The European Machine Tool Industry in 2026
A Status Report and Forecast for 2030
The Numbers
Let us begin with what is measurable. In 2025, German machine tool production fell by 8 to 10 percent. For 2026, the VDW — after two years of decline — expects "slight growth" of about one percent. Slight growth. After two years of contraction. This is not recovery. This is stagnation at a lower level.
Machine tool consumption in Europe fell by 18 percent in 2024. Germany lost 12 percent, Italy 28 percent. The domestic market collapsed by another 14 percent in 2025, while foreign business grew by 7 percent — a pattern that reflects the flight from German operating conditions.
Employment in the industry fell by 3.9 percent from October 2024 to October 2025 alone, to 63,300 employees in companies with more than 50 workers. These are not cyclical fluctuations. This is loss of substance.
The Official Reading
VDW Chairman Franz-Xaver Bernhard explains: "The German machine tool industry sees itself very well positioned in international competition." The industry continues to invest in research and development as well as in well-trained skilled workers.
This is the language of industry associations. It is not wrong — but it is incomplete to the point of being misleading.
Yes, German machine tool manufacturers are technically excellent. Yes, they have outstanding engineers. Yes, their machines are precise, reliable, durable. But the question is not whether the machines are good. The question is whether anyone buys them. And at what price.
The Chinese Shadow
Masahiko Mori, CEO of DMG MORI, Europe's largest machine tool manufacturer, puts it more bluntly: "At least until 2030, China will have the advantage of cheap labor and will thereby undercut market prices."
In plain terms: Chinese manufacturers offer machines that are 20 to 30 percent cheaper than European ones — and qualitatively "good enough." Not perfect, not leading, but sufficient for most applications. And who needs perfection when the budget is tight?
The "Made in China 2025" strategy aims for technological self-sufficiency. What should worry European machine tool manufacturers: The Chinese are catching up not only in standard machines. They are advancing into the mid-tech segment — the area where most European medium-sized companies make their money.
"In machine tool manufacturing, China is not yet ready for Europe, but sooner or later it will certainly become an issue," says Mori. He recalls photovoltaics: "There they destroyed the entire industry in Germany. We must not experience such a story again."
The history of photovoltaics is a warning sign. Germany was a pioneer, had the best researchers, the most innovative companies. Today, China produces 80 percent of the world's solar cells. The German manufacturers have disappeared — not because their technology was inferior, but because they could not compete on price.
The End of the Export Champion
The business model of German machine tool manufacturing was simple for decades: develop and manufacture machines in Germany, export them to the world. "Made in Germany" as a seal of quality, engineering excellence as competitive advantage.
This model no longer works. In 2025, German manufacturers lost their international leadership in exports — to China. The Chinese are expanding their position in the ASEAN region, in Brazil, in the Middle East, in North Africa. Even into some EU countries, Chinese exports are rising.
The reasons are manifold: Energy costs in Germany are too high. Bureaucracy consumes between 1 and 3 percent of revenue — money that is missing for investments. Supply Chain Due Diligence Act, Corporate Sustainability Reporting Directive, Cyber Resilience Act, European Deforestation Regulation — documentation requirements pile up.
Then there is trade policy. The USA under Trump relies on protectionism and tariffs. Biden's Inflation Reduction Act already attracted investment — but only local investment. Those who want to sell in the USA must produce in the USA. The same increasingly applies to China.
The Automotive Crisis
The machine tool industry lives off its customers. And the most important customer was — was — the automotive industry. Almost 30 percent of machine tool sales went to this sector.
This market is collapsing. Not slowly, not gradually — it is collapsing. The internal combustion engine, which requires hundreds of machining steps to manufacture, is being replaced by electric drive, which requires a fraction of that. An internal combustion engine has about 1,200 parts, an electric motor about 200.
European automakers — VW, BMW, Mercedes, Stellantis — are investing in electric mobility. But they are not investing in Europe. The new plants are being built in China, in Eastern Europe, in the USA. The highly complex, machine-tool-intensive production lines for internal combustion engines are being shut down, not replaced.
The Hopefuls
The associations speak of new markets. Battery production: Gigafactories need specialized machines. Hydrogen: Electrolyzer manufacturing must be scaled up. Heat pumps, climate technology, recycling. Defense industry, aerospace, medical technology. The expansion of data centers for AI.
All true. And it is not enough.
Battery production is dominated by Asian manufacturers — CATL, BYD, LG, Samsung. They bring their own suppliers. The hydrogen economy is still in the pilot phase. The defense industry is growing, but from a very small base. Medical technology is a niche.
None of these markets can compensate for the loss of the automotive industry. Not by 2030. Perhaps never.
The Innovation Paradox
Here lies the real problem — and it is cultural, not technical.
The European machine tool industry is excellent at perfecting existing technologies. Five-axis machining centers that work to micrometer precision. Automation solutions that produce day and night. Digital twins, predictive maintenance, AI-powered controls.
But it is poor at daring something new. Radically new. Technologies that do not improve the existing but replace it.
This is due to the structure of the industry. Medium-sized companies with long traditions, family-owned, conservative. They optimize what works. They buy patents, but rarely develop fundamentally new things. And when an inventor comes with a disruptive idea — a new machining process, a new kinematics — he is turned away. Too risky. Too different. Not compatible with what we have always done.
The innovation desert is not a lack of ideas. It is a surplus of reasons why ideas cannot be implemented.
DMG MORI — Symptom and Symbol
DMG MORI is Europe's largest machine tool manufacturer. Bielefeld, Pfronten, Munich — German locations with long traditions. Deckel, Maho, Gildemeister — names that stood for German engineering excellence.
Since 2015/16, DMG MORI has been controlled from Japan. The Japanese parent DMG MORI CO., LTD. — formerly Mori Seiki — holds the majority. The strategic decisions are made in Japan, and the strategy is Japanese: vertical integration, self-sufficiency, minimization of dependence on Chinese suppliers.
This is not a reproach. It is an observation. The "German" machine tool industry is no longer German — not in its ownership structure, not in its strategic decisions. It is a production site in a global corporation. That may be good for jobs. But it means that value creation — and decision-making power — lies elsewhere.
Forecast 2030
What will 2030 look like? Here is my assessment:
Consolidation will continue. Many small and medium-sized machine tool manufacturers will disappear — through acquisition, business closure, or relocation. The industry will shrink, not grow. The number of employees will fall below 50,000.
The home market Europe will continue to shrink. Industrial production in Europe is stagnating or declining. Customers — automotive suppliers, machinery manufacturers, metalworkers — are leaving or closing. The domestic market, which today accounts for 60 percent of sales, will fall below 50 percent.
China will dominate. Not in the high-end segment — there, German and Swiss manufacturers will defend their lead. But in the standard segment and the mid-range segment, China will be unstoppable. The export leadership that Germany lost in 2025 will not return.
Regionalization will increase. Those who want to sell in the USA must produce in the USA. Those who want to sell in China must produce in China. The model of "development and manufacturing in Europe, export to the world" will become a niche.
The niches will survive. Ultra-precision machining, special machines for aerospace and medical technology, automation solutions for complex processes. Where German engineering truly makes a difference — and where customers are willing to pay for it — European machine tool manufacturing will endure.
Innovation will come from outside. The disruptive technologies — additive manufacturing, AI-powered machining, autonomous production — will not be developed in traditional machine tool companies. They will come from start-ups, from tech giants, from research institutes. The established manufacturers will buy or license them — if they are fast enough.
What Would Need to Be Done
The associations have their lists of demands: reduce bureaucracy, lower energy costs, cut taxes, advance digitalization, improve education, renovate infrastructure. All correct. All known. All ignored — for years, for decades.
What would really help, nobody says aloud:
An industrial policy strategy that deserves the name. Not funding programs and application procedures, but clear decisions: In which technologies does Europe want to lead? How much money will be invested? Who coordinates?
Protection against unfair competition. Not protectionism, but a fair framework. When Chinese manufacturers sell below market prices with state subsidies, that is not a free market. It is displacement.
A culture that rewards risk instead of punishing it. Inventors who come with new ideas should find support — not bureaucratic hurdles and dismissive company executives.
But I say "should" and "would need to." Not "will."
The European machine tool industry in 2030 will be smaller, more specialized, less German. It will survive in niches where quality matters more than price. It will not disappear — the technology base is too strong for that, the know-how too deep. But it will have lost its leading position — not because it became worse, but because others were faster, cheaper, and more determined.
The question is not whether this change is coming. It is already here. The question is whether Europe will shape it or suffer it. So far, all signs point to the latter.