Since the launch of the "Twelfth Five-Year Plan," the machinery industry has faced increasing operational challenges, with a growing pressure to shift towards a more sustainable growth model. This year has been particularly tough for many enterprises in the sector. However, as market dynamics continue to evolve, there is a noticeable acceleration in industry restructuring and technological upgrades.
Looking at the performance of key sectors in the first three quarters, it's clear that industries closely tied to consumer demand, informatization, and automation are outpacing traditional investment-driven sectors. The automotive industry, which holds the largest share of the machinery industry’s growth, has seen strong performance this year, acting as a major driver for overall industry growth. Similarly, sub-sectors such as agricultural machinery, instruments, and basic components have also shown higher growth rates than the industry average.
On the flip side, traditional investment products industries—like construction machinery, machine tools, heavy machinery, and power generation equipment—are struggling. While some may not see a decline in output, their main business income and profits have dropped significantly. As one analyst put it, "There's work, but the profits are falling sharply."
The root cause of this situation lies in overcapacity. When market demand slows down, competition intensifies, and prices drop, leading to sharp declines in profitability. According to Luo Baihui, chief analyst at Jinmo Machine Tool Network, the low-end machine tool market is shrinking, while high-end imports remain strong. Amidst sluggish demand, machine tool companies are pushing for transformation, with mid-range products becoming the focal point of competition.
Despite efforts made this year in restructuring and improving efficiency, profit margins have not reversed their downward trend. This grim outlook highlights the urgent need for faster industrial transformation and greater emphasis on productivity and resource efficiency.
Looking ahead, the machinery industry is expected to maintain a relatively stable, low-growth trajectory next year. Production and sales are projected to grow by 10–15%, while profit growth is expected to be around 10%. Export earnings are anticipated to rise by 5–10%.
Domestic companies are focusing on the mid-range market, where scale and volume can be more easily achieved. Meanwhile, foreign players, especially German manufacturers, are accelerating their presence in China. In 2012, China accounted for nearly 30% of Germany’s total exports. Last year alone, German machine tool exports reached about €8.3 billion, with over €2.4 billion coming from China.
Although German exports to China grew by 6% in the first half of this year, their overall export volume declined by 3%. This has led them to focus more on maintaining market share in China. Chinese companies, with better service and lower costs, are now challenging German firms in the mid-range segment.
According to a survey by the German Machine Tool Manufacturers Association, Chinese companies often establish local service centers to offer extended warranties and 24/7 after-sales support. Even during holidays, they can respond within 48 hours, providing repairs and spare parts at a lower cost than their German counterparts.
In response, the German association is urging its members to localize products and improve customer communication. While they still rely on imports for high-end products, they are gradually shifting toward localized production and market access.
Recent trends show that more German companies are entering the Chinese market, signaling a strategic shift. However, the real challenge remains: how to gain a foothold in this competitive environment and sustain profitable growth.
At a recent meeting of the China Automotive Manufacturing Equipment Innovation Alliance (CIAME), representatives from several automotive companies discussed the importance of machine tools in the industry. It's well known that the automotive sector accounts for a significant portion of machine tool demand, with at least 50% of customers in the gold-cutting machine industry coming from this sector.
Yet, domestic machine tool companies still struggle to penetrate key areas like engine production lines. Most of the equipment used in China’s automakers is imported, despite the fact that many high-end machine tools have been developed in recent years. The issue isn’t a lack of technology, but rather insufficient marketization and industrialization.
If mid-range products can achieve scale and reliability, they could gain stronger market acceptance. China’s machine tool industry has made significant progress, expanding rapidly in size and scope. High-end products have seen breakthroughs, with a wide range of medium and high-end machines now available.
However, as Luo Baihui points out, the gap between capability and customer recognition remains. It's not just about making a product, but about proving its value through consistent quality and reliability.
Ultimately, the path to success lies in improving manufacturing processes and ensuring product reliability. Only then can domestic machine tools truly compete in the global market.
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