Mechanical engineering is the backbone of the German economy and is also strongly represented in Austria and Switzerland. Which metrics are typical, which are critical? A benchmark guide for the mechanical engineering industry.
Note: The market data in this article is based on information from VDMA and national statistical offices. The benchmark values are reference values for orientation and vary by company size and segment.
Market Overview
Mechanical Engineering in Numbers (VDMA, Destatis 2024)
| Region |
Revenue |
Companies |
Employees |
| Germany |
~265 billion EUR |
~6,700 |
~1.1 million |
| Austria |
~25 billion EUR |
~1,200 |
~80,000 |
| Switzerland |
~30 billion CHF |
~900 |
~75,000 |
Sub-Segments
| Segment |
Share |
Characteristics |
| Drive technology |
~15% |
Motors, gearboxes |
| Machine tools |
~15% |
Lathes, milling machines |
| Material handling |
~12% |
Logistics, handling |
| Packaging machines |
~10% |
Consumer goods-related |
| Textile machines |
~5% |
Specialized |
| Other |
~43% |
Very diverse |
Benchmark Metrics
| Company Size |
Weak |
Average |
Good |
| Small (<50M EUR) |
<20% |
25-35% |
>40% |
| Medium (50-250M EUR) |
<25% |
30-40% |
>45% |
| Large (>250M EUR) |
<30% |
35-45% |
>50% |
Industry characteristic: Mechanical engineering is capital-intensive (machinery, inventories), but traditionally solidly financed.
Return on Sales (ROS)
| Segment |
Weak |
Average |
Good |
| Serial machines |
<2% |
4-6% |
>8% |
| Special machines |
<3% |
5-8% |
>10% |
| Plant engineering |
<2% |
4-6% |
>8% |
| After-sales/Service |
<5% |
10-15% |
>20% |
Important: After-sales is often the margin driver.
Liquidity III (Current Ratio)
| Assessment |
Value |
| Critical |
<1.0 |
| Weak |
1.0-1.3 |
| Adequate |
1.3-1.6 |
| Good |
1.6-2.0 |
| Very good |
>2.0 |
EBITDA Margin
| Segment |
Weak |
Average |
Good |
| Standard |
<6% |
8-12% |
>14% |
| Premium/Niche |
<8% |
12-16% |
>18% |
Mechanical Engineering-Specific Metrics
Order Intake / Book-to-Bill
| Value |
Meaning |
| <0.9 |
Contraction, demand declining |
| 0.9-1.0 |
Stagnation |
| 1.0-1.1 |
Healthy growth |
| >1.1 |
Strong growth (check capacity) |
Order Backlog (in months)
| Months |
Assessment |
| <3 |
Critical, underutilization imminent |
| 3-6 |
Tight |
| 6-9 |
Healthy |
| 9-12 |
Very good |
| >12 |
Excellent (but watch delivery times) |
Export Ratio
| Ratio |
Typical for |
| <20% |
Regional, niche |
| 20-50% |
Nationally oriented |
| 50-70% |
Export-oriented |
| >70% |
Global player |
DACH Average: ~65% (Germany), ~50% (Austria), ~75% (Switzerland)
Service Share of Revenue
| Share |
Assessment |
| <10% |
Development potential |
| 10-20% |
Average |
| 20-30% |
Good |
| >30% |
Excellent (stable revenue) |
R&D Ratio
| Ratio (% of revenue) |
Assessment |
| <3% |
Low |
| 3-5% |
Average |
| 5-8% |
Innovative |
| >8% |
Very innovative (niche/high-tech) |
Cost Structure
Typical Cost Breakdown
| Position |
Share |
| Materials |
40-50% |
| Personnel |
25-35% |
| Other |
10-15% |
| Depreciation |
3-6% |
| EBIT |
5-10% |
Personnel Expense Ratio by Segment
| Segment |
Low |
Typical |
High |
| Serial machine manufacturing |
20-25% |
28-35% |
>40% |
| Special machine manufacturing |
30-35% |
38-45% |
>50% |
| Plant engineering |
15-20% |
22-30% |
>35% |
Material Ratio
| Segment |
Low |
Typical |
High |
| Serial machine manufacturing |
45-50% |
50-55% |
>60% |
| Special machine manufacturing |
35-40% |
42-48% |
>55% |
| Plant engineering |
50-55% |
55-65% |
>70% |
Working Capital in Mechanical Engineering
Typical Metrics
| Metric |
Typical |
Note |
| DSO (Receivables) |
50-70 days |
Often longer after acceptance |
| DIO (Inventory) |
90-150 days |
Long production times |
| DPO (Payables) |
40-60 days |
Standard |
| Cash Conversion Cycle |
100-150 days |
Capital-intensive |
Specialty: Advance Payments
Common in mechanical engineering:
- 30% advance payment at order
- 30% at delivery
- 30% at acceptance
- 10% retention
Balance Sheet Impact:
- Advance payments received as liability
- Reduce tied-up capital
- Important for liquidity
Risk Factors
Cyclicality
Mechanical engineering is highly cyclical:
- Early indicator for economic downturn
- Order intake reacts quickly
- Revenue follows with delay (order backlog)
Historical Fluctuations:
- 2009: Revenue -23%
- 2020: Revenue -12%
- 2022: Revenue +9%
Structural Challenges
| Risk |
Impact |
| China competition |
Price pressure in standard segment |
| Digitalization |
Investment requirement |
| Skills shortage |
Growth brake |
| Energy costs |
Margin pressure |
| Supply chains |
Availability, prices |
Red Flags in Mechanical Engineering
| Signal |
Interpretation |
| Order intake <0.8 |
Demand collapsing |
| Order backlog <3 months |
Short-term underutilization |
| Material ratio rising sharply |
Price pressure or inefficiency |
| Service revenue declining |
Installed base shrinking |
| R&D ratio below 2% |
Innovation stop |
Yellow Flags
| Signal |
Monitor |
| Export ratio rising too fast |
Currency risk, dependency |
| Single order >30% revenue |
Concentration risk |
| Book-to-bill persistently >1.2 |
Possible delivery problems |
What to Check Additionally?
Technology:
- Patent portfolio
- Product age (lifecycle)
- Degree of digitalization
Customers:
- Industry dependency (automotive!)
- Customer concentration
- Geographic distribution
Production:
- Depth of manufacturing
- Degree of automation
- Capacity utilization
After-Sales:
- Installed base
- Service contracts
- Spare parts margin
Valuation of Mechanical Engineering Companies
Multiples
| Type |
EV/EBITDA |
EV/Revenue |
| Standard/Commodity |
5-7x |
0.5-0.8x |
| Specialized |
7-9x |
0.8-1.2x |
| Premium/Niche |
9-12x |
1.0-1.5x |
| Market leader/Global |
10-14x |
1.2-2.0x |
Value Factors
| Factor |
Effect |
| High service share |
++ |
| Strong patent portfolio |
+ |
| Diversified customer base |
+ |
| Dependency on automotive |
- |
| Low internationalization |
- |
| High cyclicality |
- |
Regional Characteristics
Germany
- Largest mechanical engineering location in Europe
- VDMA as strong association
- Hidden champions
- Strong concentration in Baden-Wuerttemberg, Bavaria, NRW
Austria
- Strong in special machine manufacturing
- Supplier to German industry
- Smaller, specialized players
Switzerland
- Highest value added per employee
- Premium segment
- Strong in precision and quality
- Watch/medtech-related machines
Conclusion
Mechanical engineering is a cyclical but fundamentally solid industry with a strong position in the DACH region. The metrics differ greatly by segment - special machine manufacturers have different benchmarks than series manufacturers.
For analysis, important points:
1. Classify segment correctly
2. Consider cycle position
3. Use order intake as leading indicator
4. Evaluate service share as stability factor
5. Check dependencies (automotive, export)
The transformation through digitalization and new drivetrains will significantly change the industry - those who invest have a future; those who stagnate will struggle.
Analyze Mechanical Engineering Companies: Firmium provides financial metrics and industry comparisons for your mechanical engineering analysis.