Germany is known globally for its engineering technology. The German manufacturers are internationally well positioned with their broad range of sectors: In 23 out of 31 comparable sectors, they are among the global top three; in 14 of which, they are in first place.
The global machine trade of the 52 most important exporters of mechanical engineering products surpassed the Ç1-trillion mark for the first time in 2015, with more than 7.3 per cent than the previous year at Ç1.009 billion. Germany remained the largest machinery exporting country with a share of 15.4 per cent in world machinery exports.
India is the third-largest sales market in Asia for the German engineering industry. Top sectors attracting FDI inflows from Germany are automobile industry (20.6 per cent), services sector (15.9 per cent), construction (infrastructure) activities (15.6 per cent), industrial machinery (6.2 per cent) and drugs and pharmaceuticals (6.2 per cent). These top five accounted for about 64.5 per cent of total inflows from Germany during the last fiscal.
In 2017, the trade between India and Germany grew by 9.93 per cent to Ç19.15 billion from a figure of nearly Ç17.42 billion in 2016. Indian imports from Germany experienced a good growth of 9 per cent over the previous year and amounted to Ç10.69 billion. The exports from India to Germany attained a value of Ç8.46 billion in 2017. This was an increase of 11 per cent as compared to the year 2016.
In 2017, the total import of machinery from Germany reached a volume of Ç3.10 billion. This was an increase by 4.38 per cent compared with the same period in the previous year. Among the machinery sectors, major demand of German equipment was for power transmission (9.7 per cent), textile machinery (without dryers) (8.23 per cent), machine tools (7.16 per cent), construction equipment and building material machinery (5.96 per cent) and plastics and rubber machinery (5.54 per cent). There are other sectors like food processing and packaging, process, and material handling technology which are growing steadily in India.
Construction equipment German construction machinery industry demands stable framework conditions in Europe. From an economic point of view, the industry as a whole is scaling new heights, with sales rising by 12 per cent in 2018. For manufacturers in Germany, the figure is Ç12.1 billion, of which Ç4 billion is attributable to Germany and Ç8.1 billion to sales from abroad. Sales on the German market grew by 9 per cent compared to the previous year and are even 8 per cent up on the previous record set in 2007. Most markets in Northern and Western Europe are at a similarly high level, while Southern and Central Eastern Europe continued their recovery in 2018 and is maintaining growth, albeit at a naturally lower volume.
Growth should continue until the industry highlight bauma, which takes place from April 8 to 14, after which experts expect a slight downturn. Although a moderate decline is anticipated, the German market will remain very strong. For Europe, a trend reversal of 0 per cent and possibly even slight decline is realistic. The world market is growing more slowly than in 2018, but growth of up to 10 per cent is possible.
The representatives of the construction machinery manufacturers expect industry turnover to grow by a potential 3-5 per cent this year in Germany as a production location.
The boom in the construction equipment sector is continuing as more and more regions around the world are experiencing growth. In 2017, out of the total imports of India of construction equipment, Germany stood third with a share of 13 per cent after China (26 per cent) and South Korea (21 per cent). This trend is expected to continue for 2019, and is consistent with strong business sentiment in surveys amongst equipment manufacturers.
Building material plants
Demand of building material plants from Germany grew worldwide in 2017. In 2018 a double-digit order growth is possible.
Markets all over the globe recovered in 2017. The German manufacturers of building material plants are also benefiting from the increased demand. In the area of cement, lime and gypsum there was still a statistical base effect in 2017 caused by large individual projects in 2016. When this is factored out, at the end of 2017 incoming orders enjoyed a significant gain of 38 per cent compared to the previous year, both in Germany (up 45 per cent) and abroad (up 46 per cent). Due to the rather weak business in the previous years, sales were still slightly in the negative range. In 2017, the heterogeneous industry generated sales of Ç3.8 billion from German production. The US is the largest sales market, followed by China, France and Russia. For India, out of the total imports of construction equipment, Germany stood third with a share of 8 per cent after China (36 per cent) and Italy (20 per cent).
For the German mining equipment manufacturers, the new year started ambivalent. The turnover increased but the incoming orders decreased. The companies report a stronger background noise but huge projects are still seldom. Last year our major focus export markets were the US (Ç232 million), China (Ç126 million), Russia (Ç99 million) and Italy (Ç90 million).
In the last three statistically verifiable months (September-November 2018), 13 of the 27 sectors (which are taken into account separately in the VDMA incoming order statistics) experienced an increase compared to the previous year. Two of them even saw growth rates of 30 per cent and more: mining equipment and process plant and equipment.
Year 2018 was successful. After a long period of decline and hope for a revival of global mining, in the past year the industry regained its former strength. Order intake and sales increased by 25 per cent and 29 per cent, respectively compared to the previous year's level. We hope to exceed the forecast growth of +10 per cent for 2018.
In the wake of the upward trend in sales, exports also rose again. With regard to India, the situation looks brighter: from January to November 2017 exports to India increased by nearly 87 per cent to more than Ç47 million. The most wanted goods from Germany were processing equipment, coal or rock cutters and boring or sinking technology.
Compared to the previous years, Germany could make up losses and remains among the most important suppliers to the Indian mining industry. It ranks number three behind China which sold technology worth Ç154 million, and Italy (Ç60 million).
One of the tasks for the future is the digitalisation of the construction site. Although this is currently on everyone's lips, it has so far made little impact in the real world. A digital construction site is the vision of a fully digitalised, highly automated and customisable construction site. In order to solve the upcoming problems and shape this process, VDMA is planning to set up a working group entitled 'Machines in Construction 4.0.' This is to be officially founded at bauma on April 8, 2019.
Driven by global mining companies, safety, automation and efficiency are at the top of the list. The list of technical issues to be handled by manufacturers of mining technology is very long. Keywords include the demand for mastering leaps in technology and technology transfer, to connect equipment and machinery to the mine's digital infrastructure, to operate autonomous and remote-controlled machines, to increase digitisation and automation to autonomous machines, to develop energy-efficient machine and plant technology as well as control technology. These demands and trends apply to extraction technology, the transport of raw materials and processing.
The importance of the construction and mining machinery sector will be demonstrated again this year at bauma. The hall areas and open-air grounds of Messe Mnnchen are fully booked and the waiting list is long. Exhibitors and visitors will come from all over the world, the innovation cycles of the companies are based on the trade fair cycle. Highlights at bauma are the 'THINK BIG!' events - the career event for school students - as well as the bauma Forum with international lectures and discussions, the partner country Canada with more than 40 exhibitors and the 12th bauma Innovation Award 2019.
In principle, Indian industry has great potential for Germany especially in the areas of manufacturing, infrastructure and energy which are major growth sectors in India. A great deal of perseverance is needed until talks and discussions come to a successful end. Perhaps new developments in terms of technology and business models will give fresh impetus to Indo-German relations in the raw materials industry. The upcoming bauma in Munich in April and especially the Country Special India on April 10, 2019 at bauma in Munich offers the next good opportunity to sound out new perspectives for new business.
Rajesh Nath is Managing Director of VDMA India.