Germany Testing, Inspection, and Certification Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Germany Testing, Inspection, and Certification Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Germany Testing, Inspection, and Certification Market was valued at USD 20.78 billion in 2020 and is expected to reach USD 28.76 billion by 2026 at a CAGR of 5.7% over the forecast period from 2021 - 2026. The advent of stringent environmental norms and increasing health safety measures play a significant role in ensuring the infrastructure, services, and products are met with the standards and regulations in Germany. With the trend of testing and inspection across industries at regular intervals, such as oil and gas becoming a mandate, the testing, inspection, and certification (TIC) services are expected to grow in demand, irrespective of the industrial seasonality. Germany is significantly the largest economy in Europe and contributed almost a quarter of the EU's GDP (24.7%) in 2019. The country has a robust foothold of players, such as the Dekra Certification and TUV SUD Group, contributing to the market's growth positively.

Key Highlights

• In May 2019, TÜV SÜD PSB signed a Memorandum of Understanding (MoU) with the International Society of Automation to conduct certification assessments through ISASecure certification specifications. The company is now eligible to certify automation and control system products and organizations independently. This will ensure robust defense against cybersecurity attacks and provide assurances of product conformity for end-users of automation technology. Moreover, in Germany, the federal states are responsible for official food control and inspection tests. Businesses involved in the production, processing and selling of foodstuffs are required to document the quality of the raw materials used by carrying out in-house checks. The rising requirement for food safety and increasing international trade is expected to offer potential opportunities over the forecast period.
• Moreover, Germany's power sector is one of the primary sources of demand for NDT after the oil and gas sector. The bulk share in power generation is held by fossil fuels, which is approximately 55% of the total energy generated in the country. In comparison, the renewables share stood at 25% of the entire electricity generation. In the future, the country will only depend on renewable energy, which has to provide 80% of the power by 2040. This has raised several environmental concerns in Germany, similar to several other European countries. This has also resulted in several stringent regulations in Germany regarding the environmental pollution caused by burning fossil fuels for power generation, thereby positively impacting the market's growth. The country will shut down all its coal-fired plants by 2038.
• Furthermore, Germany's construction sector is one of the largest sources of demand for NDT in the country. The construction industry continues to contribute immensely to the national economy every year despite several setbacks, primarily driven by a surge in residential construction. Driven by rising incomes, low-interest rates, and a high level of net migration, the housing market is experiencing strong demand. Also, 3rd party certification services were absent within the software supply chain in Germany, where TÜV SÜD addressed it by creating testing methods that meet the requirements of 3rd party certification. TÜV SÜD has also developed a test mark and certification service for OpenChain, a software supply chain where open source is delivered with consistent compliance information.
• With the outbreak of COVID-19, the testing, inspection, and certification companies headquartered in Germany were able to provide services for the continued safety of workplace plant and machine safety during the problematic period, which threatened to disrupt the workplaces. In March 2020, the TIC Council, representing the independent testing, inspection, and certification sector, thanked the EU authorities and the Member States for the robust and swift response to the health crisis due to COVID-19 and requested to support the companies in the TIC sector. The companies continued to test, audit, inspect and certify the pharmaceutical and medical laboratories' conformity, as well as the manufacturers of medical devices and protective equipment according to the corresponding legislation and relevant international standards.

Key Market TrendsManufacturing and Industrial Goods are expected to Witness Significant Growth

• Suppliers related services, product, and production-related services, and projects related services are considered to offer scope for this segment. This is one of the emerging segments, which offers enormous potential and opportunity for the market studied, mainly due to advancement and automation in the sector. The type of services provided by the companies in the region include materials testing, product certification, metallurgy and process design, in-plant and operational support, quality control, and management systems certification. The advancement in the manufacturing sector in Germany with Industry 4.0 and concepts, like the Industrial Internet of Things (IIoT), the TIC service providers have a massive opportunity to expand their business over the forecast period.
• In November 2019, TCO Development, provider of the internationally recognized certification for sustainable IT, TCO Certified, formed new cooperation with the Office for Procurement of the German Ministry of the Interior (BeschA). TCO Certified becomes an integral part of the established code of conduct, agreed to by the electronics industry group BITKOM and the BeschA, another step toward more sustainable procurement of IT products. Munich Re Group, a reinsurance company, based out of Germany, provides inspection services that help customers reduce risks and optimize the efficiency of plant and equipment. It provides inspection services for different classes' plant and equipment to assist in compliance with health and safety legislation: boiler/pressure, lifting, electrical/mechanical, dust and fume extraction, power press, fixed electrical wiring.
• In May 2020, RORZE ENGENDERING GmbH, a Germany subsidiary of RORZE CORPORATION, engages in the sales and maintenance of Rorze automation systems in the European market, acquired ISO9001 (Quality Management System) certification. In December 2019, Swissbit AG, a provider of data storage and security solutions for industrial applications and the Internet of Things (IoT), opened its new electronics production facility in Berlin, Germany. The company has strengthened its long-term commitment to Germany as a manufacturing base and has tripled its production capacity for highly integrated electronics. Such instances are expected to positively impact the testing, inspection, and certification sector in the manufacturing and industrial goods industry.
• The German government announced that its industrial production in January 2020 was up 3% from the previous month, which indicates that a two-year downturn in the country's sprawling manufacturing sector was coming to an end but only for it to then be hit by the disruption from the coronavirus. Germany's manufacturing sectors account for around 20% of its GDP as the economy's trade balance is heavily dependant on exports of goods. The Ifo (Institute for Economic Research) business climate index in Germany tumbled to 86.1 points in March from 96.0 points in February, marking the steepest since German reunification in 1990 and the lowest value since July 2009. However, the TIC sector in the country is being utilized by manufacturing companies for remote inspections to maintain the continuity of safety and health compliance.

Automotive is Expected to Hold Significant Share

• The growing automotive production and trends like electric vehicles and autonomous cars are expected to fuel the adoption and demand for TIC services in Germany over the forecast period. In July 2020, Mobileye announced that Germany's independent technical service provider, TÜV Süd, had awarded the company an automated vehicle testing permit, which allows the company to drive its test vehicles in real-world traffic across all German roads up to 130 kilometers per hour. Mobileye plans to start the testing in Munich and also plans testing in other parts of Germany. Automotive testing is widely used as it supports performance testing, materials testing, research and development, safety, and certification for both established and developmental alternative energy fuels and new technologies.
• The German government's goals, to put six million electric vehicles on the road by 2030, and one million by 2020, are creating additional demand from the automotive sector. For instance, In January 2020, the Frankfurt prosecutor's office started investigating whether Mitsubishi vehicles fitted with the company's 1.6- and 2.2-litre four-cylinder turbocharged diesel engines used illegal software to pass emissions tests. In September 2019, Daimler AG, owner of the Mercedes-Benz marque, agreed to pay EUR 870 million in Germany for non-compliance with diesel emissions regulations. Volkswagen was also fined USD 125 million late last year by the Federal Court for making false representations regarding the emissions of over 57,000 diesel vehicles.
• Out of all the industries, Automotive accounts for 17% of the exported goods. Thus, the Germany government focuses that all vehicles must be routinely tested to ensure that they meet German safety standards. In September 2019, TUV Nord was approached by TIP Trailer Services to design and administer a trailer inspection certification scheme. This has enabled TIP to inspect its trailer fleet to an independent standard and reduce Vehicle Off Road (VOR) time by correctly identifying defects at the inspection event. In May 2019, Konrad Technologies and VI-grade together demonstrated the latest test method, Driver in the Loop (DIL) coupled with Sensor Fusion Test, at the Automotive Testing Expo Europe and Autonomous Vehicle Technology Expo 2019 in Germany.
• With the outbreak of COVID-19, new car registrations in Germany plummeted 61% in April 2020 after a 38% decline in March 2020. The country's economy is expected to dip by 6.5% this year; the European Commission has forecasted it. Measures to restrict the movement of people, imposed to contain the spread of COVID-19, have severely hit the car sales hard, leading Germany's Volkswagen to abandon its full-year outlook and issue a profit warning. In April 2020, Germany's auto industry association VDA joined for multiple demands from politicians and auto industry executives, calling for more incentives to revive demand for low emission vehicles in the wake of the coronavirus pandemic. Such instances are expected to significantly reduce the traction of testing, inspection, and certification in the automotive sector.

Competitive Landscape

The Germany testing, inspection, and certification market is moderately fragmented and consists of significant players. However, in terms of market share, the notable players situated in the country, such as TÜV SÜD Limited, dominate the market. Multiple startups and incumbent TIC companies with a digital focus are posing fierce competition with traditional TIC companies. Existing TIC companies are making mergers and collaboration activities a part of their core strategy over the forecast period.

• July 2020 - Hyperloop Transportation Technologies made available the first-ever completed certification guidelines for Hyperloop systems to the public. TÜV SÜD reviewed the Hazard Analysis and Risk Assessment (HARA) of the HyperloopTT system and used it in the development of a guideline that defines the vital safety requirements for the construction, design, and operation of these systems.
• October 2019 - Dekra Germany became the first notified body designated by the European Commission under the In Vitro Diagnostic Regulation (IVDR). Under the current regulatory regime, almost 90% of the IVD industry can self-certify. But with the new law, that percentage shifted drastically, with up to 90% requiring a notified body.

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Companies Mentioned
 
Société Générale de Surveillance SA (SGS SA)
TÜV SÜD Limited
Applus+ Servicios SA
ATG Technology Group
Bureau Veritas SA
Intertek Group plc
A/S Baltic Control Ltd., Aarhus
CIS Commodity Inspection Services BV
DEKRA SE
VIC Inspection Services Holding Ltd.
Vinçotte International SA
RTM BREDA S.r.l.
Kiwa N.V.
AQM S.rl.

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