Last week we spoke about Amazon possibly entering the mechanical components market and how this could change the scenario and the dynamics of this sector. Well, I don’t think that goods as complex as machine tools could be sold on a marketplace such as Amazon (at least in the short term), but the current performance of this sector definitely gives food for thought.
In fact, some say that as soon as the incentives tap is turned off (by incentives I mainly refer to hyper and super depreciation) the tools machine market will take a tumble. Do you agree?
What is obvious to everybody is that the tools machine market in Italy has witnessed a marked boost in performance in recent years, but the most recent UCIMU figures seem to point to a considerable dip in the first quarter of 2018 (despite the opinion being it is “not worrying”). But the fact is that there has been a -25.8% drop in orders by Italian manufacturers on the domestic market.
This point was highlighted by the Chairman of UCIMU himself, Massimo Carboniero, who reported that the result of these first few months should be viewed as a “rebound effect” to the peak in orders at the end of 2017, probably influenced by the mass uncertainty on whether or not the Government will decide to renew the super and hyper depreciation incentive. This uncertainty pushed many enterprises to bring forward and finalize their investments in this sector within the end of the year.
I do believe, in any case, that the it will be fairly difficult to maintain the level of results that were achieved in 2016 and 2017. But despite this, I continue to refute the idea that a manufacturing enterprise decides to purchase machine tools just because it can take advantage of incentives. Those who buy machines do so because they have work to do and therefore will be using them. In my opinion this is written in stone.
What we don’t know, however, is how the economy will perform over the coming years.
What I mean is, if the trend stays positive, then the manufacturing enterprises will continue to receive high levels of orders and, in order to process and deliver them, they will continue to invest in machinery and equipment, so as to expand and also modernise their fleet.
On the other hand, if the market should dip or witness lower growth trends, this could lead enterprises to purchase lower volumes of equipment, as they can manage with what they already have, then effectively this sector could show a significant downturn simply because less machine tools will be sold. But there is a saying, not all evil comes to harm.
Generally, in fact, less optimistic scenarios (like the one I described) often trigger a rather interesting mechanism that inevitably leads to a growth in innovation.
In other words: when a product – in this case machine tools – sells well, the manufacturer will, on the one hand, have less time to dedicate to research and development to improve its products and, on the other, there will definitely be less incentive to do so.
