Industry Overview The Machinery and Equipment Industry in Germany
The Machinery and Equipment Industry in Germany Germany is the Geographic and Economic Center of Europe Machinery & Equipment (M&E) is the second largest industry sector in Germany, and as such, is of major strategic importance. It is one of the technological motors that drives Germany as a high-tech nation, and one which combines all of the key future technologies including electronics, robotics, materials, and software. The M&E sector is the birthplace of many innovations which later make their way into the other parts of the economy and Germany is the right place to realize them. Lying at the heart of Europe, at the crossroads between the highly developed west and the booming east, Germany has attracted major system integrators who are currently taking advantage of the outstanding conditions that the country has to offer.
The German M&E Industry in Numbers With an overall turnover of approximately EUR 205 billion and growth of almost 8 percent in 2008, Germany s mechanical engineering industry is the strongest in Europe with the market forecast to experience continuous growth. Germany remains the world s export leader with 9 percent share of the global trade in M&E putting it ahead of Japan and the USA (2007). At the same time, domestic demand represents a market of around EUR 00 billion for M&E manufacturers. Machinery and equipment is Germany s largest industry by level of activity; with 6,000 companies along the value chain and a workforce of more than 975,000 highly skilled people. German M&E Industry Nominal Annual Turnover +.5% Source: VDMA, Destatis 200 2004 2005 2006 2007 Development of the 0 Largest M&E Sectors in Germany* (by production volume in EUR billion) 2007 2006 +7.5% +5.6% Power Transmission Engineering Materials Handling and Logistic Technology Machine Tools +0.6% +.8% +8.0% 2008 225 200 75 50 25 00 EUR billion +6.6% +9.4% +6.6% With annual R&D expenditures amounting to over EUR 5 billion, the M&E industry is one of the most innovative industries in Germany. Twenty-eight percent of the world s mechanical engineering patents are registered by German companies. The strength of the German M&E industry is driven by the combination of Germany s long engineering tradition, its position as a leader in technological development, and its diversified industrial base. Air-Handling Technology Construction Machinery and Equipment Food Processing and Packaging Machinery Precision Tools Printing and Paper Equipment and Supplies Agricultural Machinery Valves EUR billion 5 * The ten largest M&E sectors account for EUR 08.7 billion which corresponds to 60.5 percent of total (EUR 79.6 billion). +6.2% +7.% +2.8% +5.8% +.8% +4.5% +8.6% 5 0 Source: VDMA Industry Overview 2009 www.gtai.com
The Advantages of Germany as a Location for M&E Investments Market The German M&E industry is Europe s largest. With the doubling of production output in the last ten years, it is one of the fastest growing industry sectors. The exceptionally high demand for automated solutions resulting from Germany s strong industrial structure offers considerable production volume and client diversification opportunities for M&E companies. Germany is Europe s leader in the most important M&E application industries including well-known heavyweights such as automotive, electronics, chemicals, and food production. However, Germany is also the world s leader in upand-coming high-tech related fields like the renewable energies sector, where further significant market opportunities also exist. Personnel A highly skilled labor force has been the German M&E industry s key success factor. Benefiting from the country s unique education system which is tailored to meet industry needs, the industry can rely on a direct workforce of nearly 975,000 experienced people. In 2008 alone, there was a considerable increase of 40,000 in the number of people active in the industry. In order to satisfy this high demand, over 40,000 mechanical engineers graduate annually from nearly 00 universities and colleges with mechanical engineering faculties. Moreover, the well-established dual education system (which combines on-the-job training and instruction in part-time vocational schools) provides excellently qualified staff and effectively reduces hiring and training costs. This unparalleled system helps secure continuity of German engineering expertise. Above and beyond this, the German government is committed to further increasing the availability of graduates from technical apprenticeships and study paths. It is the Federal Government s stated aim to improve the range of training prospects available to people of all ages through initiatives like the Qualification Initiative. With the creation of additional training places and promotional scholarships, the initiative will help to provide a steady flow of highly trained labor. R&D Germany is home to a world class scientific community including numerous internationally renowned research institutes. According to the World Economic Forum s (WEF) Global Competitiveness Report 2007-2008 of nations, no other economy tops Germany in terms of capacity for innovation¹. In 2007, the German M&E industry spent almost EUR 2 billion on innovation-related tasks. This represents an innovation intensity DENMARK M&E Industry-Related Networks of Competence in Germany Bremen Lower Saxony Hanover THE NETHERLANDS BELGIUM Düsseldorf Saarland Saarbrücken FRANCE 2 2 2 SWITZERLAND NORTH SEA North Rhine- Westphalia Hessen 2 4 5 6 Stuttgart Baden-Württemberg 4 Wiesbaden Rheinland-Pfalz Mainz LUXEM- BURG DENMARK BALTIC SEA Kiel BALTIC SEA Schleswig-Holstein Mecklenburg- Vorpommern Schwerin Hamburg 4 Saxony-Anhalt Erfurt Thuringia 2 Brandenburg Berlin Magdeburg Potsdam 5 4 Dresden Saxony CZECH REPUBLIC POLAND Bavaria Munich National Border (Federal) State Borders (Federal) State Capital City-State Mechatronics/Microsystems Engineering Microsystems 2 Micro and Nanotechnology Mechatronics 4 Microelectronics Power Engineering Fuel Cells/Hydrogen 2 Power Electronics (Hybrid Engines) Traffic and Transportation Automotive Engineering and Telematics Information and Communication Tech. Navigation, Telematics 2 Traffic Systems Software Engineering 4 Virtual and Augmented Reality 2 4 5 6 2 4 5 Environmental Technology Recycling Technology Industrial Manufacturing Adaptronics Automotive Carbon Fiber Reinforced Plastics Virtual Engineering Mechanical Engineering Process Technology Materials Science Component Behavior (Modeling) Surface Engineering of Plastics Lightweight Construction Natural Fiber Composites Textile Research Source: Federal Ministry of Economics and Technology Graphic: www.typoly.de 4 Industry Overview 2009
level over five percent of industry turnover. Companies investing in Germany can benefit from joint research activities with some of the world s leading engineering research institutes and universities. Numerous innovation clusters integrate industry, science, and education in related areas such as mechatronics, robotics and automation, mechanical engineering, manufacturing processes, and material sciences. German Physical Infrastructure Denmark lectual property protection and protection from organized crime. Our legal system is one of the world s most efficient and independent, and our judiciary and civil services are your guarantee for professionally consistent and qualified delivery of service. Technology Leader Technology leadership as a key strategic advantage is playing an evergrowing role in today s fast-moving business environment. Germany s ability to meet the world s growing demand for technical solutions and processes underlines the country s competitive edge as an outstanding business location. Physical Infrastructure Located at the heart of Europe, Germany offers a sophisticated infrastructure that integrates stateof-the-art transportation networks with the most modern and cost efficient IT and telecommunications systems available today. Germany s position as the world export champion is supported by its highly efficient and smooth operating infrastructure of roadways, railways, waterways, seaports, and airports. Belgium Luxembourg Netherlands France Cuxhaven Wilhelmshaven Emden Mainz Hahn Palatinate Saarland North Saarbrücken Kiel Holstein Hamburg Bremerhaven Hamburg Baden- Wurttemberg Rhineland- Rhine- Bremen Dusseldorf Westphalia Cologne/ Bonn Hessen Wiesbaden Frankfurt a.m. Stuttgart Saxony- Lower Saxony Hanover Kiel Lübeck Erfurt Nuremberg Schwerin Mecklenburg- Anhalt Thuringia Magdeburg Bavaria Munich Rostock Stable Investment Environment Highly developed social, economic, and political frameworks provide the necessary security for your business investment. According to the WEF, Germany is one of the world s best locations in terms of planning and operating security. It is the number one when it comes to intel- Schleswig- Leipzig Potsdam Greifswald Western Pomerania Saxony Berlin Brandenburg Dresden Czech Republic Poland Capitals of Federal States Borders of Federal States Austria German Autobahn Freight Rail Networks Switzerland Navigable Waterways Graphic: www.comcontor.com ¹ World Economic Forum: The Global Competitiveness Report 2007 2008. Capacity for innovation is an expression of company ability to obtain new technologies from formally conducted research and pioneering of own new products and processes, as opposed to licensing proprietary technologies or adapting existing company technologies. Seaports Major Airport Capitals of Federal States Borders of Federal States German Autobahn Freight Rail Networks km 0 50 00 Navigable Waterways Seaports Major Airports Industry Overview 2009 www.gtai.com 5
Opportunities The Fastest Growing M&E Technological Areas (in percent) One of the reasons behind the German M&E industry s doubledigit growth is the country s highly industrialized environment. As Germany s largest industries, the electronics, automotive, chemicals, and food sectors are the four largest customers driving this growth. More than,000 companies with around 2.5 million employees are active in these four sectors, and account for an overall combined turnover of EUR 740 billion. The need for high-tech machinery and equipment in these industries is key to survival within a global environment and will accordingly continue to grow in the future. As current market developments show (see accompanying table) the demand for production efficiency and energy efficiency has strongly increased in the last year. These growth technologies will continue to be the predominant forces underpinning the ongoing upswing in the M&E industry. Building Material Machines Process Plant and Equipment Agricultural Technology Power Systems Drive Technology Robotics and Automation Compressors and Vacuum Technology Materials Handling and Logistics Technologies Application Industries Automotive The automotive industry s manufacturers, suppliers, and service providers represent Germany s largest industry in revenue terms (EUR 29 billion in 2007). Large-scale production of increasingly complex products in a highly competitive marketplace accounts for the high level of automation and production efficiency in over,000 companies with 744,000 employees. Sixteen new vehicle programs representing an accumulated volume of more than two million units at peak will be launched in Germany over the next five years. This is equivalent to one third of all new program launches in Europe for the period 2008 to 202. Electronics Electronics is the world s fastest growing industry with an average growth level of seven percent in the past 0 years. Germany will remain the number one location for highend production of complex components. Almost 800,000 highly-skilled employees generate total revenue New Mercedes E-Class production Turnover growth forecast (2007 / 2008) +% +% +% +0% +8% +6% +5% +2% Source: VDMA of EUR 75 billion. New technologies such as flat panel displays, flexible displays, and printed electronics will continue to see an increasing need for machinery and automation systems in the near future. Chemicals One of the most important M&E application industries is the chemical industry, where Germany leads within Europe with total revenues exceeding EUR 40 billion. Sixty highly developed chemical parks with an excellent infrastructure represent an optimal base for chemical processors, refiners, and producers of end products. One third of European chemical industry investment flows into Germany. Food & Beverages The food and beverages sector provides further profitable investment opportunities for M&E companies in Germany. The industry accounts for revenues of over EUR 2 billion and has seen annual investment of more than EUR 4 billion. A remarkable level of competition in the food retail market has led to high automation standards in production unique to Germany. The most important subsegments bakery products, beverages, dairy, confectionary food, and meat will see even more production line investment in the near future. Photo: Daimler 6 Industry Overview 2009
Printing press assembly at Heidelberger AG Photo: Heidelberger Druckmaschinen AG Other High-Tech Industries The renewable energies sector is one of the high-tech industries recording the most significant growth levels. Germany is one of the world s leading nations in the fields of photovoltaics, wind energy, and biodiesel in terms of market size, capacity, and production. Forecasts predict a bright future for the German renewable sector, with domestic investments expected to reach the EUR 200 billion level and exports up to EUR 80 billion by the year 2020. Growth Along the Value Chain Not only will machinery and equipment production continue to be an interesting field for foreign investment, but other areas of the value chain also provide opportunities for profitable investment in the future (for example, R&D centers especially supported by the government see Incentives in Germany ). Service and maintenance, repair and overhaul (MRO) are also attractive investment areas because of the high density of M&E installations in Germany. Industrial services have developed to be an important driving force for growth: 90 percent of all industrial enterprises consider industrial services to be a very promising market for the future. External Drivers The European Commission has announced its 20/20/20 goals which comprise of a reduction of greenhouse gas emissions by 20 percent; a proportion of renewable resources of 20 percent; and an increase in energy efficiency of 20 percent by the year 2020. These objectives will influence the way business is done and will, at the same time, function as innovation drivers.to meet the challenges ahead, extensive investments in numerous technology areas and processes are necessary. The world s green technologies leader, Germany has already secured a 20 percent share of the international market and offers multiple business opportunities. Industry Overview 2009 www.gtai.com 7
Incentives in Germany Incentives for Investments in the Machinery & Equipment Industry Types of Incentives in Germany Investment Incentives Package + Operational Incentives Package Germany offers numerous incentives for all investors regardless of whether they are from Germany or otherwise. There is a large selection of programs designed to support a wide variety of business activities at different stages of the investment process available. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor and research and development (R&D). Cash Incentives Investment Grant Investment Allowance ) only in Eastern Germany Interest- Reduced Loans KfW Loans (National Level) State Development Bank Loans Public Guarantees State Combined State/ Federal Labor-Related Incentives Recruitment Training Support Wage Subsidies R&D Incentives Grants Loans Silent/Direct Partnership Germany s Investment Incentives Package Investor production facility set-up costs can be significantly reduced using a number of different measures from Germany s extensive investment incentives package. The package consists of cash incentives, loan programs offering reduced interest rates, and public guarantees at the state and national level. The amount of these investment incentives generally depends on three factors: project scope, investor company size, and the new investment location. Investment incentives can reach up to 50 percent of eligible expenditures once these factors have been considered. Cash Incentives The main components of Germany s investment incentives package are cash incentives provided in the form of non-repayable grants. Make up Investment grants are offered in several incentive regions in Germany. Eligible investment costs include the purchase or production costs of buildings, machinery, and equipment. The purchasing costs of intangible assets are likewise eligible. In general, investment projects must create long-term jobs in order to benefit from investment grant provision. In Eastern Germany, investment grants are complemented by the Investment Allowance, which is usually provided in the form of a cash payment and/or tax credit. As with investment grants, eligible Investment Allowance costs include the purchase or production costs of buildings, machinery and equipment. Interest-Reduced Loans Special loan programs make up a second component of Germany s investment incentives package. They are offered by publicly organized financial institutions. These programs usually offer loans at below market interest rates. The provision of such loans makes it easier for investors to access funding from private lending banks. Public Guarantees The investment incentives package is complemented by public guarantees. They are granted by the German states and federal government. Public guarantees help to secure private bank loans by replacing absent securities. Commitments vouched for within public guarantees are normally subject to intensive individual examination by external assessors. Germany s Operational Incentives Package Incentives for R&D Projects Germany offers several incentives programs targeted at reducing the operating costs of R&D projects. Programs operate at the regional, national, and European level and are wholly independent from investment incentives. At the national level, all R&D incentives programs are subsumed under the Federal Government s four-year High-Tech Strategy. 8 Industry Overview 2009
MAN A turbogear unit s set of wheels R&D projects in the machinery & equipment industry can be subsidized through different programs according to the individual project objectives. Calls for proposals are published on a regular basis by the relevant government ministries. The High-Tech Strategy: Sectors and Budgets (in EUR million) equipment (nanosciences, nanotechnologies, materials & new production). Some EUR 9 billion has also been set aside for information and communication technologies, with particular emphasis placed on the field of robotics. Space Technologies Energy Technologies Information and Communication Tech. Health Research and Medical Technology Automotive and Traffic Technologies Nanotechnologies Biotechnology Environmental Technologies Materials Technologies Optical Technologies Plants Aviation and Aeronautical Technologies Production Technologies Microsystems Technology Maritime Technologies Security Research Services 800 770 640 40 420 420 0 00 270 250 220 50 80 50,80 2,000,650 Labor-related Incentives Labor-related incentives are available throughout Germany. The Federal Employment Agency and all German states offer a range of different labor-related incentives programs. They can be divided into three main groups: programs focusing on recruitment support, training support, and wage subsidies respectively. Source: German Federal Ministry for Education and Research (BMBF) Photo: MAN The High-Tech Strategy defines specific sectors with a high dependency on new high-tech developments. Each sector comprises various R&D programs. Approximately EUR 2 billion in total is reserved for nonrepayable project grants. The European Union subsidizes transnational R&D projects through its 7th Research Framework Program. A budget of EUR.5 billion for the period 2007 to 20 has been earmarked for the funding areas most applicable to the machinery & Industry Overview 2009 www.gtai.com 9
Our Services Germany Trade & Invest closely supports your project management team throughout the entire investment decision process Investment Process Milestones Strategy Evaluation Decision and Investment General market information Germany Trade & Invest Key Support Areas Information Consulting and Project Coordination Industry guides/reviews Conditions for investment, (e.g. economic data, labor market, incentives programs, and tax & legal framework) Proactive identification of business opportunities Identification of projectspecific location factors Discussion of market entry strategies Advice on project financing Model calculation of potential incentives Cost factor analysis Identification of possibilities for cooperation with suppliers, R&D institutes, technology partners, etc. Organization of site visits and fact-finding missions Contact with the economic development corporations of the German states Support with final site decision Selection of project partners and facilitators (service providers, financial partners) Negotiations with relevant authorities Assistance with the incentives application process Seamless project handover to the economic development corporation in the selected state Germany Trade & Invest Helps You Our team of industry experts in the M&E and related supply and application industries will assist you in setting up your operations in Germany. Be it engineering centers or manufacturing and assembly plants, we support your project management team from the earliest stages of your expansion strategy. We provide you with all of the industry information you need covering everything from market information and the supplier landscape to engineering technology and R&D. Profit from our experience and know-how to identify the business location which meets your specific investment criteria. We help turn your requirements into concrete investment site proposals, providing consulting services to ensure you make the right location decision. We coordinate site visits, meetings with potential partners, universities and other institutes active in the industry. Our team of consultants is at hand to provide you with the relevant background information on Germany s tax and legal system, industry regulations and the domestic labor market. Germany Trade & Invest s experts help you create the appropriate financial package for your investment and put you in contact with suitable financial partners. Incentive specialists provide you with detailed information about available incentives, support you with the application process, and arrange contacts with local economic development corporations. Take advantage of our range of free of charge services. 0 Industry Overview 2009
Contact Imprint Publisher & Editor Germany Trade and Invest Gesellschaft für Außenwirtschaft und Standortmarketing mbh Friedrichstraße 60 07 Berlin Germany T. +49 0 200 099-0 F. +49 0 200 099- office@gtai.com www.gtai.com Chief Executive: Michael Pfeiffer Contact M&E Industry: machinery@gtai.com Conception, Layout, Text, Translations Germany Trade & Invest Supported by Germany Trade & Invest is supported by the Federal Ministry of Economics and Technology in accordance with a German Parliament resolution. Notes Germany Trade & Invest, March 2009 All information provided by Germany Trade & Invest has been put together with the utmost care. However we assume no liability for the accuracy of the information provided. Order Number 692
About Us Germany Trade & Invest Friedrichstraße 60 07 Berlin Germany T. +49 (0)0 200 099-0 F. +49 (0)0 200 099- machinery@gtai.com Germany Trade & Invest is the foreign trade and inward investment agency of the Federal Republic of Germany. The organization advises and supports foreign companies seeking to expand into the German market, and assists companies established in Germany looking to enter foreign markets. All inquiries relating to Germany as a business location are treated confidentially. All investment services and related publications are free of charge. www.gtai.com Photo: xxx MAN