The 9th edition of the VDMA Business Climate Survey was conducted in April 2021. More than 100 participants across all sectors of the mechanical engineering industry shared their evaluations regarding their company’s business and the situation of their most important customer industries.
VDMA India conducts the VDMA Business Climate Survey twice every year, in spring and again in autumn. This survey is an integral part of our association’s activities here in India. And we regard this joint initiative between the association and our members as an additional compass playing a major role in future decision making. The big advantage of participating is to see and get to know what the industry peers feel about their business in terms of growth, upcoming opportunities and trends!
A concise and consolidated report is prepared and then circulated to our members based on the feedback without disclosing any critical information about the respondent or the organization. The participants to this survey receive the full report whereas the other member companies receive a limited edition of the results.
About the VDMA Business Climate Survey
» Survey duration: 12. April – 2. May 2021
» Approx. 600 VDMA member companies in India were addressed
» 106 participants completed the survey
» Sample size N = 106
» In parallel, the same survey has been run by VDMA Offices in China, Russia, and Brazil.
Economic Situation
The output of the Indian manufacturing industry increased by almost 6% year-on-year in the first quarter of this year. The growth of the manufacturing output thus reached its long-term trend. The mechanical engineering industry recovered significantly in the first quarter of this year. Growth will also be seen in the following months, as large declines were recorded in the previous year.
Nonetheless, the current wave of infections is leading to a slowdown in activity in the economy, which will almost certainly be reflected in the further recovery. The survey results are consistent with these values. Almost 91% stated that the situation is either good or satisfactory. The adverse impact of Covid-19 is still evident, but the business situation for the firms has improved significantly since autumn 2020 and especially since spring 2020.
Moreover, the current situation of capacity utilisation of said companies developed positively. The capacity utilisation is at a level that was last reached more than 2 years ago. Regarding the current stock of orders, roughly half of the companies say that orders are above normal. This is another indication of an improving business situation. Hindered industry participants name the following obstacles: Coronavirus Pandemic is the most frequent problem, followed by shortages of raw or input materials and lack of orders.
Current Business Situation
» 37% of the participants report a good business situation. While 9% still assess the current situation as bad. The majority of the companies state that their situation is satisfactory (54%).
» Nevertheless, the current sentiment has been improving compared to the sentiment in autumn 2020.
» In our last survey, 27% of the participants reported a bad business situation while 11% stated that their business situation was good.
Expected change in revenue, 2020 and 2021
On average, revenue dropped 9% in 2020, and an increase of 15% is expected in 2021
Implications and outlook
Over the months, there were several relaxations and industrial activities have begun to inch towards normalcy until the Covid-19 setback in India which has again resulted in the decline of business. The situation is improving but it will take time.
The road to recovery is slow, but the effort is sustained. Due to the supply chain disruption, many industries are facing difficulties in receiving and executing orders due to the unavailability of regular raw material supply and they are facing problems on the cash flow end due to cash flow cycles being longer and highly disrupted over the course of this pandemic. This issue could prolong on account of the third wave.
In Autumn 2020, 49% of the member companies felt that their current stock of orders was below normal. In Spring 2021, 17% feel the same way. We can see the decrease in negative sentiments mainly because of the pent-up demand and the festive season that India is in. The economic outlook is optimistic where only 14% of the respondents expect their situation to worsen during the next six months while a good 55% expect an improving situation. The remaining part believes that the situation won’t change much.
The companies expect – on average – an increase in sales revenue of 15% this year. Sales revenue dropped by 9% during 2020 according to the companies. Hence, participants expect their sales revenue to recover to the pre-crisis level. Stay tuned, the next survey is expected to come around October 2021. We look forward to the participation of all our members.