In this section of DEUTZ AG’s Capital Market Day
CEO Sebastian Schulte delves into the remarkable success of the company’s Service business, which has grown substantially and holds further untapped potential. With revenues exceeding €500 million in 2024, DEUTZ aims to reach €1 billion by 2030, leveraging its robust global service network and exploring new growth avenues.
Structure and Overview of Service Business
Sebastian begins by outlining the three core components of DEUTZ’s service business: spare parts, which contribute around 70% of the service revenue; billable service hours (performed by DEUTZ technicians), making up 8%; and the engine exchange business at 23%, where used engines are refurbished and resold. DEUTZ operates in over 130 countries with a vast network of 1,000 dealers, providing global coverage and ensuring that DEUTZ engines receive reliable maintenance worldwide.
Growth Potential in Spare Parts and Service
The global spare parts market for DEUTZ engines is estimated to be around €1.1 billion, but DEUTZ currently serves only 30% of this market. Schulte sees significant potential to grow this share to 40% or even beyond, which translates into substantial revenue growth. Likewise, in the billable service hours segment, DEUTZ has tapped only 14% of the available market, leaving a large portion of the €11 billion market in the hands of competitors. Every percentage point increase in market penetration translates into €18 million in revenue growth, making this an exciting opportunity for DEUTZ.
Key Growth Strategies
Network Expansion
DEUTZ plans to expand its service centres, particularly in the US, where it sees huge growth potential. The company is setting up DEUTZ Power Centers (DPCs), mobile service units that allow technicians to be close to customers, reducing downtime and improving service speed. This initiative alone is expected to add €100 million in revenue by 2030.
Industrial Fleet Management
DEUTZ is moving beyond just servicing its engines to offering maintenance services for entire machine fleets, including non-DEUTZ equipment. Recent service contracts with major OEMs in the material handling industry demonstrate the feasibility of this strategy.
Digital Business Models
DEUTZ is also investing in digitization, connecting more engines to its Fusion Hub for real-time data collection. With over 10,000 units already connected, DEUTZ plans to scale this number to 20,000 by next year. This data enables services like predictive maintenance, reducing unexpected engine failures and improving customer operational efficiency. The long-term vision includes offering Uptime as a Service and ensuring minimal customer downtime by anticipating maintenance needs. This initiative is expected to contribute €50 million to the service revenue by 2030.
Mergers and Acquisitions
DEUTZ’s M&A strategy is crucial to achieving its ambitious €1 billion revenue target. The company is focused on acquiring smaller service businesses, with recent acquisitions including Diesel Motor Nordics, Hor Shield, and a strategic partner in Poland. These acquisitions, along with the Rolls-Royce Power Systems service business integration, are expected to add €200 million to DEUTZ’s service revenues.
Conclusion
Sebastian concludes by emphasizing the meticulous planning and realistic goals that underpin DEUTZ’s journey to €1 billion in service revenue. These are backed by ongoing initiatives and the dedication of the DEUTZ teams, providing a solid foundation for the company’s future growth.