A recent survey by the VDMA shows that 44 percent of mechanical engineering companies in Baden-Württemberg are cautiously optimistic about the rest of the year. The reason for this is an improvement in the supply of materials, with the exception of electronic components. As a result, 68 percent of companies in Baden-Württemberg expect nominal sales growth for 2023.
Contributing to the positive underlying mood is the fact that the industry was able to cope well with the risks of energy supply over the winter months. “However, the high prices for electricity and gas are limiting the international competitiveness of the location. We need quick solutions to keep the cost driver energy in check,” said Dr.-Ing. Mathias Kammüller, Chairman of VDMA Baden-Württemberg, in Stuttgart.
Order intake is currently less dynamic. From January to March 2023, the industry in the state recorded 15 percent fewer orders in real terms than in the previous year. “International investments in machinery and equipment are falling, but only a few companies classify the situation as worrying,” Kammüller explained. Many machine builders are currently feeding off their high order backlogs, which average 11.6 months in the industry.
Skilled workers wanted – and hard to find
In view of the entrepreneurial confidence, almost 60 percent of the companies in Baden-Württemberg want to increase their staff in 2023, but can hardly cover their demand. Three out of four companies report noticeable or serious bottlenecks and a hindrance to their production due to a shortage of skilled workers. At the same time, 84 percent of companies rank the issue of demographics as the number one challenge in the coming years.
The mechanical and plant engineering sector in the southwest employed around 334,300 people in 2022, 1.6 percent more than in 2021. The persistent labor shortage had prevented a stronger increase here.
General conditions for innovative climate technologies
According to Kammüller, Baden-Württemberg’s mechanical and plant engineering sector is committed to turning megatrends into economic opportunities, particularly in the area of climate protection. In view of the global competition surrounding innovative climate technologies, the sector would like to see industry- and SME-friendly location decisions: “Climate protection and its industrial anchoring in the manufacturing industry require much faster development and expansion of renewable energies as well as efficient power lines and grids in order to make the supply secure and affordable,” Kammüller warned. Time is pressing, he said, to bring climate-neutral electricity from the north to the industrial centers in southern Germany.
Balance: In 2022 as a whole, incoming orders in the mechanical and plant engineering sector in Baden-Württemberg fell short of the 2021 result by 7 percent in real terms. In contrast, sales increased by a nominal 7.6 percent to 84.3 billion euros, because existing orders were finally processed and thus had an impact on sales. “Adjusted for prices, this result means a small minus in the books, but in view of the numerous burdens, the value is quite respectable,” said the chairman.
Exports of machinery and equipment from Baden-Württemberg increased by a nominal 6 percent to 46 billion euros in 2022. Exports were particularly boosted by a 22 percent increase in exports to the United States. “The U.S. market has long been of great importance to the local mechanical engineering industry, both as a sales and investment location. The Inflation Reduction Act offers opportunities for the industry to expand its already very good business and further improve export opportunities. At present, it would be impossible to equip new factories and production facilities without European suppliers,” said Kammüller.
The 2 percent drop in exports to China came as little surprise. The reasons for this were both the zero-covid strategy and the country’s weaker overall growth rates. “The People’s Republic will remain a strong market for mechanical and plant engineering from Baden-Württemberg. However, it must be the companies’ goal to question their own dependency and to build up alternative sales markets in Asia in view of the competitive pressure from China”, Kammüller concluded.