After difficult months, the U.S. manufacturing industry is approaching the year ahead with cautious optimism. Let's look at the defining trends for 2025.
The global machine manufacturing industry has faced a challenging year marked by declining machinery sales. In the GSA-region alone, revenues dropped by approximately 12%, with a similar trend observed in the United States. As 2025 approaches, machine manufacturers in the U.S. anticipate continued uncertainty, driven by rising raw material and labor costs, potential trade tariff disputes following key global elections, and steady geopolitical tensions.
According to a recent report from the manufacturing Purchasing Manager’s Index (PMI), production in the U.S. continues to decline at the end of 2024 as orders for new products decrease and inventories grow. But the report also highlights a slower pace of contraction, offering signs that the downturn may be easing, giving an overall cautious but positive outlook for the U.S. industry.
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While the economic outlook has taken a slightly more positive turn, the same key challenges and developments still need to be addressed across the machine manufacturing industry in 2025. Manufacturers worldwide are prioritizing strategic investments in their digital infrastructure while facing persistent challenges including the skills gap and overall talent shortage, as well as supply chain disruptions.
As we look toward the future of machine manufacturing in 2025 in the U.S., one of the biggest trends remains digitalization. Manufacturers have continued investing in digital technologies over the last several years despite economic uncertainty, rising costs, and a challenging business climate. Given the need to address elevated material and labor costs, an ongoing skills gap, and potential disruptions from geopolitical factors, investments in digital technologies across machine manufacturing organizations – and in other words, the push toward smart operations encompassing automation, AI, and connected systems – is likely to continue and expand.
A significant trend in this digital evolution is the rise of automation. Over the next decade, factory automation levels are projected to increase from 69% to 79%, reflecting a broader push to automate repetitive tasks and integrate systems such as augmented or virtual reality across the machine manufacturing value chain.
Artificial Intelligence (AI), generative AI and smart manufacturing are poised to play a transformative role in reshaping operations, from production optimization to customer interactions. According to Deloitte’s 2024 Future of the Digital Customer Experience survey, 50% of industrial product manufacturers are already leveraging generative AI tools in their operations, with over 40% of respondents plan to increase their investment over the next three years.
AI and generative AI are transforming machine manufacturing in various aspects:
The rise in data usage is driving advances in predictive maintenance, shaping the future of machine manufacturing. Moreover, AI solutions help machine manufacturers not only optimize their production processes but also gather market intelligence to uncover potential revenue streams in their parts business and improve their customer experience, a crucial aspect in times of declining machine sales.
However, despite its growing use, machine manufacturers are being more cautious about adopting AI, using traditional ROI frameworks to guide implementation. They want to ensure that investments in AI lead to clear benefits like improved efficiency, cost savings, or productivity. Instead of rolling out AI everywhere, many are targeting specific use cases where it can have the biggest impact quickly. This strategy helps reduce risks and lays the groundwork for wider adoption in the future.
A critical factor in the successful deployment of AI is access to quality data. A recent survey indicated that 68% of manufacturing organizations are still struggling with data quality and validation. This includes improving data collection, storage, analysis, and governance to ensure that AI systems have the reliable and relevant data they need to function effectively. Further, companies are still facing issues such as data privacy, cybersecurity concerns, and the need for upskilling workers to interact with AI systems.
As AI technologies evolve, machine manufacturers will adopt generative AI in more areas of their operations. Those who integrate AI with existing systems will gain a competitive advantage in a digital, data-driven industry. Success depends on balancing innovation with caution, ensuring AI aligns with business goals and is backed by strong data infrastructure.
A key trend that will impact the machine manufacturing industry in the years ahead is the decreasing availability of skilled workers. While recent signs of a loosening labor market and weaker demand for machinery have temporarily balanced labor supply and demand, the long-term outlook remains uncertain. A 2024 study by Deloitte and The Manufacturing Institute warns that, without addressing talent challenges, the U.S. manufacturing sector could face a shortfall of 1.9 million jobs over the next decade.
This shortage is driven by a combination of factors:
Further, favorable economic conditions in 2025 – such as lower interest rates and continued investments in U.S. manufacturing – could spur renewed demand for machinery and equipment. If that happens, labor shortages are likely to intensify again. Manufacturers must be proactive in managing their talent to avoid worsening these issues.
One way to mitigate the impact of labor shortages is by focusing on reducing turnover, which remains a significant cost driver for many businesses.
According to a 2024 survey by the UKG Workforce Institute, 60% of U.S. manufacturers report that the cost to replace one skilled frontline worker can range from $10,000 to $40,000. Additionally, more than half of HR leaders surveyed stated that employee turnover has a moderate to severe impact on their bottom line. With wages continuing to rise, the ability to retain and develop skilled workers has become a vital lever for manufacturers aiming to maintain profitability and operational efficiency.
To ensure a steady, skilled workforce in the long run, machine manufacturers must invest in strategies that prioritize retention, such as offering competitive wages, upskilling opportunities to manage new skill requirements around emerging technologies, and establishing a positive work culture, even in times of economic challenges. By proactively tackling the talent gap, companies can position themselves for success once competition for skilled workers intensifies again.
The global manufacturing sector has seen some improvements in supply chain conditions since the peak of the COVID-19 pandemic, but challenges persist. Lead times for production materials, while better than their 2022 high, are still much longer than they were before the pandemic. As companies plan for 2025, supply chains are likely to face ongoing challenges like disruptions, delays, and higher costs. These issues highlight the need for greater agility and efficiency.
A major concern for machine manufacturers, aside from declining sales, is the ongoing shipping delays. Geopolitical tensions and instability in key shipping routes continue to disrupt the global flow of goods, leading to higher shipping costs and delays, particularly in the important parts business
The previously mentioned labor shortages across the value chain – from production to transportation and warehousing – remain a major challenge. Persistent gaps, such as global truck driver shortages (over 7 million truck driver positions could be unfilled by 2028), are causing bottlenecks and delays at critical supply chain stages such as replacement parts, which cause costly machine downtimes at customers. With fewer workers available, companies may face more delays and rising operational costs in 2025.
Another challenge is the rise in input costs. A 2024 survey by the National Association of Manufacturers (NAM) shows manufacturers expect wages and raw material costs to increase by 2.7% or more. As materials and skilled labor grow more expensive, machine manufacturers will need to absorb these costs or pass them to customers, potentially squeezing profit margins and driving the need for cost-effective solutions.
In response to these ongoing challenges, machine manufacturers are adopting strategies to improve agility and efficiency both in the supply chain as well as the aftermarket. This includes investing in digital technologies that facilitate real-time tracking of goods, better forecast demand and improved inventory management. By adopting data-driven strategies, companies can minimize the impact of disruptions and better control costs. Moreover, there is an increased focus on diversifying supply sources and reducing dependency on single suppliers or regions that are prone to instability. For manufacturers in the GSA-Region, concerns about a further increase in trade barriers such as tariffs or export restrictions, combined with attractive location conditions, make a strong presence in the major market of the U.S. essential.
Machine manufacturers that use AI-supported tools for big data, advanced analytics, and supply chain digitization will be better prepared to improve operations and adapt to changing markets. By using AI-driven solutions for market intelligence to improve their aftermarket, machine manufacturers can not only benefit from better lead times but also discover additional revenue potential by adjusting to marked-based pricing strategies. As machinery sales decline, the parts business is becoming increasingly important for staying profitable despite rising costs and disruptions. By focusing on flexibility, diversification, and efficiency, machine manufacturers can reduce risks and compete more effectively in the global market. Building a stronger, more resilient supply chain and parts business will continue to be essential to manage the continued pressures of 2025 and beyond.
While investment in clean technology has continued throughout 2024, recent trends indicate a deceleration compared to the previous year. According to Deloitte’s analysis of Clean Investment Monitor data, U.S. clean tech manufacturing investment remains robust, but the pace has slowed since 2023. This suggests that while companies are still committed to the transition, they are following a more cautious and strategic approach to investments in this space.
Despite the slowdown, there remains a clear and unwavering commitment to electrification and decarbonization in manufacturing in general. A closer look at investor reports from heavy equipment and engine manufacturers shows that many are continuing to make targeted investments in low-carbon technologies. Machine manufacturers seem committed to these objectives even as they operate in a challenging business climate marked by economic uncertainty and fluctuating costs.
The focus on reducing operational emissions is not only driven by internal goals but also by external pressures, particularly from customers who are increasingly prioritizing sustainability in their purchasing decisions.
Looking toward 2025, however, several factors could shape the future of clean tech manufacturing. Government incentives and regulatory policies will play a pivotal role in either accelerating or hindering progress. The potential for new incentives aimed at reducing carbon footprints and encouraging the development of green technologies remains a significant factor.
Overall, while investment in clean technology manufacturing has slowed in 2024, the sector’s commitment to electrification and decarbonization remains strong. In addition to regulatory considerations, machine manufacturers will need to balance their long-term sustainability goals with the immediate challenges of economic pressures, such as rising material costs, supply chain disruptions, and labor shortages.
In 2025, the U.S. manufacturing industry is expected to face similar trends like last year, but influenced by an increasingly optimistic economic outlook. To position themselves as leaders in the industry, machine manufacturers might consider taking advantage of targeted investments in their digital and data foundation, advanced technologies, and high-ROI use cases, such as:
Advanced talent planning and management tools that can support a skills-based approach, lead to better retention, and build a workforce for the future. In summary, while 2025 presents a challenging yet dynamic environment, machine manufacturers who prioritize innovation, technology investment, and strategic planning will be well-equipped to thrive. By using these advancements, manufacturers can drive productivity, reduce costs, and position themselves at the forefront of a rapidly changing industry.
Curious to learn more about how MARKT-PILOT solutions can support your company realize the full potential of these trends in machine manufacturing? Request your personalized demo with one of our experts and discover how market-based pricing strategies can improve the parts business of your company.
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