The German Machinery and Equipment Manufacturing Association recently released the results of a survey showed that in the surveyed machinery manufacturing enterprises, the proportion of business conditions affected by the epidemic was as high as 84%, of which about half of the enterprises were “obviously” or “seriously” affected by the disruption of the global supply chain, and there were insufficient parts supply or customers could not receive goods as promised. Some 96 per cent of respondents said turnover would fall this year, with 60 per cent expecting a drop of 10 to 30 per cent. Carl Welker, president of the association, said he expected real production in the industry to fall by 5 percent this year. According to the Machinery Manufacturing Barometer released by Pricewaterhousecoopers, 38 out of 100 German business executives are pessimistic about the industry’s development prospects, and only 22 are optimistic about the outlook.

3HAC046664-001 Machinery manufacturing and automobile manufacturing are both pillar industries in Germany, and the two are closely linked. German car manufacturers are important customers for machinery manufacturers. Affected by the epidemic, Germany’s three major car manufacturers Volkswagen, Daimler and BMW have announced work stoppage in Europe, and German machinery manufacturers have received a sharp decline in orders. Ralf Wieches, chief economist of the German Machinery and Equipment Manufacturing Association, said that the greater the impact on the customer industry, the greater the pressure on suppliers.

3HAC046664-001 The German automotive industry is undergoing a deep transition from traditional internal combustion engines to electrification, and many car companies have postponed or stopped investment plans, causing a ripple effect on the machinery manufacturing industry. According to the German Machinery Manufacturing Association estimates that 11% of the total added value created by the machinery manufacturing industry in the world comes from the automotive industry, and in Germany, this proportion is as high as 20%. Wiechers said that the prospects for the transformation of the German automotive industry remain unclear in 2020, which also casts a shadow on the development prospects of the machinery manufacturing industry, which is inseparable from the automotive industry.

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3HAC046664-001 In fact, long before the outbreak of the epidemic, the German machinery manufacturing industry has been sluggish. According to the statistics of the German Machinery and Equipment Manufacturing Association, the orders of the German machinery manufacturing industry in 2019 were significantly reduced by 9% compared with the previous year. Olaf Wortmann, a macroeconomist at the association, said 2019 was a “dark year” for German machinery manufacturers. The weak world economy, intensified trade disputes, trade protectionism, Britain’s “Brexit” and the deep transformation of the automotive industry have brought a series of uncertainties, which have inhibited the investment willingness of enterprises and hindered the stable development of the German machinery manufacturing industry.

3HAC046664-001 In order to cope with the impact of the epidemic, the German government announced a rescue plan of about 750 billion euros. These include a €600bn “economic stabilisation fund” to provide loans and guarantees to companies hit by the pandemic, with the government taking stakes if necessary. Financial assistance of up to 50 billion euros will be provided for the self-employed and small businesses. Many companies are proactively adjusting production capacity and seeking alternative suppliers to mitigate the impact of temporary disruptions to global supply chains.

According to the analysis, the series of measures introduced by the German government are designed to help enterprises through the crisis, but in order to remain invincible in a new round of manufacturing competition, it is necessary to continue to seek intelligent and digital transformation. Demagissen Precision Machinery, a machine tool maker from the hard-hit German state of North Rhine-Westphalia, is taking advantage of downtime during the pandemic to train staff through an online video platform. The company’s chairman, Christian Tones, said that the company started a big push on digital transformation a few years ago. Digitalization not only allows enterprises to upgrade their production processes at full speed, but also enables companies to cope with the impact of the epidemic relatively calmly. “The current situation requires a high degree of production flexibility, which will also be necessary after the outbreak is over.”