VDMA members anticipate a new sales record for the current year with real growth potentially reaching up to 10%. This optimistic forecast is credited to the increased availability of components, facilitating better delivery capabilities for manufacturers, as deduced during the VDMA Construction - Equipment and Plant Engineering board meeting on July 14, 2023.
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Nonetheless, a continuous decrease in new orders is gradually diminishing the order backlog. Between January and May 2023, there was a 19% total drop in new orders in the construction machinery sector, while building materials plants recorded a 23% drop. Western Europe, especially the building construction machinery sector, saw a stark 50% reduction in orders.
The economic downturn induced by heightened interest rates in Europe and North America has negatively impacted residential construction and machinery suppliers. Unless there's an improvement in order intake, VDMA warns of a potential significant drop in turnover starting in Q4 2023.
Excessive bureaucracy, over-regulation, and stringent documentation requirements like the Supply Chain Sourcing Obligations Act are posing key challenges to European production companies, hindering competitiveness, according to VDMA. Franz-Josef Paus, the trade association chairman, stressed that the limits of manageability have been reached in these areas.
Rising construction and material costs, along with persistent interest rate hikes, are further complicating the industry. To attract more investments, the VDMA argues that Europe needs to be more attractive, as investors are currently favouring North America and China due to these economic developments.
China presents another source of challenge with its increasing competitive pressure. China's drive for self-reliance and the fusion of political goals and economic policies have resulted in significant overcapacities, leading to increased exports to Europe. Joachim Strobel, Chairman of the VDMA Construction Equipment Section, warned that European competitiveness could be disrupted if Chinese companies receive state subsidies.
“The situation in the real estate sector continues to be worrying, the risk of the real estate bubble bursting there hangs over us like a sword of Damocles. There is enormous overcapacity in Chinese residential construction.” expressed Dr. Jürgen Blumm, Chairman of the VDMA Construction Materials Plant Engineering Section.