machines including parts and accessories to the value of €9.5bn abroad - which is an increase of 9% on 2022.

"This means we have defended our title as world champion ahead of China and Japan," explained Dr. Markus Heering, executive director of the VDW (German Machine Tool Builders' Association), Frankfurt am Main.

Within the triad of Europe, America and Asia, exports to America grew the fastest, increasing by 18%. This was driven primarily by the US, the second largest sales market overall for the Germans, accounting for a share of 15%. The US purchased machines to the value of €1.4bn. This represents an increase of 19%.

"Our members are feeling positive about current and future developments in the US market," reported Heering. "US customers have lower costs than their German counterparts as a result of the lower energy prices there.

"Furthermore, the automotive industry is currently investing in heavy-duty engines before stricter emissions regulations come into force in 2027. Mexico is also performing strongly. Many international companies are investing there because of the country’s proximity to the US market," Heering continued. 

Indeed, exports to Mexico rose by 28%, even more strongly than those to the US. This put the Central American country 9th in the list of the most important export markets. Accounting for sales of €326m, Mexico is the second most important market in the American continent. By contrast, business in South America fell by 7% compared to the previous year.  

Exports to China lower than in the peak years

German exports to Asia rose by 7% last year. Accounting for a share of 17%, China is the most important target country of all. Compared to the previous year, exports grew by 6% to a volume of €1.6bn but remained well below the last peak year of 2018. Many companies are finding it difficult to do business there.

"The economy in China is weak and the country continues to decouple itself from foreign imports in its effort to achieve industrial autonomy," said Heering.

It is therefore important to diversify the markets to alternative growth markets instead, such as those in the ASEAN region. India is also gaining in appeal, added Heering.

Numerous inquiries are currently being received from India, with companies reporting plenty of activities, projects, and contacts there. However, the Indian market remains extremely price sensitive. India is currently the 13th most important export market. German exports there have risen by a quarter. 

European home market with slower growth 

Within the triad, Europe is the largest sales region for German manufacturers, accounting for a share of more than 50%. The German market, however, remained weakest of all, posting an increase of just 6% and a volume of €4.9bn.

"Although most Western European countries have seen growth, machine tool manufacturers are skeptical about Europe," explained Heering.

New orders are declining due to the currently sluggish economy. This applies in particular to Italy, the world's third largest sales market for German exports, which is now significantly scaling back its subsidies. Switzerland, on the other hand, is viewed positively as a stable sales market.

Accounting for a volume of €430m, it ranks fourth among the most important export markets overall. Compared to Germany, customers in Switzerland benefit from lower energy costs and longer working hours. These factors are having a positive impact on investment. Northern Europe is also viewed positively, as are sales to Turkey, which grew by 39%.

"Turkey is attracting political attention right now due to its trade relations with Russia. On the other hand, many machine tool customers in Turkey generate revenue in euros from their export business. The Turkish lira is currently weak, allowing them to use these funds to invest in production technology," said Heering.

Exports account for 70% of the German machine tool industry’s sales. The sluggish international demand for capital goods, which is also affecting German customers, is holding back business. "Economic experts are not expecting the market to pick up again until next year," concluded Heering.