MUNICH (dpa-AFX) – German machine builders are more reluctant to invest in markets that are new to them, with a view to Asia. This is indicated by the current mechanical engineering barometer from the auditing and consulting firm PwC Germany, which is available exclusively to the financial news agency dpa-AFX. Accordingly, companies that want to expand into new markets tend to concentrate on Europe and North America. Asia is losing traction. According to PwC, this could be the first sign of a disengagement, particularly from China.
Within a year, the willingness of such companies to expand into new markets in Asia had fallen sharply, it said. In the first quarter of the previous year, 72 percent of these companies were planning new investments in Asia, but now the figure is only 49 percent. In other words: The willingness to invest in the region has decreased by around a quarter. Conversely, Europe is becoming more interesting for new investments: 53 percent of companies want to expand here – an increase of 8 percentage points. In the US it is 57 percent.
It is noticeable that the numbers in Europe and Africa have risen, with a view to the USA the willingness to invest of companies that want to expand into new markets has declined slightly. However, Asia recorded the sharpest decline. According to the study, this could be due to the high risk of default and the geopolitical situation. On the other hand, it is also likely to be related to the ambitious economic stimulus programs in the USA and the EU.
“It may well be that we are seeing the first signs of a disengagement from the Asian market and China in particular,” comments Klaus-Peter Gushurst, head of Industries and Innovations at PwC Germany, according to the release. We now know about the fragility of global trade routes. Therefore, companies are well advised to remain independent and flexible.
Since the corona pandemic and against the background of international tensions, supply chains have repeatedly been disrupted in recent years, with preliminary products or components for industry sometimes being unavailable. According to the study, the restructuring of supply chains is also one of the major issues for companies.
Another focus of the industry is therefore on measures to increase energy efficiency and cyber security. However, this cannot be achieved without bold investments, said Gushurst. But that is exactly where the sticking point lies: When it comes to investments, the industry is rather cautious.
In addition, the investment share of total sales is at its lowest level since 2018 at 5.8 percent. The background is also the cost pressure in companies: Many companies expect costs to continue to rise, which, according to the study, also makes price reductions rather unlikely. After all, more than half of those surveyed intend to keep sales prices stable.
Uncertainties remain, but overall many business leaders in the industry are looking to the future with more optimism. Your expectations of sales development have increased. On average, executives expect sales growth of 1.2 percent for 2023. At the end of last year, the entrepreneurs were still assuming a decline in sales. Although the sales forecast is back at its highest level since the outbreak of war in Ukraine, it is still far from the level before the war began. At that time, the forecast was 7.2 percent.
The mechanical engineering barometer is the result of a quarterly survey of industry executives. Recently, there have also been positive signals from the mechanical engineering association VDMA: According to a survey from the end of March, the mood in the industry has brightened again in view of the easing in supply chains. More than half of the companies are still reporting noticeable or serious impairments in their supply chains. But the situation has improved step by step./knd/lew/mis
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