Research and development

Research and development expenditure
(after deducting grants) 1)

DEUTZ-Research_and_development_expenditure_(after deducting grants)1) 0 20 40 60 80 100 2014 2015 2016 2017 2018 € million (R&D ratio in %) Research and development expenditure after deducting grants from development partners and subsidies. 67.0 (4.5) 85.0 (4.8) 50.4 (4.0) 40.8 (3.3) 53.1 (3.5) 1)

R&D spending stepped up significantly 1)

Expenditure on research and development in 2018 amounted to €88.7 million (2017: €70.9 million). After deducting grants received from development partners and subsidies, expenditure was €85.0 million (2017: €67.0 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 slightly to 4.8 per cent (2017: 4.5 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, 24.7 per cent of development expenditure after deducting grants was capitalised (2017: 26.1 per cent).

Spending by the DEUTZ Compact Engines segment after deducting grants came to €71.3 million (2017: €63.5 million) and that of the DEUTZ Customised Solutions segment came to €7.1 million (2017: €2.2 million). The Other segment’s spending after deducting grants amounted to €6.6 million (2017: €1.3 million); the prior-year figure included Torqeedo’s R&D expenditure only in the fourth quarter.

Stage V certified

Our engines are equipped to meet the next European emissions standard, EU Stage V 2), which comes into effect in 2019 for engines with outputs up to 56 kW and greater than 130 kW. Back in 2017, we became the world’s first engine manufacturer to be certified for Stage V. In 2018, we brought all engines with capacities of up to 4 litres and outputs up to 56 kW into line with the new emissions legislation in Europe. The 6 to 8 litre engines with outputs greater than 130 kW were also certified. This year, it is the turn of our engines between 56 and 130 kW; Stage V legislation will come into effect for these engines from 1 January 2020. It is not yet known whether a further emissions standard will be introduced in the USA.

Ongoing expansion of the product portfolio

We are adding to our product range through alliances, acquisitions and the development of new products. The D/TD/TCD 2.2, for example, is a three-cylinder engine that has been developed on the basis of the existing four-cylinder engine with a 2.9 litre capacity. The first engines in this series went into production in 2018. In addition, we are supplying the 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 either LPG or petroleum. With China IV, the new emissions legislation in China, scheduled to come into force in mid-2020, we have commenced development of engines that eschew SCR catalytic converters.

We are also adding a powerful four-cylinder engine to our diesel portfolio. The DEUTZ TCD 5.2, which has a 5.2 litre capacity, is a new derivative of the successful DEUTZ TCD 7.8 and closes a performance gap in our 4 to 8 litre portfolio. Because of the high level of synergy with our existing 7.8 litre six-cylinder engine, we will be able keep expenditure on this new development very low.

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 first customer prototypes were built last year.

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 wasted no time in 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 in 2017 is significantly accelerating 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. Fully electric drives could also pave the way for new applications, for example in enclosed spaces or low-emission zones. We have integrated not only all-electric drives but also hybrid systems into customer vehicles. A modular system for the electrification of our drive systems is being implemented in close consultation with key customers. We have developed electric motors and batteries on a 48 V and 360 V basis depending on the performance requirements. The underlying concept for the modular system was defined in 2018 and tested in prototype vehicles as well as on our test rigs. The move to volume production is set to follow this year.

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. The DEUTZ Connect app, launched in 2017, was used intensively and refined strategically.

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.

An innovation centre that commenced operations in 2018 is bringing together mould-breaking ideas from across the DEUTZ Group. On behalf of internal and external customers and within a creative environment, collaborative teams work on accelerated projects in which new ideas are turned into prototypes in order to test new business ideas.

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) No 2016/1628 of the European Parliament and of the Council dated 14 September 2016.