Mechanical engineering industry skeptical ahead of trade fair

The robot arm applies the weld with millimeter precision: Sparks fly as the machine welds seam by seam on a solid metal block. Dresden-based company Alotec specializes in the processing and repair of metal components. "Our laser systems make it possible to repair and refurbish components," explains Managing Director Clemens Kuhn. This means that costly new production and unnecessary disposal can be avoided.

Innovation meets economic hurdles

However, despite technological innovations, companies like Alotec are facing growing challenges. Rising energy costs, increasing bureaucracy and a shortage of skilled workers are putting pressure on the mechanical engineering industry. Alotec develops customized laser systems for hardening and deposition welding and cooperates closely with research institutions such as the Fraunhofer Institute for Material and Beam Technology in order to continuously improve its products.

"Despite this positive development, Alotec and many other Saxon companies in the mechanical engineering industry are facing challenges," warns Kuhn. In particular, a reluctance to invest and strict bureaucratic requirements are slowing down innovation.

Start of the INTEC trade fair in Leipzig

Alotec is one of the 730 companies that will be exhibiting at the International Trade Fair for Machine Tools, Manufacturing and Automation Technology (INTEC) in Leipzig from Tuesday. The trade fair is regarded as a barometer of the industry's mood - and this year the assessment of many companies is cautious. After three years of growth, Saxony's mechanical engineering sector is weakening: sales are falling and the number of employees is declining.

"The situation could of course be better," says Oliver Köhn, Managing Director of the German Engineering Federation East (VDMA). The total turnover of companies with at least 50 employees fell by four percent in nominal terms compared to the previous year - from around 8.5 billion to 8.2 billion euros. "Domestic business in particular prevented a better result," said Köhn. Despite these declines, the turnover result remains the third best in the history of the sector. However, optimism in the industry is limited.

Decline in orders puts companies under pressure

"Incoming orders in 2024 were very weak," emphasizes Köhn. Eastern German mechanical engineering companies recorded a 22% drop in orders in real terms in 2024 compared to the previous year. Both domestic customers (minus 13%) and foreign customers (minus 24%) placed noticeably fewer orders. "There was a lack of impetus for domestic business throughout the year."

Köhn blames this on the uncertain economic conditions and structural changes, among other things. The order situation will remain tense in 2025, which could result in a drop in sales and job cuts.

Saxony relies on funding programmes and digitalization

The Saxon state government is aware of the challenges, emphasizes the Ministry of Economic Affairs. The Free State is supporting the industry with funding programs, digital approval procedures and investments in research. For example, the German Aerospace Center (DLR) in Zittau is working on energy-efficient production processes. At the same time, more efficient planning approval procedures should offer companies more planning security.

Another pressing problem remains the shortage of skilled workers. To counteract this, the state government is focusing on the "Saxony 2030 Skilled Workers Strategy". The aim is to get more young people interested in STEM professions - science, technology, engineering and mathematics. In addition, the "Pact for Attracting International Skilled Workers" aims to recruit qualified workers from abroad.

Saxony Fund as hope for investment

Economics Minister Dirk Panter (SPD) also refers to the so-called Saxony Fund: "I am pleased that we in the coalition have been discussing the structure for the Saxony Fund, which has various investment areas, for weeks as part of the budget negotiations." His ministry plans to finalize the structure before the federal investment package is passed. "Then we can take the money into this fund and disburse it," says Panter. He hopes "that we can then continue to invest in the economic future".

However, there is still room for improvement in the view of VDMA East boss Köhn. With a view to the mechanical engineering trade fair in Leipzig, he criticizes the fact that the Free State of Bavaria is currently not providing any funding for trade fair participation - either at home or abroad. "This instrument should definitely be reinstated in order to strengthen small and medium-sized companies in particular in their efforts to internationalize."