In the fourth quarter of 2014, the index of machine tool orders, processed by the Studies Dept. of UCIMU-SISTEMI PER PRODURRE, registered a 19.1% increase compared with the same period of the previous year, for an absolute value of 138.4 (basis 2010=100). The global outcome was determined by the positive results achieved by the manufacturers in Italy, as well as abroad.

The index of orders collected in the foreign markets reported a 19.3% upturn versus the period October-December 2013, for an absolute value of 134.8.

The domestic orders index recorded a new growth, in the amount of 18.8% in comparison with the same period of the previous year, for an absolute value of 163.3.

On an annual basis, the index showed an average increase amounting to 14.7% in comparison with 2013 (absolute value 118.5). The outcome was determined by the positive performances of manufacturers in the foreign market (+10.1%), as well as by the good results achieved on the domestic market (+37.2%) which went back to investing in capital goods, supported by the introduction of the New Sabatini Law.

“This last survey – stated Luigi Galdabini, President of UCIMU-SISTEMI PER PRODURRE – highlights that there were five consecutive quarters of growth registered by the index processed by our Studies Dept.; this certainly confirms a good expectation for the near future, taking into account that the collection of orders will materialize in production in the next six-eight months”.

Alfredo Mariotti, General Manager of UCIMU-SISTEMI PER PRODURRE, pointed out: “These data and the good forecasts for 2015, – which is envisaged as a positive year for the Italian and for the European machine tool sector, as confirmed by the figures Oxford of Economics, – are a good omen for the success of EMO MILANO 2015, the world exhibition of the sector, hosted in Italy every six years (alternating only with Germany). Ten months before the tradeshow scheduled at fieramilano from 5 to 10 October, 1,100 companies have already sent their applications for participating, booking an exhibition surface of over 100,000 square meters (95,455 sq m was the final surface booked in the last edition, 2009).

“On the other hand – went on Luigi Galdabini – the recovery of the Italian demand for machine tools shows that the manufacturing industry of our country is getting back on track. We hope that this new phase will be confirmed even in the long term, to the benefit of the whole country system”.

“In this connection, the introduction of the New Sabatini Law, in force since last March, plays and will play a fundamental role which goes far beyond the mere economic calculation of the financed operations. According to the note of the Ministry for the Economic Development, at the end of 2014, funds amounting to 1,048 million euro were granted by the public financial institution “Cassa Depositi e Prestiti”, for 3,681 accepted applications. From our observatory of entrepreneurs we can say that the value of the measure is much higher in comparison with the over 2,000 million euro of investments financed so far: it corresponds to the injection of trust brought into the market by the New Sabatini Law. For this reason our Association fought in order to have this measure again within the Decree Law of Stability 2015. Now, it welcomes the decision included in the Investment compact, which allows to obtain a state subsidy on the interest paid also by using autonomous funding on loans granted by banks and leasing companies, without utilizing the funds offered by Cassa Depositi e Prestiti”.

“This said, however it is necessary to stress again the need for specific measures capable of supporting, in a structured way, the relaunch of the domestic market and of the Italian manufacturing sector. A complementary action to the New Sabatini Law should be the liberalization of depreciation on purchased capital equipment and the revision of coefficients for its calculation, dating back to 1988”.

“Finally – concluded Galdabini – the recovery of machine tool consumption in Italy is an issue of interest not only for manufacturers, but, on the contrary, it is and must be more relevantly among the priorities of our country, whose manufacturing industry is working with more and more obsolete and less efficient production technologies. To avoid a loss in competitiveness in our country system, we need to consider an incentive programme to support the replacement of obsolete machinery. The provision, which was favourably considered by Vice Minister Calenda, could actually give a shake to machinery consumption, but most of all it would encourage the necessary modernisation of production plants, in response to the companies’ requirements of higher productivity and of compliance with stricter and stricter regulations in terms of energy saving and improvement of safety standards at the workplace”.

In November 2014, incoming orders in the mechanical engineering industry in Germany were down ten percent on the previous year. The VDMA German Engineering Association recently announced in Frankfurt that domestic business fell by nine percent and international business was down 11 percent year-on-year.

Based on a three-month comparison, which is less affected by short-term fluctuations, incoming orders rose by three percent year-on-year between September and November 2014. Domestic orders were down six percent, while international orders increased by seven percent.

“After five months, incoming orders fell short of the previous year for the first time in November – by as much as a tenth. Orders from euro area partner countries were the only glimmer of hope. Overall, November is to be seen as a setback,” stated VDMA chief economist Dr Ralph Wiechers with regard to the result.

The recently concluded multi-stakeholder Design_MTS project has facilitated enterprises in Europe’s Machine Tool Sector (MTS) to take a strategic approach to Corporate Social Responsibility (CSR) and sustainability. Since July 2013, Design MTS partners in the partly funded European Commission project have raised the bar for CSR in machine tool sector by practically integrating a multi-stakeholder approach to develop awareness and socially responsible best practice and to enhance the visibility and value of CSR in the MTS.

As the project drew to a close in December 2014, it formulated the principles around raising awareness and communication on CSR and facilitating a strategic approach to CSR in the MTS. These promised to bring continued benefits in terms of risk management, cost savings, access to capital, customer relationships, and human resource management and innovation capacity.

Training

Free-of-charge online training modules are now offered to machine tool companies (mainly SMEs) and trade associations in MTS in a bid to raise awareness about the strategic value of CSR and CSR international standards to help the sector meet the growing requirements on large customers of machine tool SMEs. Access the training modules here: http://designmts.eu/training-modules/

On conclusion of the project, key findings resulting from project activities above all highlighted the importance of continuing to build on the CSR awareness and understanding for stakeholders through continued education. Specifically, further scope for improvement and action was linked to the need to develop practical competence of stakeholders by focusing on skills development, monitoring performance, information sharing and transfer of innovation initiatives.

Stefan Crets, Executive Director of CSR Europe has reiterated this by saying, ‘’only through continued communication and sharing of good practice on CSR can the capability of MTS enterprises be further enhanced. In a complex and multidimensional sector, good CSR practices potentially impact on several sectors in the supply chain including automotive, aerospace, renewable energy and medical devices. Future cross sectorial incentives such as CSR awards or training programmes for MTS enterprises and their partners in the value chain will be key.’’

The European machine tool industry is an SME-oriented B2B sector providing customers with innovative, highly customized and sustainable solutions. Communication of CSR and sustainability in the sector varies from one company to another depending on many factors including customer demands. It is often larger companies and trade associations at national and European levels which take the leading role in CSR communications.

Filip Geerts, Director General at CECIMO, states “in response to stakeholder expectations, technical requirements and legislation affecting particularly larger companies from user industries such as the automotive sector, the issue of CSR and sustainability is likely to remain a strategic issue among European machine tool builders. Through initiatives like Design MTS project, we raise the level of CSR awareness in the sector and help companies gain competitiveness through sustainability”.

Policy recommendations

To consolidate and continue good progress made by stakeholders to date, project partners have published policy recommendations and a networking strategy to set the foundation for longer-term commitments and enterprise engagement in CSR.

Aligning policy approaches towards CSR and sustainability at the National and European level was identified as key to highlighting its relevance to industry and specific sectors as well as offering insights to policy makers on implementing, fostering, and disseminating CSR within MTS.

Principally, recommendations call for the continuation of partner initiatives that target awareness raising, training and capacity building with the sharing of best practice examples of integrated CSR management in the MTS, other sectors and regions. This will also go a long way to securing sustainable solutions and a robust and viable industry into the future.

Research shows cellular machining utilising general-purpose CNC machine tools offers significant advantages over high-end, special purpose machines, with no loss of part accuracy or quality.

Haas Automation has long-since argued that customers who invest in multiple, affordable CNC machine tools vs high-end, special purpose machines benefit from greater flexibility, lower investment and running costs and, ultimately, lower cost-per-part. Now, the company’s claim is supported by a recent, independent study on lean machining at the Technische Universität (TU) Darmstadt in Germany.

Research shows cellular machining utilising general-purpose CNC machine tools offers significant advantages over high-end, special purpose machines, with no loss of part accuracy or quality.

Zaventem, Belgium. October 20th, 2014: A recent report from the Technische Universität (TU) Darmstadt in Germany demonstrates that the use of several, modestly priced CNC machine tools arranged in a cellular configuration can offer significant benefits over the use of more expensive special-purpose machines configured for ‘done-in-one’ operations. The cell-configuration studied at the university features two Haas Super Mini Mill 2 CNC machining centres and a Haas SL-10 CNC lathe.

The TU Darmstadt report, entitled ‘Cellular Manufacturing to enable Lean Machining’, was prepared by Stefan Seifermann, Jörg Böllhoff, Eberhard Abele and Joachim Metternich at the university’s Institute of Production Management, Technology and Machine Tools (PTW). Dr. Sven Bechtloff, who has since left the university, was also a key member of the study team.

The idea for the research was based on a perceived absence of the principles of lean manufacturing applied in widespread machining operations in manufacturing companies of all sizes. Although deployed widely in assembly and process engineering environments (typically in the volume automobile manufacturing sector), the principles of flow as a central element of lean manufacturing have not often been transferred successfully to machining operations, and are rarely to be found at all in Europe.

In essence, cellular manufacturing is the grouping of heterogeneous equipment (in this case, CNC machine tools) to manufacture a family or group of similar parts. Typically, the concept involves the arrangement of machines in a U-shape to aid flow and balance work-in-progress with ‘takt’ time (the average unit production time needed to meet customer demand).

To demonstrate the potential advantages, a com reference production line has been established at the PTW’s Process Learning Factory (CiP). The ‘done-in-one’ line features two, high-specification machine tools: a four-axis CNC horizontal machining centre with tombstone fixture, and a CNC multi-axis automatic turning centre. The competing line, a machining cell, features two Haas Super Mini Mill 2 three-axis machining centres and a Haas SL-10 two-axis CNC lathe, as well as two, general purpose CNC machining centres and a CNC lathe supplied by another machine tool manufacturer. The report notes that the investment for the two machines in the ‘done-in-one’ line totaled €780,000, while that for the six CNC machine tools in the cell configuration was just €340,000.

An economic comparison between the two machining line configurations (based on 2000 parts per week, and one worker on each line) drew startling results. The ‘done-in-one’ line required 15 shifts to complete the 2000 parts. The lead-time was 35 minutes, while the unit cost of each part (without material) was calculated at €3.95. Using a cellular machining configuration, however, it took just 12.6 shifts to finish the 2000 components to an identical specification, lead-time was reduced to 10 minutes, and unit cost to just €2.55.

As an alternative scenario, if two workers are deployed in the machining cell the unit price climbs slightly to €3.10 as a result of the additional labour cost (but still far cheaper than the €3.95 unit cost of the ‘done-in-one’ line), 12.6 shifts are reduced to 9.8, and lead-time is cut from 10 minutes to just 7.

Using a capacity comparison based on 15 shifts, the ‘done-in-one’ line will complete 2000 parts; the cell with one worker will finish 2377 components (a 19% increase); and the cell with two workers will complete 3064 parts (a 29% increase).

In all cases, the study ensured part accuracy and quality standards were maintained and that the less expensive, general purpose machines were able to produce to a similarly high standard as the special-purpose machines.

Future costs could also be taken into consideration when comparing the different approaches. In the case that the production line needs to be expanded, introducing a new machine to the cell will be considerably cheaper than introducing a machine to the ‘done-in-one’ line due to the large disparity in their individual purchase prices.

The  year was particularly good for the industry manufacturing machine tools, robots and automation systems. The report also indicates good prospects for 2015.

The Italian industry manufacturing machine tools, robots and automation systems closes 2014 with a positive result. Production is growing and Italian consumption starts again, registering a double-figure increase and driving the manufacturers’ deliveries and import. Export is stable. The forecasts for 2015 are positive. This is the scenario described by President Luigi Galdabini, on the occasion of the year-end press conference of UCIMU-SISTEMI PER PRODURRE.

According to the preliminary figures processed by the Studies Dept. of UCIMU SISTEMI PER PRODURRE, in 2014 production achieved 4,695 million euro, reporting a 4.6% growth compared to the value of the previous year.

Exports confirmed to remain on the level of 2013, reaching 3,360 million euro (-0.7%), penalized by the general slowdown of the world trade and, in particular, by the decision of the European Union to limit exports of machine tools to Russia, as a consequence of the tension between the Federation and Ukraine.

According to UCIMU processing on the ISTAT data, in the first nine months of the year, the main destination countries of “Made in Italy” in the sector resulted to be China, (-18.6%) 264 million euro, the United States (-8.4%) 258 million, Germany (+0.2%) 231 million, Russia (-16%) 110 million, France (+0.8%) 102 million, Turkey (+0.6%) 81 million, Poland  (+17.1%) 71 million,  India (-35.5%) 62 million,  Mexico (+11%) 61 million, Brazil (-37.3%) 60 million.

A remarkable increase was recorded in Italian consumption, back to a positive sign, which attained 2,420 million euro, i.e. +18.2% vs. 2013, highlighting the recovery of investments made by the Italian manufacturing industry in production systems.

Manufacturers have primarily taken advantage of this trend: their deliveries in the domestic market grew by 21.1%, to 1,335 million euro. On the other hand, imports recorded a lower increase (+14.9%), amounting to 1,085 million euro.

After six years of growth, the ratio export/production went down to 71.6%, due to the recovery of the domestic market, towards which the Italian manufacturers have immediately re-oriented a part of their supply offering.

According to the forecasts in 2015 the positive trend of the Italian industry in the sector will see an increase for all the main economic indicators.

Even manufacturers’ deliveries will keep on growing, achieving 1,390 million euro, marking a +4.1%, driven by the positive trend of domestic consumption which will reach 2,530 million euro, i.e. +4.5% vs. 2014. Also imports will benefit from the bright demand expressed by the Italian users, increasing to 1,140 million euro, +5.1% vs. 2014.

Luigi Galdabini, President of UCIMU-SISTEMI PER PRODURRE, commented: “The recovery which had started at the end of 2013, materialized in 2014. Among all indicators, the most relevant datum is that of domestic consumption which has finally come back to a positive sign, showing the new willingness to invest of the Italian users. This trend, together with the positive forecasts for 2015, is an excellent omen for those who will participate in EMO MILANO 2015, the world exhibition of the sector on scene at fieramilano from 5 to 10 October next year”.

“On the other hand – stated the President of UCIMU-SISTEMI PER PRODURRE – we cannot hide the fact that the increase in the Italian demand of production systems was stimulated by the introduction of the New Sabatini Law. In its first eight months of operation it financed purchases (not only of machine tools) for an amount of 2,300 million euro. Indeed the success of this instrument, – added Galdabini – capable of ensuring financing at cut rates, proves that the demand for production systems also and still exists in Italy. The problem is rather the loss of cash flow for the companies that wish to invest, as they do not have any financial resources. Indeed the validity of the provision, really capable of creating great optimism in the market, has pushed UCIMU-SISTEMI PER PRODURRE to fight in order to obtain the re-financing also for next year. For 2015, the New Sabatini Law has been refinanced for 12 million euro only, but it will go up to 31.6 million in 2016 and to 46.6 million in 2017”.

“This said, however it is necessary to stress again the need for specific measures capable of supporting, in a structured way, the relaunch of the domestic market and of the Italian manufacturing sector that is often working with obsolete production systems so far. A complementary action to the New Sabatini Law should be the liberalization of depreciation on purchased capital goods and the revision of coefficients for its calculation, dating back to 1988”.

“On the other hand – concluded Galdabini – the recovery of machine tool consumption in Italy is an issue of great interest not only for manufacturers, but indeed it is and must always be among the priorities of our country, whose manufacturing industry is operating with more and more obsolete and less efficient production technologies. To avoid a loss in competitiveness in our country system, we need to consider an incentive programme to support the replacement of obsolete machinery. The provision, which was favourably considered by Vice-Minister Calenda, could actually give a shake to machinery consumption, but most of all it would encourage the necessary modernisation of production plants, in response to the companies’ requirements of higher productivity and of compliance with stricter and stricter regulations in terms of energy saving and improvement of safety standards at the workplace”.

German machinery and plant manufacturers are confirming the production forecast of 1% for 2014 that they first issued in the summer. “In the first ten months of the year, production of machinery and plants in Germany was up 1.0% year-on-year in real terms. We are therefore very optimistic that we will achieve our forecast,” explained VDMA President Dr Reinhold Festge at the Association’s annual press conference in Frankfurt on Thursday. “All in all, sales of EUR 212 billion and production totalling EUR 199 billion in 2014 mean we exceeded the previous records for both of these figures from 2008 (sales of EUR 208 billion and production of EUR 196 billion),” said Festge.

Employment exceeds the one million mark

“Our employees are the clear winners from this strong overall performance,” emphasised the VDMA President. However, I also see this growth in employment as an important investment in the future.” The number of employees hit the one million mark again in May for the first time since 1993. In October, a total of 1,011,000 people were working in the mechanical engineering industry. That is 1.7% or 16,000 people more than in the same month last year. As reasons for the increase – in light of the moderate production growth – Festge cited primarily the huge challenges (Industry 4.0, pension age of 63, demographic change) that the mechanical engineering industry can surmount only with qualified staff.

Outlook for 2015: Production forecast of +2% confirmed

For 2015, German mechanical engineering companies are maintaining their production forecast of +2%. The production value could exceed the EUR 200 billion threshold for the first time in 2015 at EUR 205 billion. “Our incoming order volume to date has laid the foundations for this. In the first ten months, incoming orders were up 2% year-on-year after adjustment for price changes,” reported the VDMA President.

However, he also indicated that there are still incalculable risks such as the Russia/Ukraine crisis, the sluggish pace of reforms in France and Italy and the restrictive effect on growth from laws introduced by the German federal government in recent months.

Mechanical engineering companies see opportunities primarily in the reindustrialisation process in the US. The low commodity prices are also stimulating the global economy. The decline in the external value of the euro also helps. “In the past, the overvalued euro reduced margins and also prevented a few deals. Of course, it is still the case that strong demand is more important for mechanical engineering companies than a low exchange rate,” explained Festge.

Exports up slightly on previous year’s level

Exports amounted to EUR 112.6 billion in the first nine months of the year, thus slightly exceeding the previous year’s level of EUR 112.1 billion. This represents a nominal increase of 0.5%. The major markets are developing positively: The EU partner countries posted a rise of 5%, while China recorded a 2% increase. The US market grew by 6% and the markets in South-East Asia by 9%. Africa posted growth in both the North region (+11%) and the West region (+7%). The Middle East expanded by 4% in total, benefiting in particular from the upturn in Iran business (+20%).

Weaker demand was experienced by mechanical engineering companies in some major emerging economies and countries neighbouring the EU. Australia, Brazil, South Korea, India, South Africa and Turkey all posted double-digit declines in comparison to the previous year. Deliveries to Ukraine fell by a third, while exports to Russia were down 16%. “This was undoubtedly due not only to sanctions, but also to the sharp drop in the rouble exchange rate and the decrease in oil revenues,” said Festge.

Domestic market on growth track with rise of 3%

The domestic market is also on a growth track. “In the first ten months, sales in Germany were up 3% year-on-year,” reported the VDMA President. “I do not wish to deny that we had expected more. We are one of the victims of the continuing lack of investment in Germany.”

German imports of machinery also increased by almost 5% to EUR 44.3 billion in the first three quarters. Approximately EUR 27 billion came from the EU partner countries. “Our location is therefore not an isolated market, but rather an extremely open and highly competitive market – a fact that everyone benefits from. This is something that we should not forget in light of the discussions regarding the benefits of the Transatlantic Trade and Investment Partnership TTIP,” said Festge.

Politics weakening industrial location – Agenda 2025 is overdue

This is not what an investment-friendly economic policy looks like, said the VDMA President critically on the topic of the political decisions on pension, wage and employment policy that have been made in recent months. “Instead of perpetuating the solidarity surcharge contrary to all previous commitments, the federal government should finally reduce any subsidies to a fixed percentage of, say, 5% or more,” urged Festge.

According to Festge, the lowering of the pension age to 63 is particularly painful for the mechanical engineering industry. A trend survey by the VDMA last week showed that 74% of those who leave companies at the age of 63 belong to the category of skilled workers and master technicians. “We are thus heading for a difficult situation at one of the core areas of production. “This is really hurting us,” said the VDMA President. Politicians must finally remember their responsibility for creating investment-friendly conditions, he commented. “There must not be any tax increases, including hidden tax increases, just because public funds have been plundered under the pretext of social justice. More than enough benefits have been handed out over the past twelve months. “A new agenda, an Agenda 2025, is now overdue,” the VDMA President emphasised. “But for the moment we would be satisfied if politicians would at least stop destroying Agenda 2010.”

A recent report from the Technische Universität (TU) Darmstadt in Germany demonstrates that the use of several, modestly priced CNC machine tools arranged in a cellular configuration can offer significant benefits over the use of more expensive special-purpose machines configured for ‘done-in-one’ operations. The cell-configuration studied at the university features two Haas Super Mini Mill 2 CNC machining centres and a Haas SL-10 CNC lathe.

The TU Darmstadt report, entitled ‘Cellular Manufacturing to enable Lean Machining’, was prepared by Stefan Seifermann, Jörg Böllhoff, Eberhard Abele and Joachim Metternich at the university’s Institute of Production Management, Technology and Machine Tools (PTW). Dr. Sven Bechtloff, who has since left the university, was also a key member of the study team.

Haas Automation has long-since argued that customers who invest in multiple, affordable CNC machine tools instead of one or two high-end, special purpose machines benefit from greater flexibility, lower investment and running costs and, ultimately, lower cost-per-part. Now, the company’s claim is supported by a recent, independent study on lean machining at the Technische Universität (TU) Darmstadt in Germany.

Research shows cellular machining utilising general-purpose CNC machine tools offers significant advantages over high-end, special purpose machines, with no loss of part accuracy or quality.

The idea for the research was based on a perceived absence of the principles of lean manufacturing applied in widespread machining operations in manufacturing companies of all sizes. Although deployed widely in assembly and process engineering environments (typically in the volume automobile manufacturing sector), the principles of flow as a central element of lean manufacturing have not often been transferred successfully to machining operations, and are rarely to be found at all in Europe.

In essence, cellular manufacturing is the grouping of heterogeneous equipment (in this case, CNC machine tools) to manufacture a family or group of similar parts. Typically, the concept involves the arrangement of machines in a U-shape to aid flow and balance work-in-progress with ‘takt’ time (the average unit production time needed to meet customer demand).

To demonstrate the potential advantages, a cellular reference production line has been established at the PTW’s Process Learning Factory (CiP). The ‘done-in-one’ line features two, high-specification machine tools: a four-axis CNC horizontal machining centre with tombstone fixture, and a CNC multi-axis automatic turning centre. The competing line, a machining cell, features two Haas Super Mini Mill 2 three-axis machining centres and a Haas SL-10 two-axis CNC lathe, as well as two, general purpose CNC machining centres and a CNC lathe supplied by another machine tool manufacturer. The report notes that the investment for the two machines in the ‘done-in-one’ line totaled €780,000, while that for the six CNC machine tools in the cell configuration was just €340,000.

An economic comparison between the two machining line configurations (based on 2000 parts per week, and one worker on each line) drew startling results. The ‘done-in-one’ line required 15 shifts to complete the 2000 parts. The lead-time was 35 minutes, while the unit cost of each part (without material) was calculated at €3.95. Using a cellular machining configuration, however, it took just 12.6 shifts to finish the 2000 components to an identical specification, lead-time was reduced to 10 minutes, and unit cost to just €2.55.

As an alternative scenario, if two workers are deployed in the machining cell the unit price climbs slightly to €3.10 as a result of the additional labour cost (but still far cheaper than the €3.95 unit cost of the ‘done-in-one’ line), 12.6 shifts are reduced to 9.8, and lead-time is cut from 10 minutes to just 7.

Using a capacity comparison based on 15 shifts, the ‘done-in-one’ line will complete 2000 parts; the cell with one worker will finish 2377 components (a 19% increase); and the cell with two workers will complete 3064 parts (a 29% increase).

In all cases, the study ensured part accuracy and quality standards were maintained and that the less expensive, general purpose machines were able to produce to a similarly high standard as the special-purpose machines.

Future costs could also be taken into consideration when comparing the different approaches. In the case that the production line needs to be expanded, introducing a new machine to the cell will be considerably cheaper than introducing a machine to the ‘done-in-one’ line due to the large disparity in their individual purchase prices.

The government plans to promote industrialization on a massive scale, making the country a particularly interesting proposition for the mechanical engineering and plant engineering sectors.

Although growth has been significantly reduced in recent times, India continues to be one of the world’s high-growth national economies. The Asian Development Bank expects to see growth of 5.5% for 2014, increasing to 6.3% in 2015. There is also a great need for modernization in the mining and steel industries. In addition, there will be major investments in infrastructure.

When we talk about the drivers of the global economy, we usually think of three countries: China, the USA and India. In comparison to the USA and China, India is currently the least industrialized country, despite the enormous economic growth it experienced up until 2011. Historically, the national economy is largely focused on the internal market. According to calculations by the German Chambers of Commerce Abroad, India’s exports are only 15% of the value of China’s. One reason for this is the structure of the Indian national economy.

Industry set to create jobs

In the last few years, the contribution made by industry to the gross national product in India has stagnated at around a quarter. The service sector dominates in India, as it accounts for 59% of economic performance — unusual for an emerging nation. India’s high level of expertise in IT plays a key role in this regard. And although more than 50% of the population works in agriculture, this sector represents only 14% of the gross national product. Against this background, the stated aim of the new Indian government is to promote industrialization, as industry is seen as the only way to create enough jobs for the large numbers of poorly qualified people. In addition, the government aims to remove both regulatory and bureaucratic obstacles and improve infrastructure.

The 100 Billion Dollar project

These investments will be made in developing the transport network as well as improving energy and water supplies. The largest infrastructure project -the Delhi-Mumbai Industrial Corridor – is set to change the parameters in the country. It aims to create an industrial corridor between the cities of Delhi and Mumbai that will be around 1400 km long and 300 km wide. The starting point involves the development of roads and high-speed rail networks. New cities are set to be created along this corridor that will be several times bigger than Shanghai. For this megaproject alone, the government is anticipating investing 100 billion dollars. Other corridors and special economic zones are also being planned. The aim of this project is twofold. Firstly, it aims to attract foreign investors and manufacturing companies, and secondly it aims to strengthen domestic industry.

This supports the “Make in India” initiative that was launched in the fall of 2014. The government wants to use this initiative to improve the investment environment by eliminating unnecessary laws and reducing the amount of bureaucracy. Investors can get in touch via the central website www.makeinindia.com . A committee of eight people will answer inquiries from investors within 48 hours.

Despite the fact that industry currently accounts for a relatively small proportion of the gross national product, it is already a very interesting market from a mechanical engineering perspective because of the size of India’s national economy. In 2013, Indian companies purchased machinery worth around EUR 3 billion in Germany alone. One of the driving forces is the automotive sector. Virtually all automotive companies have built plants in India in the last few years and have brought suppliers with them. According to the OICA (The International Organization of Motor Vehicle Manufacturers), more than twenty million motorized vehicles, passenger cars, commercial vehicles and motorcycles left Indian factories in 2013.

World’s biggest tractor manufacturer

In terms of quantity, India is the biggest manufacturer of tractors in the world while also being the largest market. The Association of Equipment Manufacturers in Milwaukee, Wisconsin in the USA has calculated that almost a third of the world’s tractors are built in India. Indian manufacturers are currently working to improve export opportunities – particularly to Asia and Africa – by attempting to move from the low-cost segment to the medium performance and price segments. To achieve this aim, these manufacturers are also cooperating with European suppliers. However, the products developed in Europe are usually too expensive and too complex for the Indian sales markets. If solutions are developed locally and with local requirements in mind, then they can also be produced locally and will have a much better chance of success.

Mining: Major need for modernization

While the automotive sector is already primarily using modern machinery, technical equipment in older industries such as mining is for the most part completely outdated. As prices of raw materials have fallen, companies have invested even less money than they did in the years before 2011. For this reason, the new government announced a new action plan in early August 2014 for the strict regulation of the mining industry. This action plan is mainly concerned with revising the Mines and Minerals Regulation Act of 1957.

In the mining industry, the demand for equipment will therefore increase in the medium term, especially since ground-level reserves are decreasing and companies will need to develop deeper layers. Up to now, Indian manufacturers have specialized in equipment for open-pit mining: In terms of the coal required for generating power, nine times more coal is currently being mined above ground than below ground. The prospect of tapping into underground reserves offers an interesting opportunities for international machinery manufacturers.

Food: Less than ten percent packaged

The food industry will also develop in the medium term, but at a greater rate. The amount of industrially processed and packaged food is currently very low. According to information from Germany Trade & Invest, it represents significantly less than ten percent of total production in terms of value. A growing middle class and the approval of commercial chains with corresponding logistical networks is expected to increase this percentage significantly. In the long term, this should lead to the formation of one of the biggest markets for food processing and packaging machinery.

India ahead of Brazil and Russia

According to calculations by the International Monetary Fund (IMF), India will overtake both Brazil, as well as Russia or Italy, in the ranking of the biggest national economies by 2019 due to its stronger growth. This makes India is one of the markets with the strongest economic growth for mechanical engineering, after the USA and China.

40 Years of Bosch Rexroth in India

Bosch Rexroth has been in India since 1974. Over four decades, it has established itself as a supplier for Indian mechanical engineering in the mobile applications, plant engineering, factory automation and renewable energy sectors. Since 1974, Rexroth has achieved this by producing hydraulic and automation components locally, and has developed solutions and products that are adapted for Indian requirements. As a local partner, Rexroth has equipped and modernized numerous Indian steel works. Product variants for mobile hydraulics developed in India are being used in hundreds of thousands of Indian tractors.

With eight sales offices and three Service Centers, this multi-technology specialist is present in all of the key regions. In 2013, the company opened a new plant at its main location of Ahmedabad. Its investment of EUR 33.7 million has tripled the production space. Bosch Rexroth now employs around 880 people in India.

In October 2014, incoming orders in the mechanical engineering industry in Germany were up seven percent on the previous year. The VDMA (German Engineering Association) recently announced that domestic business increased by one percent and international business was up nine percent year-on-year.

Based on a three-month comparison, which is less affected by short-term fluctuations, incoming orders rose by seven percent year-on-year between August and October 2014. Domestic orders rose by three per cent, while international orders increased by eight per cent.

“The German economy is evidently more robust than was expected a few weeks ago. As such, our figures for October are an encouraging sign. But we should not let ourselves become overconfident on this basis. A stabilisation is not the same thing as an upturn,” stated VDMA chief economist Dr Ralph Wiechers with regard to the result.

Thailand is the gateway to the South-East Asian economic area: gigantic growth potential, an affordable manufacturing location, a smoothly functioning infrastructure, an extensive network of component suppliers, a liberal economic system, these are facts that indicate a profitable market to enter. Thailand, however, is simultaneously a challenge and an opportunity. At least, this is how Reiner Fries, Managing Director of the machine tool manufacturer Schwäbische Werkzeugmaschinenfabrik GmbH from Schramberg-Waldmössingen, sees it: “For our company, it will be of major importance in the future to grow concurrently as

Thailand itself develops, and thus maintain our own position against our competitors.”
Reason enough for the entrepreneur to take part in the VDW’s Technology Symposium in Thailand. 14 front-ranking German machine tool manufacturers showcased their corporate capabilities and their product and service portfolios in Bangkok on 12 November 2014. 150 high-profile representatives of Thailand’s industrial sector, from the automotive industry and its component suppliers, the aviation and electrical engineering industries, the metalworking sector and mechanical engineering sector, plus tool and mould manufacturers, accepted the invitation extended by the VDW (German Machine Tool Builders’ Association).

The machine tool market in Thailand, particularly, is a fiercely contested one. Leading-edge technology from Germany faces stiff competition from affordable Asian machines, which dominate the market.

It’s precisely here that German entrepreneurs like Fries see an opportunity. With requirements for quality and productivity expected to tighten in the automotive industry and among its component suppliers, as well as in the electrical engineering sector, German vendors will be particularly well placed to establish themselves as a permanent presence on Thailand’s market. Schwäbische Werkzeugmaschinenfabrik has already responded to this opportunity, and is represented in Thailand with a service partner experienced in the products concerned.

Thailand is one of the biggest markets for machine tools
“In 2013, with around 2.5 million vehicles produced, Thailand was the world’s ninth-biggest manufacturing location for automobiles,” explained Klaus-Peter Kuhnmünch, who at the VDW is responsible for the German technology symposia. This is why customers from the automotive industry and its component suppliers were particularly targeted for this event. In parallel to the country’s economic upturn, the local machine tool market has also developed most impressively. In the past few years, Thailand’s imports of machine tools have grown by a breath-taking 88% to reach 2.4 billion euros. This means the country is the world’s fourth-largest importer of machine tools. From the German machine tool industry’s viewpoint, Thailand has likewise in the past few years gained significantly in perceived importance, and continues to justify optimism for the future.

Wullop Liwiwathanapornchai, a representative of Thailand’s Ministry of Industry, views this development as highly auspicious. “The symposium comes at precisely the right time, since Thailand’s industrialisation is steadily advancing. In order to drive this process successfully forward, particularly in the automotive industry, our companies need high-tech machines from Germany.”

A thrust to challenge Japan’s domination of the market
For years now, the market in Thailand has been significantly dominated by Japanese machine tool manufacturers. For them, Thailand occupies a special status, since the Japanese automotive industry is strongly positioned there. In 2013, Japan accounted for 57% of Thailand’s entire machine tool imports, followed by vendors from Asia and the USA. German manufacturers ranked 6^th, with a market share of 3%. This dominance of Japan is something the Germans will have to challenge, and fly the flag more vigorously in Thailand than hitherto.

How the market position is to be sustainably improved is outlined by Andrew Parkin, Managing Director of Heller Asia: “Despite Japan’s strong position on the market, we are confident that with our own highly qualified workforces and our good service support capabilities we can gain more ground here in Thailand. Our goal is to further reinforce and steadily expand our market share as a can-do vendor of holistic solutions for metal-cutting applications.”

German machine tool industry with powerful allies
The symposium was organised on the spot in conjunction with the German-Thai Chamber of Industry and Commerce, and supported by prestigious local institutions from the industrial sector and the research community. It was being held in Thailand for what is already the second time, after 2010, and thus underlines the country’s importance as one of the major industrialised nations in South-East Asia. The German side was represented by the following companies: Alzmetall, Emag, FFG-Werke, Gleason-Pfauter, Heckert, Heller, Index, Mikron, Profiroll, Samag, Siemens, Schwäbische Werkzeugmaschinen, Trumpf and United Grinding.

Dr. Willi Nef, Deputy Sales Manager at Mikron GmbH in Rottweil, was participating in the symposium for the first time, and this is his verdict: “The event offers an ideal platform for familiarising yourself with the situational complexities of the local market, but also for exchanging news and views with your German counterparts, who are facing similar challenges. The matchmaking organised beforehand with the local customers was very helpful for clearing up open questions and making some initial business contacts.”

Jörg Buck, Executive Director of the German-Thai Chamber of Industry and Commerce, concurs: “The very good attendance at the VDW’s symposium shows that the topic of ‘Innovations in Production Technology’ in Thailand is in tune with contemporary concerns. The kingdom will in future, too, be prioritising a high-tech strategy, encouraging further automation of the traditionally strong domestic component supplier sector.” The enthusiastic response from Thailand’s trade associations and entrepreneurs has shown that there is keen interest in German technology. The symposium laid a good foundation for expanding what are in any case good sales opportunities for the German machine tool industry in Thailand, said Buck.

Finally, Kuhnmünch from the VDW pointed out that German manufacturers are approaching the Thai market with a long-term strategy. “We are confident that German manufacturers, thanks to their long years of experience in the international automotive industry and among component suppliers, can be dependable partners in upgrading and expanding Thailand’s industrial production capabilities,” he stressed. The VDW is emphatically supportive of this thrust, and is available as a contact point for prospective customers from Thailand.