German Machine Tool Industry Trends in the First Half of 2026

Orders Grow for Two Consecutive Quarters

Orders received by Germany’s machine tool industry rose 12% in the second quarter of 2026 compared with the same period in 2025, following 15% growth in the first quarter. The industry appears to have passed its low point, although the recovery began from a low base. Domestic and foreign markets contributed roughly equally to growth, while project-based business remained an important driver. The adverse effects of the Iran conflict and the associated rise in energy prices have so far remained manageable. For the first half of 2026, total orders rose 14% year on year, with domestic orders up 16% and foreign orders up 13%.

Aerospace and Defence Demand Strengthens; Automotive Remains a Concern

Among major customer sectors, aerospace and defence showed particularly strong growth. Business with the electronics and medical technology sectors was also viewed positively. Metalworking and mechanical engineering remained challenging, while the automotive industry and its suppliers continued to be the greatest concern. A VDW survey for 2025 showed that automotive’s share of total industry sales had fallen to 23%. Mechanical engineering remained the largest customer sector at 27%. Aerospace increased its share by five percentage points over two years to reach 11%.

Production Declines as Improved Orders Have Yet to Take Effect

Production in the second quarter of 2026 was estimated to be 6% below the second quarter of 2025. For the first half of 2026 as a whole, production was down 7% from the same period a year earlier. Improved orders are expected to be reflected gradually in production as the year progresses. Exports fell 4% year on year in the second quarter, but the rate of decline was half that recorded in the first quarter. Exports remained down for the first half as a whole.

The United States Remains the Largest Market; Chinese Demand Shows Signs of Stabilising

The United States remained the German machine tool industry’s largest sales market and an important pillar of demand. Shipments to the US rose 8% year on year in the first half of 2026. In contrast, exports to China, the second-largest market, fell by almost one-quarter. Companies have nevertheless reported that demand in China is stabilising and recovering slightly. Given the intense price competition there, the principle of producing locally for the local market is becoming increasingly important for German manufacturers with production facilities in China. India continued to grow steadily and has become the fourth-largest sales market.

European Markets Diverge, with France and Eastern Europe Providing Support

German machine tool exports to Europe fell 6% year on year in the first half of 2026. France, however, recorded significant growth—presumably driven by strong aerospace demand—and became the third-largest export market. Positive results in Poland and the Czech Republic also helped stabilise export business. Italy, by contrast, had a notably negative impact, highlighting persistent difficulties related to tax depreciation rules, which have traditionally played an important role in investment decisions.

Domestic Sales Remain Weak as the Decline in Imports Eases

Sales in Germany remained weak in the second quarter and were down 10% year on year for the first half of 2026. Imports recovered slightly in the second quarter, limiting their first-half decline to 2%. Japanese and South Korean manufacturers, in particular, increased their sales in Germany. Overall, the German market continued to contract in the first half, with domestic consumption down 6% year on year.

Capacity Utilisation Stabilises, but Structural Adjustment Weighs on Employment

Capacity utilisation did not fall further, stabilising at a comparatively low level of around 75%. The industry nevertheless continues to face structural pressure. Demand has declined substantially in recent years, and production in real terms is around one-third below its earlier peaks, making further adjustment necessary. The impact on employment is becoming increasingly apparent: around 60,000 people were employed in the industry in June 2026, nearly 7% fewer than in June 2025.

Stastical Sources： Federal Statistical Office, Ifo-Institute, VDMA, VDW

*This article is reprinted from VDW (German Machine Tool Builders' Association), 

Source: https://vdw.de/wp-content/uploads/2026/08/stat_wiza-lang-englisch_2026-Q2_2026-08-31.pdf