Quo Vadis Mechanical Engineering 2025: Trends and Perspectives

Already in late 2023, forecasts painted a grim picture: "German mechanical engineering: bleak outlook for 2024." And negative headlines like these continued throughout the year: "German mechanical engineers don't believe growth will pick up until 2025" or "German mechanical engineering in the midst of an autumn depression." At the beginning of December, the German Mechanical Engineering Industry Association (VDMA) drew a sobering annual balance sheet, reporting a production decline of eight percent. It expects a further decline of two percent in 2025. 

Capacity utilization in companies has recently fallen below 80 percent. VDMA President Bertram Kawlath explains: "This is a significant underutilization. An increasing number of companies are no longer able to adequately cushion production with their order backlogs in the face of sharply declining orders." However, falling interest rates are likely to boost consumption and investment willingness, thus marking the beginning of a slight economic recovery. 

What else will the coming year bring? 

Future visions for mechanical engineering 2025

1. The geopolitical situation is unsettling

Mechanical and plant engineering companies view geopolitical developments abroad as one of the biggest obstacles to their business growth. This is shown by the quarterly panel survey conducted by PricewaterhouseCoopers GmbH Wirtschaftsprüfungs- und Beratungsgesellschaft, PwC Germany, in December 2024. 66 percent of respondents share this concern. This unsettles their outlook on the global economy. 

2. Cost pressure as a brake on growth 

An appeal to politicians: According to the study, increasing cost pressure is causing even greater concern for companies. 79 percent think this will hinder their company’s growth. VDMA President Bertram Kawlath is clearly calling for a policy reversal on this issue: " We need to end overregulation, rigid tech mandates – and the excessive cost burden in Germany." 

3. Job cuts and a shortage of skilled workers – a contradiction in terms?

The shortage of skilled workers will hit the mechanical engineering industry hard. The reason is demographic change: 296,000 employees are expected to retire in the next ten years. That's about a quarter. Since only about 118,000 skilled workers are expected to replace them, they create a potential gap of 178,000 bright minds, according to the German Economic Institute. One solution: retain retirees. But that requires cutting through bureaucratic red tape. 

At the same time, however, according to a recent industry survey, 61 percent of companies expect job cuts in the next twelve months. Kawlath also predicts a slight reduction and therefore demands: "Above all, the federal government must reduce bureaucracy and provide cost relief!" Contribution obligations must be eliminated, planning and approval procedures accelerated, and the tax burden on companies reduced. He also advocates labor market reforms. 

Tagesschau – the leading German news broadcast – analyzed the overall labor market and found that job cuts are being made, even though many companies are reporting a shortage of skilled workers. The explanation: “Many change processes are happening at the same time and are interdependent.” As a result, among other things, skilled workers are no longer needed in some declining business areas, while there is a massive demand for new ones. Retraining or further training could provide a solution.

4. Climate neutrality as the key to competitive advantage

Sustainability forms the foundation of future business success. Many manufacturers are already recycling materials or switching to electric alternatives that previously required the use of fossil fuels. If processes are also designed intelligently, energy and water consumption can be significantly reduced. According to the EU Commission's Corporate Sustainability Reporting Directive (CSRD), companies with more than 250 employees must submit an annual sustainability report by 2026 at the latest. 

The prerequisite for meaningful ESG (Environmental, Social, and Governance) reporting and data-driven sustainability initiatives is the successful connection between digitalization and sustainability initiatives – digitaability. Many companies still face this challenge, either because they lack suitable data and analytic tools or because the cultural transformation is still underway. 

Sustainability is no longer driven by regulation alone. Customers, partners, investors, applicants, and even the press – all are closely monitoring sustainability initiatives. Furthermore, German products, which are considered reliable, are in high demand globally. If they are also sustainable, this provides a decisive advantage on the global market. 

5. No future without digital production

"Digital transformation is becoming a key issue for success in mechanical and plant engineering," explains VDMA in a recent press release on the short study "Success Factors of Digital Business Models." In it, VDMA's IMPULS Foundation highlights options for action for companies. The FIR Institute at RWTH Aachen University prepared the short study, which identifies four stages of digital transformation: networking smart machines, service optimization, offering digital products, and the subscription business. 

Hartmut Rauen, Deputy Managing Director of VDMA, says: "The intense global competition demonstrates how vital it is for the industry to position itself for the future. Integrated, comprehensive solutions offer the opportunity to combine proven methods with digital business models, thus initiating the necessary transformation and unlocking additional sales potential." 

Are you interested in a production planning software that will be part of your digital transformation – and also contributes to your sustainability goals?
 

“Good planning is always sustainable because it ultimately conserves resources, eliminating, for example, rush deliveries that would have to be delivered with a high CO2 footprint”, 

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