The global machine tools market size is anticipated to grow USD 73.5 billion in 2027 from USD 119.2 billion in 2020, at a CAGR of 8.4% from 2021 to 2027. The machine tools industry plays an essential role in the global manufacturing industry. The competitiveness in the manufacturing industry is highly dependent on the quality of tools used in metal forming and metal cutting activities. The machine tools industry provides critical inputs to all sectors of manufacturing. The performance of the machine tools industry plays a significant role in the growth of the country’s manufacturing sector. Many critical and high-priority end-use sectors such as automotive, heavy equipment, defense, aerospace, and casting require a strong machine tools industry to support their manufacturing.
The machine tools manufactured vary in functionality, size, structure, speed of operation, control mechanism, and other factors. A machine tool is an assembly of multiple components, and no regulations mandate the usage of any particular component. Machine tools are indispensable to the industrial and manufacturing process. The industry outlook has changed drastically with technology. The industrial revolution modernized all kinds of equipment used in industries—concepts such as ‘Industry 4.0’ reconciled production with information technology and the internet. The main objectives of Industry 4.0 include individualization of requirements, flexibility in work, enhanced uptime of manufacturing, and accuracy in decision making. The commercialization of artificial intelligence pushed vendors to opt for tools capable of handling minor issues themselves. With a rising emphasis on this, vendors operating in the market are also revolutionizing their procedures by leveraging automated manufacturing systems. This has pushed the demand for advanced machine tools in the past.
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The machine tools market has witnessed decent growth in the past five years. Machine tools such as cutting and forming tools are being used in numerous industries, so their demand has maintained a steady growth rate. Over the last few= decades, the global machine tools market has witnessed the introduction of disruptive technologies such as AI and hardware integration. Smart precision tools that hasten manual operations for humans are the most disruptive. At present, the market is witnessing several innovations, with the introduction of co-bots (collaborative robots) being used for integration with machine tools.
COVID-19 Impact on the Global Machine Tools
The COVID-19 pandemic will cause cultural, political, and social changes that have not been seen in decades. Major sectors from finance have already experienced its effect on airlines. The pandemic has led to several casualties and negatively impacted many businesses worldwide. For instance, in mid-March 2020, US automakers declared a complete lockdown for a few Detroit production facilities. Therefore, the utilization of machine tools declined in 2020. This is one of the sharpest declines in the market after the economic recession of 2008.
The automotive sector is one of the major shareholders among consumption industries of the machine tools market and has witnessed the hardest hit after World War II. The demand for automotive vehicles went down by more than 10% globally. The supply chain saw widespread disruptions due to lockdowns imposed across the globe. Further, the blow to travel, tourism, and production factories pushed the automotive market toward a deep recession. The second half of 2020 performed better than the first half. This is due to slight normalcy in business after H1 2020. However, the market is still under grave uncertainty, which is likely to hurt growth even further. Therefore, associated industries such as machine tools will take a hard hit due to COVID-19.
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Global Machine Tools Market Dynamics
Drivers: Growth in Automotive Sector
The growth in developing economies has played a significant role in developing the automotive sector across the globe. With the rising demand for automotive vehicles in emerging economies, vendors have promising opportunities to capitalize upon. Further, as the competition intensifies among several OEMs in developing economies, vendors have pushed themselves toward product differentiation. All these developments in the automotive sector will drive the consumption of machine tools in the region.
Developments have been robust in emerging markets, with industrialization and foreign trade operations, especially in BRICS countries. China’s large fiscal stimulus programs have rendered it the pioneer in emerging markets over the last few years. China has retained its status as the world’s largest car market in recent times. India’s automotive industry is competitive and rising rapidly. Many auto OEMs are entering the market to tap its huge potential. The economic growth in BRICS nations has propelled the growth rates for the automotive industry in present times.
Restraints: Rise in Material Cost
Raw materials constitute the single largest cost for machine tools. These costs comprise approximately 50%−60% of the overall cost of production. The key raw materials for the machine tools industry include ferrous and non-ferrous metals, particularly steel and aluminum. The production and sales of these raw materials witnessed significant fluctuations due to COVID-19. The volatility of raw material prices poses a severe threat to vendor margins. Other operating expenses such as wages of labor are also witnessing a sharp increase. All these factors burden vendors are striving to produce highly efficient power tools at affordable costs to cope with increasing competition in the market.
Steel prices have become highly volatile in global markets. Consequently, input costs for many steel-consuming industries have fluctuated dramatically. Carbon steel is the predominantly used raw material in machine tools, and price fluctuations for carbon steel will have an adverse impact. Volatility in raw material price also affects the estimations and predictions of vendors and end-user industries, which disrupts their growth strategies. Therefore, fluctuations in raw material costs, specifically carbon steel, aluminum, and tungsten, could hinder the machine tools market’s growth.
Opportunities: Industrial & Economic Growth in APAC
Since the first industrial revolution in the late 18th century, the manufacturing sector has remained highly dominated by a few European countries and the US. These countries traditionally held immense control over key resources worldwide. They were better poised to foster industrial development and drive innovation through advancements in production technologies, materials, and end-user solutions. However, these countries have faced the challenge of demand and competitiveness over a period. The demographic dividend and market maturity put them at a disadvantage over fledgling economies with cheaper resources and huge end-user markets.