Germany’s engineering sector is bracing for continued production declines in 2025, though at a slower pace than in 2024, according to the VDMA engineering association. Production is forecast to drop by 8% in 2024 and a further 2% in 2025, amid dwindling orders, capacity underutilization, and intensifying global competition. The association also flagged the potential for slight job losses, a rare occurrence for the sector.
VDMA President Bertram Kawlath highlighted a challenging global landscape characterized by protectionism, geopolitical conflicts, and policy uncertainty, including risks from China’s competitive pressures and U.S. trade policies under Donald Trump’s administration. Kawlath urged policymakers to adopt business-friendly measures to restore confidence and competitiveness, particularly for small and medium-sized enterprises (SMEs).
Underutilization and Structural Challenges
The sector’s capacity utilization fell to 79.1% in October 2024, reflecting significant underutilization. Production in the first ten months of 2024 dropped by 6.8%, consistent with the year-end forecast of an 8% decline. Many companies are struggling to maintain operations as order backlogs dwindle.
While falling interest rates are expected to support consumption and stimulate investment, a dramatic economic rebound is unlikely. Kawlath cited enduring issues like trade wars, structural disruptions, and bureaucratic burdens that disproportionately affect SMEs.