Manufacturing Economics in 2026 and Beyond: A Transformative Opportunity for OEMs

An Expert View from Taylor St. Germain, ITR Economics

Disclaimer: The following is an AI summary of a presentation on current economic conditions by ITR Economics. It is not financial advice.

OEM leaders are no stranger to alarming headlines forecasting turbulence in manufacturing, but stepping out of the noise and looking objectively at the data reveals a far more encouraging story. ITR Economics sees OEMs entering a rare window of general growth filled with opportunity for those ready to invest in capacity, talent and technology.

The coming four years will reward OEMs that expand strategically, automate intelligently and strengthen supply chain resilience. While a cyclical downturn awaits later in the decade, periods of softness can be moments of opportunity for those who are prepared. It’s a call to build strength during the expansion, so you can capitalize when others pull back.

Automated material handling equipment operating on a clean, modern OEM production line with robotics and conveyor systems.
An OEM manufacturing floor where a team member reviews performance analytics.

The Economic Outlook: How to Prepare for Strong OEM Growth

Global conditions are stabilizing, and U.S. industrial production, the metric most aligned with OEM activity, has moved back into positive territory after the 2024 dip. ITR Economics forecasts 12 quarters of general growth through 2028.

For OEMs, this means increasing demand for equipment, components and production technologies. The challenge isn’t generating orders. It’s scaling profitably and efficiently.

What OEMs should prioritize now:

  • Capacity expansion aligned to customer demand cycles
  • Capex that boosts throughput and reduces changeover time
  • Supplier diversification for critical components
  • Visibility systems to manage volatility and improve forecasting

OEMs who make these moves early will be positioned to own market share throughout the upcycle.

Tariffs & Trade: OEMs Must Lead with Agility and Scenario Planning

Tariff environments affect OEMs differently than downstream manufacturers. With the high import content of many electronic components, OEM supply chains feel tariff volatility quickly. Meanwhile, shifting trade relationships, like stronger U.S. to Europe export flows, create new opportunities for OEM market expansion.

What OEMs should do:

  • Build multi-regional sourcing strategies to reduce single-country dependency
  • Strengthen domestic supplier partnerships, especially in microelectronics and fabricated parts
  • Use indexed contracts with customers to stabilize pricing during input cost fluctuations
  • Explore tariff engineering with suppliers to reduce exposure

Agility—not avoidance—is how OEMs win under persistent tariff conditions.

Costs, Inflation & Margins: Protecting Profit in a High-Demand Environment

OEMs are uniquely exposed to inflationary pressures due to complex BOM structures and long production lead times. As the expansion accelerates, costs will rise from:

  • Materials impacted by tariffs
  • Labor demand pushing wages up meaningfully
  • Energy costs influenced by datacenter expansion
  • Higher interest rates, expected to approach 7–8% by 2029

OEMs should use these strategies to defend and expand margin:

  • Lock in financing for major equipment or facility upgrades within the next 6–9 months
  • Create value-based pricing models with automatic escalators
  • Invest in process automation, robotics and digital work instructions
  • Improve inventory intelligence to reduce working capital strain

This is how OEMs turn strong sales into strong profitability.

OTTO 1500 autonomous mobile robot carrying materials through a manufacturing facility at Mauser Packaging Solutions.
An OTTO 1500 autonomous mobile robot transporting materials at Mauser Packaging Solutions to enhance efficiency and reduce manual movement.

Talent: OEM Workforce Challenges Require Strategic Design

OEMs face distinct staffing pressures: technical roles, precision assembly, engineering and production planning are tight labor pools. While the market is slightly more flexible today, it will tighten sharply by late 2026.

OEMs should take these actions to stay ahead of labor market trends:

  • Hire ahead of need. Today’s slight slack won’t last.
  • Leverage senior technicians and engineers to mentor and upskill younger hires.
  • Turn Gen Z’s tech fluency into value through digital MES systems, data analytics and machine interfaces.
  • Deploy technology like AI and industrial robotics to shift from automation to autonomy and reduce reliance on scarce skill sets.

A proactive workforce strategy will allow OEMs to scale when demand peaks.

Looking Toward 2030: OEMs Must Build Antifragile Systems

ITR Economics expects a gradual economic downturn from 2030–2036. For OEMs, that means preparing now during the strongest growth years to ensure you enter the next cycle with advantages competitors lack.

Three strategic questions OEMs should answer:

  1. How sensitive are our products to interest rates and inflation?
    • Run correlation analyses on equipment orders versus macro variables.
  2. Are our key verticals positioned for strength in the 2030s?
    • Technology, defense, healthcare and energy infrastructure will drive durable demand.
  3. Are we positioned to acquire or be acquired?
    • OEMs with cash reserves and low leverage will have significant M&A (mergers and acquisitions) opportunities during the downturn.

The Path Forward for OEMs: Invest Now, Lead Later

The message for OEMs is simple: the next four years will be transformative for those who prepare. Invest in automation, build talent pipelines, reinforce your supply chains, expand capacity intelligently and solidify your financial footing.

OEMs that take these steps will not simply weather the 2030s. They will outperform, innovate and lead.

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