Research and development

Research and development expenditure (after deducting grants) 1)

P036_Chart: Research and development expenditure (after deducting grants)

R&D spending stepped up significantly 1)

Expenditure on research and development in 2017 amounted to €70.9 million (2016: €53.5 million). After deducting grants received from development partners and subsidies, expenditure was €67.0 million (2016: €50.4 million), which was in line with the planning. The R&D ratio (after deducting grants), i.e. the ratio of net development expenditure to consolidated revenue, thus increased to 4.5 per cent (2016: 4.0 per cent). The rise in R&D expenditure compared to spending in the prior year was largely attributable to the expansion of our product range. In the year under review, 26.1 per cent of development expenditure after deducting grants was capitalised (2016: 18.1 per cent).

Spending by the DEUTZ Compact Engines segment after deducting grants came to €63.5 million (2016: €47.7 million) and that of the DEUTZ Customised Solutions segment came to €2.2 million (2016: €2.7 million). The Other segment’s spending after deducting grants amounted to €1.3 million (2016: €0.0 million); this figure included Torqeedo’s R&D expenditure from the fourth quarter of 2017.

Stage V certified

In previous years, we had completely overhauled our engine portfolio due to the introduction of the EU Stage IV/US Tier 4 emissions standards. Our engines are also equipped to meet the next European emissions standard, EU Stage V 2), which comes into effect in 2019. Most of our TCD engines in the 3.6 to 7.8 litre capacity range were certified for Stage V in 2017 – the first engines worldwide to obtain such certification. It is not yet known whether a further emissions standard will be introduced in the USA.

Ongoing enhancements to the product portfolio

We are expanding our product range through new development, alliances and acquisitions. The D/TD/TCD 2.2, for example, is a three-cylinder engine that we are developing on the basis of the existing four-cylinder engine with a 2.9 litre capacity. In addition, we will offer smaller engines not only in a diesel variant but also in a liquefied petroleum gas (LPG) variant. The latter is a particularly interesting option for forklift trucks and other material handling applications. We are also planning to offer ‘bi-fuel’ engines, i.e. engines that can run on LPG and petroleum.

Our plans for our larger engines include the introduction of a four-cylinder engine with a 9 litre capacity and six-cylinder engines with capacities of 12.0, 13.5 and 18.0 litres in cooperation with Liebherr Machines Bulle S.A. These industrial engines with outputs between 200 and 620 kW represent an important extension to our upper power output range.

The diesel engine debate is driving the development of new technologies. Alternative drives will also play an important role in DEUTZ’s core segments in future. DEUTZ is seizing the opportunities arising from the changing conditions by introducing the E-DEUTZ strategy to complement its innovative drive systems. The strategy focuses on the development and manufacture of hybrid and all-electric drive systems for off-highway applications. The acquisition of Torqeedo, the market leader for electric drives for boats, is significantly accelerating and supporting the electrification of DEUTZ’s drive units. Some of the greatest potential is to be found in the substantial reduction of fuel consumption and the lowering of operating costs.

Most of our medium-duty engines are now Stage V certified. Expected demand for these engines has increased as a result. In addition, the E-DEUTZ strategy is opening up new opportunities for our product portfolio. We have therefore decided to stop the complete redevelopment of the four-cylinder 5.0 engine that had been planned. Instead, we will meet customers’ requirements from our existing product portfolio and by refining existing engines, which will involve significantly less capital expenditure. Details of the related impairment loss can be found in the ‘Earnings performance’ section.

We have also continued to concentrate on data transfer and analysis (Industry 4.0) so that we can offer our customers new services in the future. As a first step, we made our new DEUTZ Connect App available to customers in November 2017.

Preliminary development work intensified

Exhaustive research and development will continue to form the basis for innovative products and services from DEUTZ in future. We have recently expanded our activity in the field of alternative fuels. As well as looking at natural gas, we are focusing on hydrogen and on fuels generated from renewable sources. The aforementioned projects under the E-DEUTZ strategy are still classified as preliminary development work at the moment.

1) Research and development expenditure constitutes actual spending on R&D projects. It differs from the research and development costs recognised in the income statement in that development expenditure that can be capitalised is deducted and amortisation on completed development projects is added.
2) Regulation (EU) 2016/1628 of the European Parliament and of the Council dated 14 September 2016.