Mechanical and plant engineering in figures & charts - vdma.eu
Commentary: Investment as the key to economic renewal
The German and European economies are not only in an economic slump, but are also increasingly suffering from a structural weakness in investment. This development is not a purely German or European phenomenon—according to the OECD, there has been a global investment gap since 2008—but it is particularly pronounced in Germany. A look at real equipment investment reveals the dramatic nature of the situation: while the US is set to record growth of 12 percent between 2019 and 2025, the eurozone is stagnating and Germany is showing a decline of 14 percent.
There are many reasons for this: uncertainty is above average in this country – whether due to geopolitical tensions, regulatory complexity, or, at the moment, erratic US tariff policy. And uncertainty is poison for investment. Added to this are noticeably higher costs in terms of taxes, labor, bureaucracy, and energy. As a result, competitiveness is declining, especially in comparison to China. This weakness is also evident in the manufacturing sector: the investment ratio fell from around 3.5 percent (2019) to around 3 percent (2023). Machinery and equipment is particularly affected, as it is a capital goods industry that suffers directly from declining orders.
This weak investment has long-term consequences: potential growth declines, and in view of demographic developments, net investment in capital stock is essential to secure productivity and prosperity. In the short term, rising government spending could support investment in equipment (keyword: special funds). However, it is crucial that structural reforms are implemented in order to stimulate private investment—which accounts for around 90 percent of equipment investment—in the long term. Investment is made when there is optimism about the future. To achieve this, policymakers must create better framework conditions. Only in this way can the economic potential of Germany and Europe be restored.
Investment momentum has slowed
Since the global financial crisis, investment momentum has slowed significantly. An OECD study shows how investment has developed since the end of the 2000s compared to previous years. It is clear that there is a significant gap between actual investment and the investment that was forecast based on pre-crisis trends.
This gap has widened particularly since 2014 and has been further exacerbated by the pandemic. In 2023, the investment gap in Germany alone amounted to around €124 billion. It is very likely that it has grown further in recent months. For machinery and equipment manufacturing, as an investment goods industry, this ongoing weakness represents a considerable burden and contributes to the overall subdued development of the sector.
Germany and Europe are falling behind
In an international comparison, the weakness in investment varies in severity. This is particularly evident in equipment investment, which is a good indicator of machine production. In the US, this investment already exceeded 2019 levels about two years ago.
In Europe, on the other hand, it has stagnated compared to 2019, and in Germany it has even declined. Since the pandemic, not only has the general investment gap widened, but a growing divide with other important economic areas has also emerged. This further weakens the competitive position of machinery and equipment manufacturing in Germany and Europe.
Competitiveness is declining
One symptom of reluctance to invest is declining competitiveness. In the last two years in particular, many machinery and equipment manufacturing companies in Germany and Europe have reported a noticeable deterioration in their position in international comparison. Added to this are geopolitical and trade tensions, which are having a disproportionate impact on the highly globalized European machinery and equipment manufacturing industry.
Declining competitiveness, in turn, reinforces reluctance to invest. Political and economic conditions are therefore needed that both create incentives for investment and ensure the international competitiveness of European companies in order to counteract this cycle.
Investments abroad are increasing
Without the right framework conditions in the domestic market, direct investments abroad will most likely continue to increase. The stock of investments abroad has more than doubled in nominal terms since 2010, from EUR 22.9 billion in 2010 to EUR 57.6 billion in 2023. By 2023, the focus on the two major markets of China and the US will have increased.
China's share of investment stock grew from 14.3 to 17.0 percent, and investment stock in other Asian countries also increased from 7.9 to 10.1 percent. The share of the US grew slightly from 22.7 to 23.8 percent, and the share of direct investment in other EU countries also rose from 28.7 to 32.2 percent.
International network of the VDMA
Mechanical and plant engineering from Germany and Europe stands for cutting-edge technologies, innovations and solution competence. It is strong in exports and internationally active, with an immense range of products and applications. And: mechanical and plant engineering is large and innovative.
Innovation industry Mechanical and plant engineering: Speaking of innovation: mechanical engineering is a leading force in research in both Germany and Europe. According to the Stifterverband, around 8 percent of the German economy's expenditure on research and development comes from mechanical engineering. And in a comparison of industrial sectors, mechanical and plant engineering is one of the most innovative: 70 percent of its companies are innovators, according to the Centre for European Economic Research (ZEW). The focus is on many of the key issues of our time: digitally networked production, future mobility, climate protection and feeding the world.
International network for mechanical and plant engineering: The VDMA has been an advisor, stakeholder, international network, sparring partner and voice of the mechanical and plant engineering industry for more than 130 years. As an organization, the VDMA represents 3600 German and European companies, making it the most important industrial association in Europe. The VDMA portfolio is unique in terms of its thematic breadth and the variety of services and networking options for member companies. Regional individuality and an international focus are valuable characteristics that make the VDMA particularly attractive for its members. Capital city offices, regional offices and international representative offices are anchor points in the VDMA network:
International network of the VDMA
Source: VDMA
Key data for machinery and equipment manufacturing
Machinery and equipment manufacturing companies based in the EU generated an estimated turnover of around €871 billion in 2024. €293 billion, or around one third, was sold to countries outside the EU single market. This compares with machinery imports worth €129 billion. The foreign trade surplus thus amounted to around €165 billion.
The EU market for machinery and equipment had an estimated volume of around €707 billion in 2024. Around 82 percent of this came from a manufacturing facility in the internal market. Looking at the EU market volume for machinery products by country of delivery, Germany accounts for 35 percent, followed by Italy (13%), France (7%), the Netherlands (5%), Sweden (4%), Austria and Denmark (3% each). As in previous years, the most important foreign machine suppliers were China (6%) and the USA (3%), followed by the United Kingdom (2%).
Industry structure
With a total of almost 3.1 million employees in the EU, including just under 1.3 million in Germany alone, machinery and equipment manufacturing is one of the largest employers among the capital goods industries, both in the EU and in Germany. Looking at the manufacturing sector as a whole, only food and feed production (4.3 million) and the manufacture of metal products (3.7 million) employ more people in absolute terms.
In terms of turnover, machinery and equipment manufacturing ranks as the third-largest industrial sector after the automotive industry and the food and feed sector, with a turnover value of €908 billion in 2023. This ranking is unlikely to have changed to date. The VDMA estimates the turnover volume for EU machinery and equipment in 2024 at 871 billion euros. This corresponds to around 27 percent of global machinery turnover. By comparison, China accounts for almost 35 percent and the USA for 13 percent.
Production
Since mid-2023, EU machinery and equipment manufacturing has been characterized by persistently weak demand. In 2024 alone, price-adjusted production output shrank by 7 percent. The highest year-on-year decline was recorded in May 2024, at -9.8 percent. Apart from the coronavirus year of 2020 and the year of the global economic crisis in 2009, the last time there were similarly high declines in production in European machinery and equipment manufacturing was during the recession years of 1992 and 1993.
The weak demand is having a very different impact on machine manufacturers. Only in Greece were they able to escape the negative trend in cumulative terms. Here, price-adjusted production even achieved a small increase of 0.3 percent. The machine industry recorded comparatively small losses in Portugal and Spain. There was a high single-digit decline in Sweden. In Germany, the decline was only slightly lower at almost minus 8 percent. Production had to be cut back even more sharply in Bulgaria, Belgium, and Latvia, resulting in double-digit declines compared to the previous year.
Global turnover
In 2024, machines and equipment worth an estimated €3.26 trillion were manufactured worldwide. In euro terms, this is 1.5 percent less than in 2023.
As in previous years, one-third of the machines produced worldwide in 2024 came from China. This means that the country remains the undisputed number one in the country ranking in terms of turnover. The gap between China and the countries that follow it remains enormous. The USA ranks second, followed by Germany, Japan, and Italy. In 2024, the EU economic area achieved a turnover volume of €871 billion, which corresponds to around 27 percent of global machine turnover.
Employees
In 2023, approximately 3.1 million people were employed in machinery and equipment manufacturing in the EU-27. The long-term employment trend in the EU internal market is encouraging: between 2013 and 2023, the number of employees in the EU-27 increased by approximately 14 percent. Numerous smaller EU member states, but also Germany, benefited in many ways from the EU internal market.
With around 41 percent of those employed in machinery and equipment manufacturing in the EU, the vast majority work in Germany. The number of employees in Germany has increased by almost 20 percent over the last 10 years. Italy has the second highest number of employees in absolute terms, with just under 16 percent, or slightly less than half a million employees in the industry, followed by France with around 193,000.
Average labor costs in machinery and equipment manufacturing vary greatly between EU countries. While in 2023 they averaged €53.80 per hour worked in Denmark, they averaged only €15.30 in Hungary, €12.30 in Romania, and just €8.90 in Bulgaria. Germany (€51.40) ranks alongside Austria (€51.30), the Netherlands (€52.40), and Sweden (€50.20) in the group with the highest earnings within the EU-27. However, in the long-term trend, Eastern European countries in particular, which currently still have significantly lower wages, are catching up. In Romania, for example, average hourly labor costs rose by over 151 percent between 2013 and 2023, albeit from a very low level. In Portugal, on the other hand, where labor costs stood at €14.70 in 2023, growth was less than 21 percent over the same period.
Foreign trade in machinery
Machinery exports from the EU-27 totaled €585 billion in 2024. Germany accounted for a good third of this, exporting machinery worth around €202 billion worldwide. It was followed by Italy with €95 billion, or 16.2 percent of total EU-27 machinery exports, and the Netherlands with €54 billion, or 9.3 percent.
The most important sales markets for machinery deliveries from the EU-27 countries, both within the EU and to non-EU countries, are, in order, the US, Germany, France, and China. In 2024, Germany will be the number one sales market for a total of 12 EU countries and the number two sales market for another 10 EU countries in machinery and equipment manufacturing. Looking at the EU-27's total machinery imports of €400 billion, Germany also imported the largest share in 2024, at €87 billion or 21.9 percent. It was followed by France with an import volume of €45 billion or 11.3 percent and the Netherlands with €38 billion or 9.5 percent. The most important countries of origin are Germany, China, and Italy. The EU partner countries imported machinery worth €88 billion from Germany. This corresponds to a share of 22.1 percent. China has been able to continuously increase its share of EU-27 machinery imports in recent years. After a double-digit decline in 2023, machinery imports from China rose again by 4.3 percent in 2024. With a volume of around 42 billion euros, the People's Republic contributed 10.6 percent to the EU-27's total machinery imports. Italy follows in third place with 35 billion euros and a share of 8.7 percent.
World trade shares
Global machinery trade among the 51 most important machinery exporting countries fell to €1,441 billion in 2024. This represents a nominal decline of around one percent compared to the previous year. Overall, six of the 51 exporting countries recorded double-digit growth rates in euro terms, while 39 exporting countries recorded declines, eight of them with double-digit loss rates.
China's share of global machinery exports was 20.3 percent in 2024, followed by Germany with 14.0 percent. The USA (8.6 percent), Japan (6.9 percent), and Italy (6.6 percent) followed in third to fifth place.
European companies continue to be global leaders in several sub-sectors of machinery and equipment manufacturing. This is directly reflected in their specific shares of world trade. In 6 of 31 machinery and equipment manufacturing, companies from the EU-27 will account for more than 50 percent of world trade (including intra-EU trade) in 2024. Manufacturers from the EU-27 have particularly high shares in the export of cleaning systems (68.7 percent), food and packaging machinery (63.1 percent), woodworking machinery (57.4 percent), and agricultural machinery (59.0 percent).
Incoming orders
In 2024, order intake in German machinery and equipment manufacturing fell short of the previous year's level by 8 percent in real terms. Domestic orders declined by 13 percent, while orders from abroad were 5 percent below the previous year's level.
After a promising first quarter in 2025, orders fell again in the second and third quarters. This resulted in a price-adjusted decline in orders of 1 percent for the first nine months of the year, which was evenly distributed between domestic and foreign markets. Noteworthy is the 10 percent increase in orders received from eurozone countries, which contrasts with a 5 percent decline from non-eurozone countries.
In 2024, machine orders for most machinery and equipment sectors were characterized by negative growth rates. The power systems, general ventilation technology, textile care, fabrics and leather technologies, mining & minerals, and compressors, compressed air and vacuum technology sectors recorded growth. Ten sectors suffered double-digit declines. As usual, the spread was wide, ranging from a real increase of 23 percent to a decline of 22 percent.
