Weak year 2024: China puts pressure on the German construction machinery industry

German construction machinery manufacturers had hoped for a soft landing, even though the weak economy and, above all, sluggish housing construction have long brought them a real crisis - but the figures for 2024 tell a different story. Sales of machines for building and road construction as well as for earthmoving fell by 21 percent last year, as the mechanical engineering association VDMA reported in Frankfurt on Friday. It is a setback that this branch of mechanical engineering has not experienced since the global financial crisis.

Joachim Schmid, managing director of the VDMA's Construction Machinery and Building Material Systems Association, and his deputy Sebastian Popp had to admit that the crisis in housing construction has become a crisis for the entire construction industry. Little remains of the industry's historic highs in 2022 and 2023, when economic stimulus packages cushioned the effects of the pandemic and boosted business for construction machinery companies. Sales in 2024 have plummeted to 12.2 billion euros. Construction machinery even saw a 26 percent drop. The industry is clinging to the hope that this is "not the new normal," as Popp put it, but that single-digit growth is possible this year.

Optimism is likely to be put to the test, especially since higher tariffs would spell disaster in the United States. Since around 20 percent of German exports are delivered to the United States, "a lot could be lost" there, it was said. The industry needs new markets - or a revival of other strong markets, which primarily means Europe. The USA, which accounts for 33 percent of the world market for construction machinery and is far ahead of all other countries and regions, also lost ground last year, losing 14 percent of sales. And because higher inflation is expected under the presidency of Donald Trump , there is still a "downward trend" here, as Popp put it.

Even China , which accounts for 11 percent of the world market and grew by 10 percent last year, can no longer inspire the imagination of the industry. The construction industry there is still in crisis and what the political leadership wanted to build has long since been built. Larger investment projects are no longer to be expected. One should "not be too optimistic about China."

The opposite is the case - if you look at the international competition situation. German manufacturers need a technological advantage in order to be able to assert themselves, said Schmid. This has always been part of the industry's self-image. Currently, the warnings are getting louder when it comes to Chinese competitors. Schmid announced that German companies would fight back to counteract undesirable developments.

One of them has to do with Bauma, the industry's leading trade fair in Munich, which takes place in April. It has always been the best opportunity to gain momentum and reassure yourself, even in difficult times. However, it has long been common practice for Chinese construction machines to be exhibited there that look as if they are suitable for the European market, but which lack EU approvals. A kind of smokescreen to the detriment of German companies.

The rules here are "very lax," said Schmid, and this practice must be stopped. "We have run out of patience." He also called on the customer industries to be vigilant, because market supervision cannot be everywhere. To put this into perspective: the production capacity in China is greater than the global demand for construction machinery.

Like many representatives of the German mechanical engineering industry, Schmid has to admit that the technological lead of German companies over their Chinese competitors has become smaller. A competitor has emerged that - generously supported by the Chinese state - is flooding the world market not only with very cheap but also with high-performance machines. This increased competition is also part of the overall picture of the German construction machinery industry. The industry is also expecting that there will soon be more Chinese direct investment in Europe, meaning that the competition is getting closer.

Schmid is, however, far from questioning the technological performance of the industry. And he says that there are areas in which neither Chinese nor American manufacturers can keep up. This applies to service, but above all to the integration of different manufacturers in large networks that bring customers great added value. These glimmers of hope match the results of the latest economic survey of German companies by the trade association; the mood is more positive again, it was said, and many believe that the worst has been reached. These are small signs of encouragement that should provide support in the great crisis.

On the day of the major construction machinery review, the VDMA in Frankfurt issued another report that highlighted the fragile state of this core industrial sector. According to preliminary calculations by the Federal Statistical Office, total exports fell by 5 percent in 2024 compared to the previous year. In total, machinery and equipment worth 199.6 billion euros were exported. Adjusted for prices, machine exports were 7.1 percent below the previous year's level. It's not just excavators, cranes, road construction machines, etc. that are having a tough time at the moment.