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Siemens: Machine Tool Finance Programs "Highly Important" for Investment

December 11, 2013, 07:01 AM
Filed Under: Machine Tools

New research from Siemens' Financial Services unit (SFS) has shown the growing importance of asset finance in enabling machine tool investments. The study was conducted among the global top 80 machine tool Original Equipment Manufacturers (OEMs), representing 55% of machine tool sales worldwide.

In the study, 84% of the respondents reported that their customers are experiencing increased difficulty in accessing traditional bank loans to fund equipment acquisition. At the same time, 64% of the surveyed OEMs confirmed that asset finance has been "highly important" in enabling their customers to acquire equipment in the two previous years. Demand for asset financing techniques is expected to grow through to the end of the decade, with 68% of the respondents pointing to asset finance becoming "highly important" in the next five years. Leasing, specifically, has been highlighted by 55% of the OEM respondents as the principal funding source utilised by machine tool users.

In the US, machine tool consumption growth between 2007 and 2012 far outstripped GDP growth in the same period. This can be attributed to a US manufacturing renaissance which has benefitted from a host of factors including lower transportation and energy costs. The shale gas revolution and increased availability of cheap energy are expected to bring down manufacturing costs even further, making domestic production in the US an increasingly attractive option. Demand for new planes and expected increase in vehicle sales are also helping create opportunities for the US machine tool industry.

"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," said Gary Amos, Head of Americas of SFS Commercial Finance unit. "Specialist asset financiers like SFS have a more in-depth understanding of machine tools as an asset category. They are, therefore, able to craft financing arrangements that fit the end-user's particular circumstances and cash flow needs."

The US machine tool users are often specialist component manufacturers anchored in the supply chains of high value-added manufacturing such as vehicles, aircraft, machinery and medical devices. Since many of these companies are small and medium-sized enterprises who have difficulty accessing traditional bank financing for equipment acquisition, availability of affordable and appropriate finance will prove increasingly crucial in enabling them to capitalize on the industrial uptake.

The study concludes that machine tool OEMs are increasingly interested in integrating finance in their sales proposition and leasing and renting arrangements are progressively coming to the fore as the financing method of choice. Such tailored financing arrangements ultimately could result in benefits that range from improved productivity and access to new markets, to multi-tasking and operating cost savings from energy efficiency. The research findings also underline the rising demand for equipment (asset) finance from the customers of machine tool OEMS - a demand which is predicted to steadily rise to the end of the decade.

Research was conducted by telephone amongst the global top 80 machine tools original equipment manufacturers (OEMs) between July and August 2013. All vendors interviewed had sales across the ten countries which are the subject of the study. These countries include China, France, Germany, India, Poland, Russia, Spain, the UK, the US and Turkey. Respondents were interviewed on their views in relation to the importance, demand and future trends of equipment sales finance.

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