Turkiye`s machine tool market

MachinesTechnical ArticlesSouth-East European INDUSTRIAL Мarket - issue 1/2024 • 18.03.2024

The machinery sector in Turkiye, including the machine tool segment, continues to be one of the main drivers of the local economy. Moreover, today Turkiye`s machine tool market is among the top 10 in the world, according to data of the German Machine Tool Builder`s Association (VDW) released during the highly successful latest edition of the leading international exhibition for metalworking and manufacturing technology EMO Hannover in September 2023.

The fair is seen as a platform that makes significant contribution to the progress of the industry in Turkiye. The country`s leading companies have participated in EMO Hannover for years, experts from Hannover Fairs Turkey underline and add that Turkiye`s industry and production are expanding daily, and firms are attempting to gain a larger market share abroad by participating in leading international trade shows.

Nearly 60 Turkish businesses took part in the biannual exhibition last year. The long-standing good relations between Turkiye and Germany and the active participation of Turkish companies at German industrial fairs have resulted in highly positive results in exports in the last more than two decades, Hannover Fairs Turkey calculate.

The long-standing partnership between Turkiye and Germany

Turkish businesses are currently developing many new industrial projects as the country`s economy is ranked among the top 20 in the globe, according to the Germany Trade and Invest Agency (GTAI). Germany is one of the nations with the most foreign investments in Turkiye, having undertaken significant initiatives in the local energy, transportation, and automotive sectors. Key client segments had plans to invest EUR 3 billion in the machine tool industry in Turkiye in 2023, according to Oxford Economics, VDW`s research partner. The automotive industry is getting a significant portion of this investment, statistics show.

“In recent years, there has been a notable increase in the export of machine tools from Germany to Turkiye, showcasing the growing importance of this partnership. Turkiye has emerged as a significant player in the production of machine tools, particularly in the areas of forming and cutting tools. The Turkish machine tool industry relies on foreign trade, with a substantial portion of its production being exported. Additionally, Germany holds a significant position as a trading partner for machine tool imports in Turkiye”, VDW says in a current report.

Besides German, numerous global machine building companies are present in Turkiye today, using the country as a regional hub to access nearby markets. The machine tool sector has been steadily growing over the past decade with approximately 5% CAGR, the Turkiye – Finland Business Council informs.

Accounting for a 9% share of the total exports, machinery products are shipped to more than 200 countries. 60% of total machinery product exports are shipped to the USA and EU countries.

Turkiye`s machine tool market – in the top 10 in the world

With a volume of EUR 1,9 billion in 2022, Turkiye is the tenth largest machine tool market in the world, VDW`s latest report also states. “With its own production of more than one billion euros, the state also plays an important role as a manufacturer. Almost 90 percent of the demand was nevertheless imported from abroad. When it comes to imports, Turkish companies also rely on machine tools “Made in Germany”. Germany is the third most important import partner”, the Association said in an official publication.

Turkiye received machine exports from the German machine tool industry in 2022 totaling about EUR 240 million, including parts and services. As a result, the export value may rise by 27% when compared to the same time last year.

Additionally, Turkiye`s prominence as a purchasing nation has grown. In terms of the most significant export markets, the nation remained in 14th place in 2021 but had moved up to 11th in 2022. In the previous year, Turkiye received about three percent of all German machine tool exports.

Turkiye today is one of the most significant places in the world for machine tool production, VDF points out. The country produced machinery valued at precisely EUR 1,0 billion in 2022 (up 29% from the year before). It had the 12th position in the globe in terms of production volume. Particularly prominent among local manufacturers are companies who make shaping and cutting equipment. Approximately EUR 683 million, or 68% of the output value, is accounted for by this technology category. Approximately EUR 317 million, or 32% of the total, come from metal cutting technology, VDW also calculates.

“The Turkish machine tool industry is heavily geared towards foreign trade. The export volume in 2022 was around EUR 784 million (plus 34 percent compared to the previous year). This meant that almost 80 percent of domestic production was destined for sale abroad. The main buyer countries for exports were Russia (EUR 106 million, share of 14 percent), the USA (EUR 71 million, 9 percent) and Germany (EUR 55 million, 7 percent)”, the Association`s data further shows.

Again in 2022, machine tools worth EUR 1,7 billion (up 29% from the previous year) were imported by Turkish businesses. Germany is the third biggest trading partner for imports, after China (16%) and Taiwan (24%) with a 13 percent stake. Italy (9 percent), South Korea (10 percent), and Japan (12 percent) are Turkiye`s other major suppliers.

The total volume of the Turkish machine tool market was around EUR 1,9 billion (plus 27 percent) in 2022, making it the tenth largest in the world. In relation to the individual machine groups, the market for machining centers (approximately EUR 491 million) was the largest. This is followed by lathes and turning centers (approximately EUR 378 million) as well as bending, folding and straightening machines (approximately EUR 195 million), VDW`s report also says.

A strong machinery industry and an export-oriented market

The machinery sector in Turkiye today provides direct employment for over 440 thousand people. When employment in supplier subsectors is taken into account, this number rises, the country`s Investment Agency reports. Turkish machinery sector, with a volume exceeding TL 357 billion and an export volume (including free zones) exceeding USD 23 billion, has an important place in the national economy. It includes 23 sub-branches, mostly involving small- and medium-sized enterprises, which produce a wide range of products.

During times of international unrest like the COVID-19 pandemic, the industry provides national self-sufficiency and independence from outside markets, making it strategically significant. International clients are particularly interested in the sector`s firms` export performance, their quality record in global marketplaces, and their adaptable and competitive structure.

60% of the sector`s exports are destined for markets with intense competition, such the US and the EU. More than 200 nations currently use Turkish machinery industry products in one manner or another. The Turkish machinery industry works hard to increase its value through sustainable ways, such as creating strategies and solutions to adjust to digitization and the sustainable green transformation, in collaboration with its numerous local and international stakeholders.

An important pillar in this direction is the Twin Transition Project in the local machinery Sector, which is carried out under the coordination of the Turkish Machine Manufacturers Association (MIB) and was currently selected as one of the best practice examples for the industry by the Ministry of Trade of the Republic of Turkiye.

In recent years, Turkish machinery industry growth rates are much higher than growth rates of Turkiye`s overall economy and industry. With its rapid development and the potential, it has, the Turkish Machinery industry is a sector increasing its share in the Turkish exports. Machinery is the second largest sector in Turkiye`s export”, the country`s Machinery Exporters` Association informs.

According to latest data of the Association, in 2022, Turkiye`s machinery exports reached USD 25,5 billion. The machinery sector contributed to 10 percent of the country`s total exports. The exports of the industry increased by 11 percent in 2023 compared to 2022 to reach USD 28,1 billion last year.

Investments in the machinery and equipment sector in Turkiye have witnessed continuous growth over 16 consecutive quarters, the Turkish Machinery Exporters Union (MAIB) reports. That continued growth enhances the export goal for 2024, which is USD 30 billion, despite the recession in Europe. Despite the Corona pandemic, the sector`s exports increased by approximately 75 percent in the past five years, the Union`s statistics show.

“Over the last 22 years, machinery export has increased 17-fold. More than 200 countries around the world use Turkish machines. Machines come first in products that Germany and USA import from Turkiye. The country is the sixth-largest machine manufacturer in Europe, ranked 26th in the global machinery trade in 2022”, a MAIB`s current report also says.

Another important aspect – the Turkish machinery industry places a high value on research and development. The proportion of R&D spending to GNP is steadily rising in Turkiye, official data shows. Turkish machinery leverages a wide range of systems engineering expertise to enable digital transformation.

Advantages of the Turkish machine tool industry and market

The machine tool manufactures in the country significantly benefit from developed engineering skills and quick adaptation to new technologies. In Turkiye there are sufficient production facilities (in the many industrial zones for example) and a suitable infrastructure.

Other advantages are the advanced sub-industries, the rapid adoption of international manufacturing standards and the strong quality awareness, MIB further underlines.

The sector gives place to many specialized, highly educated, and skilled middle and senior managers and the main part of the workforce is of comparatively young age.

The machine tool market is strongly supported by a stable domestic supply of raw materials and the flexible structure of enterprises, as most of the companies in the machine tool manufacturing industry in Turkiye are SMEs. In addition, the sector benefits from the country`s geographical proximity to some of the highest growth markets in the machinery segment.

Per the relevant laws and regulations, for a company to be an exporter in Turkiye it must also be a member of an exporters` association operating in the respective industry. The Machinery Exporters` Association (MAIB) is the only establishment for machinery and accessories exporters in Turkiye, and has 16 000 member companies, most of which are manufacturers.

An important focus of the Turkish machine tool industry is the Fourth industrial evolution. In this context digitalization, artificial intelligence, digital twins, automation, and robotics become topics of greater and greater interest for the local manufacturing and exporting companies. Another key pillar of the industrial transformation is the strive towards sustainability and “green” technologies. These two megatrends of the world economy, strongly reflected in the Turkish manufacturing sector, allow the country to remain competitive on a global scale among many leaders such as Japan, USA and Germany.

Today the machinery industry is the third largest manufacturing sector in Turkiye in terms of market size. Turkiye`s economy, which has expanded by an annual average of 6,3% in the period 2020 – 2023, has reached the top among OECD countries, and machinery investments contributed with an annual average growth rate of 18 percent. This was announced at the latest CECIMO General Assembly with the participation of the Turkish Machine Manufacturers Association (MIB) in Antalya.

During this period the imports also increased at a similar rate, reaching USD 35 billion in 2022. More than 50 percent of Turkiye`s machinery exports go to the EU. In the machine tools and other related manufacturing technologies sector, exports amounted to USD 1,2 billion in 2022, MIB also informs.

The organization represents EMO Hannover in Turkiye, as well as other important global exhibitions, like SIMTOS, which is held biannually in South Korea. MIB also supports numerous machinery fairs, organized in Turkiye, such as MAKTEK Avrasya, MAKTEK Izmir, MAKTEK Konya and Bumatech.