With global machinery trade share of almost 16 percent, Germany’s M&E industry sector remains the world’s leading supplier of machinery and equipment – ahead of China and the USA.
The machinery and equipment (M&E) sector is the second largest and most innovative industry sector in Germany. The industry's strength is driven by a combination of Germany’s proven engineering tradition, its position as a technology development leader, and a highly diversified industrial base. The country retains its role as a globally competitive and flexible R&D test bed thanks to M&E innovative strength.
Number 1 domestic industry sector by level and degree of innovation
Number 2 domestic industry by turnover – generating EUR 221 billion in 2021 alone
6,600 companies and more than 1 million workers along the value chain
Germany is home to Europe’s best-performing machinery & equipment sector, with record turnover in the region of EUR 221 billion in 2021. The positive turnover trend is set to continue with market forecasts for 2022 (EUR 265 billion) and 2025 (EUR 290 billion) and beyond predicting growth at the same level.
Machinery & equipment is Germany’s largest sector by level of activity, boasting almost 6,600 companies – of which nearly 90 percent are small and medium-sized enterprises – along the value chain. The German M&E industry remains Germany’s largest industrial employer: It currently employs a workforce of over one million people.
Global export leader
16 percent share of global machinery trade making it the world’s leading M&E supplier
82 percent of machinery turnover generated from international exports
With global machinery trade share of almost 16 percent, Germany’s M&E industry sector remains the world’s leading supplier of machinery – consolidating its position ahead of both China and the USA. In 2020, German machinery and plant manufacturers were world market leaders in 13 (rank 1) and 8 (rank 2) out of 31 M&E sectors.
EUR 17 billion yearly expenditure for innovation in 2021 and 2022 and further budget of EUR 17 billion planned in 2023
EUR 400 billion extra value added potential forecast for the period up to 2025
Machinery and equipment innovation outlay reached a new high of nearly EUR 17 billion in 2021 and 2022, with further R&D budget of EUR 17 billion forecast for 2023. With 2.8 and 6.8 percent share of innovation expenditure to turnover in 2020, the M&E industry belongs to the five most innovative sectors in Germany. The German economy retains its role as a globally competitive and flexible R&D test bed.
Foreign direct investment magnet
Number 1 FDI destination in Europe – with more than 800 M&E FDI projects into Germany (2015-2022)
Germany is the preferred M&E investment location in Europe, attracting around 24 percent of all M&E projects. This makes the M&E sector the largest industry sector in inward investment terms, with one in five of all M&E manufacturing and R&D investment projects.
German manufacturers are the world leaders in 13 out of 31 M&E sectors in international comparison. In a further eight categories, German companies occupy second spot compared to their international rivals.
These numbers show very clearly that developing and manufacturing machinery in Germany delivers strong results.
Complete value chain coverage is one of the main drivers of the sustained success of the German M&E industry. Numerous research institutions, close proximity to key supplier industries – including electronics, robotics, materials, and software – and a strong industry base guarantee a pooling of resources of all actors within the value chain to promote innovation and R&D excellence. Service & maintenance and repair & overhaul are other value chain areas proving attractive thanks to their market size and healthy growth prospects.
Germany enjoys a long and successful tradition in mechanical engineering and manufacturing. Researchers, companies and employees alike continue to profit form the country's global know-how.
Germany’s universities and universities of applied sciences produce some of the most highly qualified employees in the business. Almost 34 percent of all university and college graduates have an engineering or applied sciences degree. Germany’s unique dual education system – combining classroom and on-the-job training – is specifically geared to meet industry needs, making it attractive to investors and a model for international success.
Manufacturers located in Germany work in close partnership with a network of around 100 mechanical engineering university faculties and numerous internationally recognized research institutes.
The decentralized nature of Germany's M&E industry has allowed innovation clusters to develop strong science and industry networks. This has helped them secure an internationally leading position in various technology fields and consolidated their international benchmark status.
Germany’s industry cluster concept has created an environment in which operators from all sectors are able to flourish in close proximity with other important actors.
Germany - The World's Leading Industrie 4.0 Nation
Industrie 4.0 has become an international by-word for intelligent, networked production – with Germany consolidating its reputation as the world’s factory outfitter and a country capable of meeting the challenges of the digital age. International companies that come to Germany gain direct access to Europe’s biggest manufacturing market as well as a unique R&D and cluster landscape.
Industrie 4.0 R&D hotspot Germany
The online map shows where universities and research institutes, networks and clusters as well as SME support institutions are located in Germany. For a customized search, the following four search filters are available: SME support institutions, cluster & networks, universities and associated institutes as well as non-university research institutes. Click on the location for detailed information about the corresponding organization.
Contact our industry experts who can put you in contact with the organizations as well as help you find the right location in Germany for your business. Our experts will also provide you with tax and legal information as well as information about financing grants.
University/non-university research institutes
Internationally renowned non-university R&D institutes as well universities and associated institutes focus their research activities on digitalization, production technologies and Industrie 4.0 and cooperate closely with industry players. These include various Fraunhofer Institutes, the German Center for Artificial Intelligence (DFKI) and the National Research Center for Applied Cyber Security (ATHENE). As well as conducting research and promoting knowledge transfer with industry, universities also train the engineers of tomorrow.
Clusters & networks
Investors will find an impressive number of regional and national networks and clusters in Germany. Plattform Industrie 4.0 is the central network to advance digital transformation in production in the country. The initiative seeks to consolidate Germany’s leading Industrie 4.0 role by engaging in ongoing dialogue with partners and developing action recommendations for all stakeholders that serve as the basis for a common framework.
Further important national industry associations working in the field of Industrie 4.0 include acatech (National Academy of Science and Engineering), Bitkom (Germany's digital association), VDMA (Association of German Machinery and Plant Manufacturers), and ZVEI (German Electrical and Electronic Manufacturers Association).
In numerous regional clusters and networks, companies cooperate closely with R&D institutes and universities with a focus on automation and production technologies and Industrie 4.0.
SME support institutions
Small and medium-sized companies in particular can find a lot of support with their digitalization activities. Mittelstand 4.0 Competence Centers raise awareness about digitalization among companies and provide support including information, training and the opportunity to view and test new solutions in practice across the country. In addition, universities and research institutes provide test and demonstration labs for Industrie 4.0 applications.
Opportunities: Digitalizing German industry
A number of industries are increasing their digital efforts, with global businesses turning to digital services for the implementation of new business models that support increased productivity and the development of new products and services for increased customer and supplier engagement.
The Internet of Things
The Internet of Things ("IoT") is one of the most promising innovation accelerators for digital enterprises, with use cases spanning manufacturing, construction, retail, and transportation — almost all areas that utilize online devices or sensors. The short-term focus is on use cases and initiatives that can provide immediate and easy financial benefits with IoT enabling a new level of automation.
Germany is the fifthlargest digital economy in the world. All major industries – automotive, electrical and chemical sector – rely on big data. Developments in the IT infrastructure are set to fuel further market growth: 5G networks see strong growth (86.5 percent of Germany covered in 2021; commercial launches of SA stand alone networks). Eighty percent of all companies in the manufacturing sector plan to digitalize their value chain up to 2024.
Besides big data, analytics and IT infrastructure, additive manufacturing ("3D printing") is another very promising sector in the field of industry digitalization. Around one in three large German industrial companies currently use 3D printing.
Companies can count on generous Industrie 4.0 research support in Germany. The European Union supports technological innovation through the Horizon Europe program and Germany has established several funding programs in order to consolidate its status as an Industrie 4.0 leader.
Industrie 4.0 markets by industry sector
Industrie 4.0 as a project for the comprehensive digitalization of industrial production is being widely implemented in Germany as a leading industrial location. In Germany, 62 percent of companies utilize Industrie 4.0-related technologies and solutions (software, IT services and hardware) according to a Bitkom digital association 2021 study.
The main application industries driving Industrie 4.0 solutions uptake are the automotive, mechanical and plant engineering, and electronics and high-tech sectors. Find out more about each and every major Industrie 4.0 sector below.
Germany is the world's automotive innovation hub - making use of Industrie 4.0 solutions to create tomorrow's mobility solutions. The sector accounts for one third of the country's industry R&D spending.
ICT and software industry
Germany has one of the world's largest ICT markets and boasts the single largest software market in Europe. The country's ICT and software sectors are leading players in the deployment of Industrie 4.0 solutions.
Machinery & equipment industry
Germany is the world's leading supplier of machinery and equipment. The industry has invested more than EUR 10 billion in Industrie 4.0 solutions from 2015 to 2020, with smart manufacturing investment set to continue for the foreseeable future.
Germany is a major microelectronics force, securing its place at the top of the international table as Europe’s leading semiconductor production location. The country plans to spend up to EUR 50 billion to consolidate Germany’s position as an attractive semiconductor production location.
domestic market volume for agricultural machinery in 2022
producer of agricultural technology in the world
forecast software spending in the agriculture industry in Germany until 2024
One in six companies in Germany expects to invest in digitalization in the immediate future according to digital association bitkom. Around four in five companies also see digitalization as an opportunity. Artificial intelligence and big data solution uptake currently remains low (around 14 percent), allowing innovative SMEs and start-ups alike to capitalize from the future demand from almost 60 percent of companies intending to implement such solutions in the near future.
According to forecasts, the global IoT agricultural market is set to grow by more than 90 percent to around USD 7 billion by 2025 – with Europe and North America representing the largest markets. Smart farming and agricultural robotic (“agri-robotic”) solutions are also expected to become significant agricultural trends in the near future.
Agriculture transformation in Germany
Agriculture in Germany is undergoing a structural transformation. The absolute number of farms and labor force has fallen as agricultural product demand has increased. In 2022, Germany was Europe’s second-biggest agricultural production nation with production value of more than EUR 74 billion.
Nearly half – 16.6 million hectares – of domestic land mass is used for agricultural purposes. Bavaria, Baden-Württemberg, Lower Saxony, and North Rhine-Westphalia are the federal states with the most agricultural land use. Arable farming accounts for over 70 percent of land used. Livestock husbandry is focused in the areas of beef, pork and poultry production.
The popularity of organic food in Germany has been growing exponentially in recent years in the EU’s most populous nation. And now Germany has set concrete targets for sustainable farming for the rest of this decade. In our video we take a look at what’s up down on the farm in Germany and how your business could benefit.
Digital farming market opportunities in Germany
Germany provides a plethora of exciting market opportunities to companies active in the field of digital agriculture. Below we list just a few of the segments where new opportunities are presenting themselves to SMEs and start-ups alike.
Agricultural machinery manufacturers meet digital product and service providers
Germany is the world’s third biggest producer of agricultural machinery and is home to a domestic market valued at over EUR 7 billion in 2022. Agricultural machinery manufacturers diversifying into autonomous farming, alternative powertrains and ICT solutions require cooperation with digital product and service providers. Data collection and processing and intelligent automation technologies are also important focal points in new machinery development. Agricultural businesses tend to source machinery from an array of producers, creating a marked preference for solutions that allow digital connectivity between machines.
Commercializing autonomous field robots
Global market volume for agricultural robotics (“agri-botics”) is expected to grow to almost 36 billion units by 2030 according to an Agricultural Robots Market study. Small-machine autonomous field robots (AFRs) represent one promising solution to the chemically treat crop and plant diseases with pesticide microdoses. Autonomous systems increase work safety by reducing contact to substances and free up labor for the cultivation of specialty crops for example. Autonomous field robots could enter into commercial production as early as 2030.
Artificial intelligence and precision farming
Precision farming allows domestic farms to respond in real time to changes in the weather, soil and soil conditions, water supply and other quality characteristics that impact upon crop growth. The implementation of AI and software precision farming solutions frees up resources and improves product quality. The Federal Ministry of Food and Agriculture is supporting EUR 44 million funding to 36 collaborative AI research projects. Of these projects, 24 are crop production related, with a further four projects investigating the use of AI in animal welfare.
On the investment agenda: sensor technologies
Sensor technologies for animal husbandry use are currently high on the investment agenda of companies in the sector, with almost half of all domestic farms planning future investment according to bitkom. Sensors can also be deployed to determine crop biomass levels for the appropriate use of fertilizer and crop protection measures.
Digital solutions for organic farming
Germany is Europe’s largest organic food market. European Union and German federal regulations restrict the use of herbicides and promote the use of sustainable livestock husbandry. Demand for organic and sustainably farmed produce creates new opportunities for companies providing digital solutions to promote animal welfare and herbicide use reduction.
Germany’s world-class R&D institutes and universities are helping shape the future of digital farming. Working closely with industry and the farming community, Fraunhofer-Gesellschaft and Leibniz Association institutions are bringing innovations to market. Internationally active companies, small and medium-sized enterprises and start-ups are all at home in different industry clusters across the country.
Digital farming funding
Germany supports digitalization in agriculture through a number of initiatives and programs. Specialized R&D funding programs have been created to promote the development of digital agriculture technologies. Research and development programs can provide up to 70 percent of eligible costs subject to company size and area of research activity.
Clusters and industry associations
International companies active in the digital farming sector enjoy ready access to agricultural technology clusters where farmers, machinery manufacturers, agrotech start-ups, universities, and research institutes work together. Stakeholders are organized in regional networks including the Agrotech Valley in northwestern Germany, Agronym in Saxony, and Competence Network Digital Agriculture Bavaria in Bavaria.
Our R&D cluster map provides you with an overview of important actors across Germany.
Germany offers a broad platform of incentives for all investors - regardless of whether they are from Germany or otherwise.
There is a large selection of programs designed to support a wide variety of business activities at different stages of the investment process. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor as well as research and development.
Within the new High-Tech Strategy, the government offers special support for technology partnerships and provides R&D grants and loans. Germany’s INDUSTRIE 4.0 Future Project is one of the declared priorities in the new High-Tech Strategy. The Federal Government is providing comprehensive support to establish Germany as a lead market and provider of key technologies and as a future center for production.
For more information, please refer to the incentives chapter in our Investment Guide to Germany.
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