Machinery & Equipment

Stabilizing amid caution, with growth driven by technology, policy support and electrification

MEDIUM RISK FOR ENTERPRISES

Last Update: June 2025

Strengths & Weaknesses

High barriers to entry: The sector demands substantial investments in advanced technology and capital expenditures to stay competitive. These requirements create significant entry barriers, protecting established players from new competitors.
Robust long-term growth potential: The increasing adoption of robotics and process automation is driving sustained growth. The integration of Artificial Intelligence (AI) is expected to accelerate demand for smart, innovative machinery and equipment.
Pricing power through technological differentiation: Companies with advanced AI and automation capabilities can maintain strong pricing power due to a limited supply of cutting-edge solutions amid growing demand.
Revenue diversification: The sector serves a wide array of industries, regions and end markets, providing companies with a diversified revenue base that mitigates risks linked to economic cycles or sector-specific downturns.
Strong R&D focus and innovation culture: Continuous investment in research and development fosters innovation, allowing companies to improve product performance, efficiency and adaptability to evolving customer needs.
Strategic role in industrial digitalization: Machinery and equipment firms are key enablers of Industry 4.0 initiatives, supporting customers in their digital transformation journeys, which strengthens long-term client relationships.
After-sales service and maintenance opportunities: The sector benefits from recurring revenue streams through maintenance, upgrades and spare parts, enhancing customer retention and profitability.

Cyclical nature: The sector is highly sensitive to economic cycles, with companies experiencing significant declines in demand and pricing power during recessions or economic slowdowns.
Complex and fragmented supply chains: The reliance on diverse, often global suppliers creates vulnerability to disruptions, delays and bottlenecks, which can impact production schedules and increase costs.
Capital-intensive operations: High upfront investments in machinery, infrastructure and ongoing R&D expenditures are required to maintain competitiveness and innovation, creating significant financial strain and barriers to rapid scaling.
Exposure to commodity price volatility: The sector depends heavily on metals such as aluminum, copper, steel and nickel. Fluctuations in commodity prices can lead to increased production costs and margin pressure.
Long sales cycles and project lead times: Due to the complexity and scale of machinery projects, sales processes and delivery timelines are often lengthy, which can slow cash flow and reduce agility in responding to market changes.
Regulatory and compliance challenges: Stringent safety, environmental and industry-specific regulations increase compliance costs and can slow product development or market entry.
Technological disruption risks: Rapid technological advancements require continuous adaptation; companies that fail to innovate quickly risk losing market share to more agile competitors or disruptive startups.

Sector Overview

What to watch ?

Global economic outlook: Macroeconomic conditions continue to weaken. Following modest growth of just +2.9% in 2023 and +2.8% in 2024, global GDP growth is projected to remain sluggish in 2025 and 2026. This prolonged slow recovery could constrain sector growth in the near term, particularly given its sensitivity to economic cycles.
Evolving industrial policies: Major economies like the US, China, India, Germany and Brazil are ramping up industrial policies and subsidies. Governments are increasingly shaping industrial priorities and strategically supporting innovation and technology adoption, which could reshape competitive dynamics and investment flows within the sector.
Business confidence & manufacturing activity: Key indicators such as business confidence and Purchasing Managers’ Indexes (PMIs) serve as vital barometers for sector health. Over 2024 and the first half of 2025, these indicators have showed a relatively flat evolution, with no clear sign of improvement.
Supply-chain normalization: The severe supply-chain disruptions of 2020-2022 have notoriously eased throughout 2023 and 2024, aided by a slowdown in global trade volumes. This relief has been particularly beneficial for machinery manufacturers, who depend heavily on a global network of parts suppliers.
Commodity price volatility: Metal prices remain volatile. While steel and nickel prices have softened, aluminum and copper prices continue showing upticks. These fluctuations present ongoing margin risks for manufacturers reliant on these raw materials.
Disinflation and better financial conditions: Inflationary pressures have eased, with global inflation expected to moderate. Thanks to this, financing conditions should continue easing throughout the year in Europe particularly. However, companies in the US should remain cautious as the trade war could increase prices in the country.
Accelerating AI adoption: Leading firms are rapidly integrating AI and machine learning into production, driving efficiencies and enabling the development of advanced machinery. The ongoing wave of industrial automation presents substantial growth opportunities and productivity gains.
Sustainability and regulatory pressures: Increasing global focus on environmental regulations and sustainable manufacturing practices is driving demand for greener machinery and energy-efficient equipment. Compliance costs and the pace of adopting sustainable technologies will be crucial factors to monitor.
Geopolitical tensions and trade policies: Ongoing geopolitical uncertainties and evolving trade policies may disrupt supply chains and market access. Machinery producers need to stay agile in navigating higher tariffs, export controls and shifting alliances.

The global machinery and equipment sector is valued at approximately USD715bn in 2025. North America accounts for the largest share of the market at 31%, followed by Europe at 29% and Asia-Pacific (APAC) at 24%. The remaining 16% is divided between South America and other regions.

Over the past two years, new orders in the global machinery and equipment sector have exhibited mixed performance. In 2023, orders softened notably due to recession fears, tighter financial conditions and heightened geopolitical uncertainty. Despite this, companies maintained the output levels by drawing down elevated backlogs accumulated during the post-pandemic recovery and periods of supply-chain disruption. This trend continued throughout 2024, with backlogs declining steadily as production consistently outpaced incoming orders. In the first half of 2025, new orders have remained relatively muted, reflecting cautious investment behavior across key end-markets such as construction and agriculture. However, a gradual recovery in global business confidence and rising demand from technology-driven sectors (particularly those linked to automation and AI infrastructure) is expected to support a moderate rebound in order intake by the second half of 2025. As a result, backlog levels should begin to stabilize after two consecutive years of decline.

In terms of output, the cyclical machinery and equipment sector continues to experience the ripple effects of a complex global environment. Following a sharp pandemic-driven production contraction in 2020 (-11% year-on-year), the sector rebounded strongly with growth of +12% in 2021 and +15% in 2022 as end-markets resumed operations and increased orders. However, this momentum slowed considerably in 2023 (+3.1%) and reversed slightly in 2024 (-2.0%). For 2025, the outlook is cautiously optimistic, with global sector growth projected at +2.2%, supported by easing inflation, stabilizing interest rates and relatively increasing investment in infrastructure and digital transformation across key regions.

Geographically, although the machinery and equipment sector in Europe has underperformed relative to Asia and the US over the past two years, 2025 has shown steady month-on-month improvement in the region. This gradual recovery reflects easing inflation and supply pressures. Nevertheless, despite this positive trend, the sector remains below the strong performance levels seen in 2021-2022 following the pandemic.

To sum up, the global machinery and equipment sector entered 2025 in a cautious but stabilizing position. While certain end-markets such as construction and agriculture remain under pressure, the sector is supported by renewed industrial policies, technology-driven demand (including robotics) and a steady shift toward electrification and automation. Long-term fundamentals remain solid, though geopolitical uncertainty and still-elevated financing costs continue to challenge business confidence.

Subsectors

The machinery & equipment sector includes the following sub-sectors: construction machinery, agricultural & farm machinery, industrial machinery and equipment, mining equipment and robotics.

Contacts

Maria Latorre

Sector Advisor

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