VDMA: ‘Industry caught between record sales and gloomy outlook’

According to VDMA members, the current year is expected to set a new sales record, with a projected real growth of up to 10%.

The availability of more components to manufacturers has improved their ability to deliver, as concluded during the board meeting of the trade association VDMA Construction – Equipment and Plant Engineering on July 14, 2023.

However, the order backlog is gradually declining due to a significant decrease in new orders. From January to May 2023, the construction machinery sector experienced a total decline of 19% in new orders, while building materials plants saw a decline of 23%.

In Western Europe alone, orders are down by as much as 50%, particularly in building construction machinery.

Residential construction has been impacted by the economic downturn caused by higher interest rates in both Europe and North America, affecting machinery suppliers as well. Unless the order intake situation improves, the VDMA says that they must be prepared for a noticeable decline in turnover starting from the fourth quarter of 2023.

The VDMA highlights that one of the key challenges affecting companies with production in Europe is the lack of competitiveness caused by excessive bureaucracy, over-regulation, and demanding documentation requirements, such as the Supply Chain Sourcing Obligations Act. The chairman of the trade association, Franz-Josef Paus, emphasized that the limits of what is feasible have been reached in this regard.

The industry is also facing difficulties due to increased construction and material prices and continuous interest rate increases. To attract more investments, the VDMA suggests that Europe needs to become more appealing, as investors are increasingly favouring North America and China because of these developments.

Another challenge comes from China, where competitive pressure is growing. China’s pursuit of autonomy and the integration of political goals with economic policy measures have led to significant overcapacities in the country, resulting in increased exports to Europe. Should Chinese companies receive state subsidies, the level playing field in Europe would be disrupted, as explains Joachim Strobel, Chairman of the VDMA Construction Equipment Section.

Dr Jürgen Blumm, Chairman of the VDMA Construction Materials Plant Engineering Section, also expressed fears, “The situation in the real estate sector continues to be worrying, the risk of the real estate bubble bursting there hangs over us like a sword of Damocles. There is enormous overcapacity in Chinese residential construction.”