3/1/2019 | 3 MINUTE READ

2019 German Precision Tool Industry Outlook is Positive Amid Uncertainty

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Despite geopolitical economic uncertainty, the German VDMA Precision Tools Association is projecting growth in precision tool consumption.  


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When local, national and international press gathered in Frankfurt for the German VDMA Precision Tools Association’s annual press conference on January 16, the anticipation was palpable. Heading into 2019, with a volatile geopolitical economic environment, there is less certainty about the outlook for most markets including manufacturing than there has been in the past.

The biggest issues on everybody's minds these days in Europe are Brexit, trade friction between the United States and China, President Trump's politics including trade barriers and immigration, as well as the fear of the world moving away from the internal combustion engine in the age of electrification.

Lothar Horn, managing director of cutting tool company Paul Horn and chairman of the VDMA Precision Tools Association, is optimistic that the sector will continue on its growth path and expressed his belief that "the couple of million cars sold in Germany out of the roughly 90 million cars produced globally are insignificant compared with a market such as China, where a third of the globally made cars end up. Still we make a fuss about e-mobility and clean diesel technology." Sure, there was pressure coming from China where the government supports investment in hybrid and fully electric cars; out of the 30 million cars sold in China, 8 million are electric or hybrid, Mr. Horn says. The Chinese are also preparing to generate the necessary energy by slowly getting rid of coal-fired power plants and replacing them with nuclear power stations. “But considering the forecast of around 120 million cars annually produced worldwide by 2030, with 20 percent being equipped with electric drives rather than combustion engines, the total number of cars with traditional engines and drivetrains won't decrease.

"So, we will not be nearly as done with internal combustion engines as one might assume," Mr. Horn adds. "The automotive industry will increasingly require different, very precise and high-quality parts to meet the changing demands of future drive concepts. For instance, gearboxes will have to be designed to meet the industry’s demand for reduced noise emissions and components will have to be much more wear-resistant to respond to sudden loads, as when switching from the electric drive to the internal combustion engine at high speeds."

As a result, the VDMA is convinced that the consumption of precision tools (which includes cutting tools, clamping technology and toolmaking) will continue to grow. The anticipated growth in production in 2018 of 5 percent will most likely be exceeded and reach 8 percent with production values reaching 11.5 billion Euros. According to the association, one of the main drivers for growth is foreign deliveries, which increased by 5 percent compared with 2017.

The U.S. remains the German precision tools sector’s biggest export market, worth 655 million Euros (January through October 2018), up 14 percent from 2017. At the same time, exports to Mexico decreased by 11 percent due to the uncertainties in connection with U.S. trade barriers, the VDMA says. China remains the second largest export market, followed by the Netherlands, Switzerland, Italy and France.

All in all, the sector is positive that trade with the U.S. will remain stable, and the cutting tool industry is convinced that the U.S. market will be the main driver for growth in 2019. “We expect a moderate growth of 1 percent for the precision tools industry in 2019,” Mr. Horn says.

When asked by the audience if he “loved” Trump for his government’s corporate tax cuts, Mr. Horn replied with a smile, “Our Americans love him.” Horn USA is the company’s largest production site, and for companies with local subsidiaries, the tax cuts are a good incentive for local and foreign investment. “We plan to expand our U.S. facility by 300 percent by 2020, but we have been investing in international sites for 20 years now. I am not worried about what the president comes up with next when he wakes up in the morning. You have to think local and act global. The same is true for the coming Brexit. If we are faced with a ‘Hard Brexit,’ or ‘No-Deal Brexit’ where the U.K. would leave not only the E.U. but also the E.U.’s Single Market and the E.U. Customs Union, we have to find other ways, such as delivering our U.K. customers from sites outside the E.U., such as the United States.”


About the Author

Barbara Schulz

Based in Germany, Barbara Schulz is the European Correspondent for Production Machining. Her role is to present perspective relative to European machining trends, technology and tactics to our readers.



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