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The Machinery and Equipment Industry in Germany Industry Overview


The M&E Industry in Germany

Germany is the Geographic and Economic Center of Europe Machinery & Equipment (M&E) is the second largest and most innovative industry sector in Germany, and as such, is one 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.

Finland

Sweden

Norway

Estonia Moscow Latvia Denmark

Ireland

< 24 h by

truck

United Kingdom

30 h >

Lithuania RU

< 12 h

15 h >

Belarus

Netherlands

Belgium

Germany

Poland

Luxembourg

Ukraine

Czech Republic Slovakia

France Switzerland

Austria

Moldova

Hungary

1.5 h >

Slovenia Croatia

Romania

BosniaHerzegovina

Portugal

Serbia

Spain Montenegro

Italy

Bulgaria Macedonia

Albania

3h>

Greece

Turkey

Malta

Member States of the European Union

Cyprus


The German M&E

German M&E Industry Annual Turnover

Industry in Numbers

+13.8%

- With an overall turnover of approximately EUR 190 billion and growth of almost 14 percent in 2007, Germany’s mechanical engineering industry remains the strongest in Europe with the market forecast to experience continuous growth. - Germany is the world’s export leader with 18 percent share of the global trade in M&E - putting it ahead of Japan and the USA. At the same time, domestic demand represents a market of around EUR 100 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 950,000 highly skilled people. - With annual R&D expenditures amounting to EUR 4.3 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.

200

+10.6%

175

+5.6%

150

+7.5% 125

+1.5%

100 2003

2004

2005

2006

2007 EUR billion

Source: VDMA, Destatis, 2008

Development of the 10 Largest M&E Sectors in Germany* (by production volume in EUR billion) 2007

2006 Power Transmission Engineering

+16.6% +19.4%

Materials Handling and Logistic Technology

+16.6%

Machine Tools

+16.2%

Air-Handling Technology Construction Machinery and Equipment

+17.1%

Food Processing and Packaging Machinery

+12.8% +5.8%

Precision Tools

+1.8%

Printing and Paper Equipment and Supplies Agricultural Machinery Valves

+14.5% +8.6%

EUR billion 5

10

15

* The ten largest M&E sectors account for EUR 108.7 billion which corresponds to 60.5 percent of total (EUR 179.6 billion). Source: VDMA, 2008

Industry Overview 2008 www.invest-in-germany.com

3


The M&E Industry in Germany

The Advantages of Germany as a Location for M&E Investments Market The German M&E industr y 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 impor tant M&E application industries including well-known “heavyweights” such as automotive, electronics, chemicals, and food production. However, Germany is also the world leader in up-and-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 950,000 experienced people. In 2007 alone, there was a considerable increase of 50,000 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 100 universities and colleges with mechanical engineering faculties. Moreover, the well-established dual education system (which combines on-thejob training and instruction in part-time vocational schools) provides excellently qualified staff and effectively reduces hiring and training costs. This unique 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 20072008” of 131 nations, no other economy tops Germany in terms of capacity for innovation¹. In 2006, the German M&E industry spent more than EUR 10.7 billion on innovation-related tasks. This represents an innovation intensity level of 5.4 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

M&E Industry-Related Networks of Competence in Germany DENMARK BALTIC SEA

Kiel

BALTIC SEA

Schleswig-Holstein NORTH SEA

3

Schwerin

Hamburg

MecklenburgVorpommern

1 4

Hanover

2

Micro and Nanotechnology

1 North RhineWestphalia

Adaptronics

2

Automotive

3

Carbon Fiber Reinforced Plastics

Power Engineering

4

Virtual Engineering

11

Fuel Cells/Hydrogen

5

Mechanical Engineering

2

Power Electronics

6

Process Technology

POLAND

Potsdam

2 Saxony-Anhalt

4 2 1

5

4

5

Saxony

Traffic and Transportation

1

Component Behavior (Modeling)

Automotive Engineering

2

Surface Engineering of Plastics

and Telematics

3

Lightweight Construction

4

Natural Fiber Composites

5

Textile Research

Hessen Thuringia

1 3

Wiesbaden Rheinland-Pfalz

Mainz

2

1

3

Information and

CZECH REPUBLIC @

Saarland Saarbrücken

l d

LUXEMBURG

i

Communication Tech.

FRANCE

6

d

i

3 1

Materials Science

Dresden

Erfurt

BELGIUM

Microelectronics

(Hybrid Engines)

Düsseldorf

2

Mechatronics

Berlin Magdeburg

1

Industrial Manufacturing 1

THE NETHERLANDS

2

Recycling Technology

Microsystems

4

Brandenburg

Lower Saxony

Environmental Technology

Engineering 1

3

Bremen

Mechatronics/Microsystems

Stuttgart

Bavaria

3 Baden-Württemberg

1

Munich

4

1

Navigation, Telematics

2

Traffic Systems

3

Software Engineering

4

Virtual and Augmented Reality

1 National Border (Federal) State Borders (Federal) State Capital

SWITZERLAND

4 Industry Overview 2008

City-State

Source: Federal Ministry of Economics and Technology, 2007


universities. Numerous innovation clusters integrate industr y, science, and education in related areas such as mechatronics, robotics and automation, mechanical engineering, manufacturing processes, and material sciences.

German Physical Infrastructure

Denmark

Technology Leader Technology leadership as a key strategic advantage is playing an ever-growing 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 state-of-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.

Kiel S ch l e sw i g -

World Economic Forum: The Global Competitiveness

Potsdam

Berlin

Magdeburg

B r a n d e n b u rg

SaxonyAn h a l t

Rhine-

Leipzig

Dusseldorf

We st p h a l i a

Saxony

Erfurt

Cologne/ Bonn

Dresden

He sse n Thuringia

Belgium

Wiesbaden

RhinelandHahn

Frankfurt a.M. Czech Republic

Mainz

Palatinate Saarland

Nuremberg

Saarbrücken

Stuttgart France

Bavaria BadenWu r t t e m b e rg

Munich

Capitals of Federal States

Austria

Borders of Federal States German Autobahn Freight Rail Networks

Switzerland

Navigable Waterways Seaports

Borders of Federal States

pression of company ability to obtain new technologies

Freight Rail Networks

from formally conducted research and pioneering of own

technologies.

Po

Lower Saxony

No r t h

German Autobahn

proprietary technologies or adapting existing company

We st e r n P o m e r a n i a

Hanover

Report 2007 – 2008. “Capacity for innovation” is an ex-

new products and processes, as opposed to licensing

Greifswald

M e ck l e n b u rg -

Ha m b u rg

Netherlands

Capitals of Federal States ¹

Rostock

Schwerin

B re m e n

Luxembourg

Stable Investment Environment Highly developed social, economic, and political frameworks provide the necessar y 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 intellectual 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.

Bremerhaven

Lübeck

Ho l st e i n Hamburg

Cuxhaven Wilhelmshaven Emden

Kiel

0

50

Navigable Waterways Seaports Major Airports

km 100 Source: comcontor

Industry Overview 2008 www.invest-in-germany.com

5


The M&E Industry in Germany

Opportunities

The Fastest Growing M&E Technological Areas (in percent)

One of the reasons behind the German M&E Turnover growth forecast (2007 / 2008)* industry’s current double-digit growth is the country’s highly industrialized environ+14% Process Plant and Equipment ment. As Germany’s largest industries, the +10% Engines and Systems electronics, automotive, chemicals, and +9% Fluid Power food sectors are the four largest customers +9% Productronics driving this growth. More than 11,000 com+8% Robotics and Automation panies with around 2.5 million employ+8% Materials Handling and Logistics Technologies ees are active in these four sectors, and +8% Machine Tools and Manufacturing Systems account for an overall combined turnover +7% Power Transmission Engineering of EUR 740 billion. The need for high-tech machinery and equipment in these indusSource: VDMA, 2007 tries is key to sur vival within a global environment and will accordingly continue to grow in the future. As current 1,000 companies with 744,000 employees. ted electronics will continue to see an market developments show (see accomSixteen new vehicle programs – repre- increasing need for machinery and autopanying table) the demand for producsenting an accumulated volume of more mation systems in the near future. tion efficiency and energy efficiency has than two million units at peak – will be strongly increased in the last year. These launched in Germany over the next five Chemicals growth technologies will continue to be years. This is equivalent to one third of all One of the most important M&E applicathe predominant forces underpinning the new program launches in Europe for the tion industries is the chemical industry, ongoing upswing in the M&E industry. period 2008 to 2012. where Germany leads within Europe with total revenues exceeding EUR 140 billion. Application Industries Electronics Sixty highly developed chemical parks Automotive Electronics is the world’s fastest grow- with an excellent infrastructure represent The automotive industry’s manufacturers, ing industry with an average growth level an optimal base for chemical processors, suppliers, and service providers represent of seven percent in the past 10 years. Ger- refiners, and producers of end products. Germany’s largest industr y in revenue many will remain the number one location One third of European chemical industry terms (EUR 293 billion in 2007). Large- for high-end production of complex com- investment flows into Germany. scale production of increasingly complex ponents. Almost 800,000 highly-skilled products in a highly competitive market- employees generate total revenue of EUR Food & Beverages place accounts for the high level of auto- 175 billion. New technologies such as flat The food and beverages sector provides furmation and production efficiency in over panel displays, flexible displays, and prin- ther profitable investment opportunities for M&E companies in Germany. The industry accounts for revenues of over EUR 132 billion and currently sees 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.

New Mercedes E-Class production

6 Industry Overview 2008


Printing press assembly at Heidelberger AG

Other High-Tech Industries Growth Along the Value Chain External Drivers The renewable energies sector is one of Not only will machinery and equipment The European Commission has announthe high-tech industries recording the production continue to be an interesting ced its “20/20/20” goals which comprise of most significant growth levels. Germany field for foreign investment, but other a reduction of greenhouse gas emissions is one of the world’s leading nations in the areas of the value chain also provide oppor- by 20 percent; a proportion of renewable fields of photovoltaics, wind energy, and tunities for profitable investment in the resources of 20 percent; and an increase biodiesel in terms of market size, capacity, future (for example, R&D centers espe- in energy efficiency of 20 percent by the and production. Forecasts predict a bright cially supported by the government – see year 2020. These objectives will influence future for the German renewable sector, “Incentives in Germany”). Service and main- the way business is done and will, at the with domestic investments expected to tenance, repair and overhaul (MRO) are same time, function as innovation drivers. reach the EUR 200 billion level and exports also attractive investment areas because To meet the challenges ahead, extensive up to EUR 80 billion by the year 2020. of the high density of M&E installations investments in numerous technology areas in Germany. Industrial services have de- and processes are necessary. The world’s veloped to be an important driving force “green technologies” leader, Germany has for growth: 90 percent of all industrial already secured a 20 percent share of the enterprises consider industrial services international market and offers multiple to be a very promising market for the future. business opportunities.

Industry Overview 2008 www.invest-in-germany.com

7


The M&E Industry in Germany

Types of Incentives in Germany Incentives

Investment Incentives Package

Operational Incentives Package

Cash Incentives

InterestReduced Loans

Public Guarantees

Labor-Related Incentives

Investment Grant

KfW Loans (National Level)

State

Recruitment

Combined State/Federal

Training

Investment Allowance 1

1)

+

State Development Bank Loans

R&D Incentives Grants Loans

Wage Subsidies

Silent/Direct Partnership

only in eastern Germany

Incentives in Germany 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 R&D.

Assembly work during a D-Check at Lufthansa Technik

8 Industry Overview 2008

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 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 instrument of Germany’s investment incentives package are cash incentives provided in the form of direct investment grants. Germany will make more than EUR 2.3 billion in cash incentives available in 2008. 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 longterm jobs in order to benefit from investment grant provision.

In eastern Germany, investment grants are complemented by the Investment Allowance (Investitionszulage IZ), 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 and as subordinated loans similar to equity. The provision of such loans makes it easier for investors to access additional funding from private lending banks. Public Guarantees The investment incentives package is complemented by public guarantees. This tool is offered by the state and the federal government to help secure private bank loans.

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. 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 12 billion in total is reserved for non-repayable project grants.


MAN – A turbogear unit’s set of wheels

The European Union is subsidizing transnational R&D projects through its “7 th Research Framework Program”. A budget of EUR 3.5 billion for the period 2007 to 2013 has been earmarked for the funding areas most applicable to the M&E sector (nanosciences, nanotechnologies, materials and new production). Some EUR 9 billion has also been set aside for information and communication technologies, with particular emphasis placed in the field of robotics. 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.

R&D projects in the M&E sector can be subsidized through a number of different programs according to the project’s objectives. Calls for proposals are published on a regular basis by the relevant government ministries. The High-Tech Strategy: M&E Industry Relevant Sectors and Budgets (2006-2009 in EUR million) 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

3,650 2,000 1,180 800 770 640 430 420 420 310 300 270 250 220 150 80 50

Source: German Federal Ministry for Education and Research (BMBF)

Industry Overview 2008 www.invest-in-germany.com

9


The M&E Industry in Germany

Invest in Germany Closely Supports Your Project Management Team throughout the Entire Investment Decision Process Investment Decision Process – Areas of Invest in Germany Support Investment Process Milestones

Invest in Germany Key Support Areas

Strategy

Evaluation

Decision and Investment

- General market information Information

- Industry guides/reviews - Conditions for investment, e.g. economic data, labor market, incentive programs, and tax & legal framework

- Discussion of market entry strategies

- Support with final site decision

- Advice on project financing

- Selection of project partners and facilitators (service providers,financial partners)

- Model calculation of potential incentives Consulting and Project Coordination

- Proactive identification of business opportunities - Identification of projectspecific location factors

- 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

Invest in Germany 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.

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.

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-

Our team of consultants is at hand to provide you with the relevant background information on Germany’s tax and legal system, industr y regulations and the domestic labor market. Invest in Germany’s

10 Industry Overview 2008

- Negotiations with relevant authorities - Assistance with the incentives application process - Seamless project handover to the economic development corporation in the selected state

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.


Picture credits

Cover Photograph: ©MAN Page 2 Germany is the Geographic and Economic Center of Europe Graphic: ©www.typoly.de Page 4 The Advantages of Germany as a Location for M&E Investments Graphic: ©www.typoly.de Page 5 The Advantages of Germany as a Location for M&E Investments Photograph: ©www.comcontor.com Page 6 Opportunities Photograph: ©Daimler Page 7 Opportunities Photograph: ©Heidelberger Druckmaschinen AG Page 8 Incentives in Germany Photograph: ©Lufthansa Technik Page 9 Incentives in Germany Photograph: ©MAN

Imprint

Publisher & Editor Invest in Germany GmbH Friedrichstraße 60 10117 Berlin Germany T. +49 30 200 099-0 F. +49 30 200 099-111 office@invest-in-germany.com www.invest-in-germany.com Managing Director: Michael Pfeiffer Director Marketing Communications: Bettina Knape Contact M&E Industry: machinery@invest-in-germany.com Conception, Layout, Text, Translations Invest in Germany Supported by Federal Ministry of Economics and Technology Note Invest in Germany, July 2008 All information provided by Invest in Germany is for informational purposes only and not legally binding. Invest in Germany does not accept liability for inaccuracies or errors in translation.

©


About Us Invest in Germany is the inward investment promotion agency of the Federal Republic of Germany. We assist and advise potential investors interested in Germany. Foreign enterprises planning to establish their business operations in Germany can ob-

Headquarters Invest in Germany GmbH Friedrichstraße 60 10117 Berlin Germany T. +49 30 200 099-0 F. +49 30 200 099-111 machinery@invest-in-germany.com www.invest-in-germany.com

tain information on the business environment, such as the corporate investment framework, tax regulations, and subsidies.

services from site selection to the final realization of the investment. All inquiries are kept confidential and our services are free of charge.

Our range of services includes strategic planning, market research and competitive analysis. Our experts provide comprehensive project management and support

We support investors from our headquarters in Berlin and from our offices in the US, China, and Japan.


The Machinery and EquipmentIndustry in Germany