A new survey of machine tool builders concludes that asset financing is emerging as a critical factor in their ability to supply new equipment to machine shops and other manufacturers. Siemens Financial Services conducted the study based on interviews with 80 OEMs of machine tools, producers who represent 55% of machine tool sales worldwide.
Siemens Financial Services is a business unit of engineering and electronics giant Siemens AG that provides financial packages for infrastructure, equipment, and working capital investments, for Siemens and other business-to-business customers.
SFS interviewed machine tool OEMs between July and August this year, and all of the vendors interviewed have sales arms in ten countries that are the subject of the study: China, France, Germany, India, Poland, Russia, Spain, the U.K., the U.S., and Turkey.
In much of the world, including the nations covered by the study, machine tool sales have declined during 2013. In the U.S., for example, even a recent upswing in new orders leaves the year-to-date total 10.6% below the comparable 2012 rate.
The SFS study indicates that financing new orders may be part of the problem.
SFS said 84% of its respondents reported that potential machine tool buyers are experiencing increased difficulty arranging traditional bank loans to fund equipment acquisition. Another 64% of machine tool builders said asset financing has been “highly important” for customers buying machine tools over the past two years. That may be significant, in the U.S. market at least, where sales increased in 2012 over 2011, driven by a very solid month in September 2012, one of the strongest months in the recent history of the sector.
The Siemens study also drew attention to the importance of equipment leasing programs, which 55% of the OEM respondents reported have been the principal funding source for their customers. It’s a point underscored by the Equipment Leasing & Finance Foundation, which recently forecast 3.0% economic expansion in the U.S., but cautioned against a series of complicating factors.
Options Needed to Address Demand
U.S. machine tool consumption grew faster than GDP from 2007 to 2012, mainly because manufacturing activity benefitted from a series of extraordinary factors, including lower transportation and energy costs.
Looking forward, SFS said the increased availability of low-cost energy will continue to promote domestic manufacturing, while demand for new cars and planes will continued to drive demand for new machine tools.
“As the market becomes increasingly competitive, machine tool operators must seek to underpin their businesses with increased efficiency and productivity. This requires a commitment to implement up-to-date equipment and, hence, considerable capital investments,” stated Gary Amos, who heads of the Americas region for the SFS Commercial Finance unit.
However, most of the likely buyers of machine tools are small and medium-sized enterprises that have difficulty accessing traditional bank financing for equipment acquisition. “Specialist asset financiers like SFS have a more in-depth understanding of machine tools as an asset category,” Amos explained. “They are, therefore, able to craft financing arrangements that fit the end-user’s particular circumstances and cash flow needs.”
The SFS study concluded that an increasing number of machine tool OEMs are interested in integrating finance with their sales proposition, and that leasing and renting arrangements are emerging as the financing method of choice. It found that machine tool buyers’ rising demand for equipment finance services would rise steadily through the end of this decade.
