Rail industry supports sustainable worldwide economic growth

• The worldwide rail market represents an annual business volume of over EUR 100 billion
• Over the next ten years, the market is expected to see real growth of 2% per year
• Rail markets in Eastern Europe, CIS and Asia Pacific are seeing the strongest growth

The rail supply industry has successfully adapted to changing market conditions arising from deregulation, market concentration and globalization. Today, the worldwide market for rail technology represents a business volume of EUR 103.3 billion. 70% of the overall market is accessible to suppliers; the rest is work conducted by rail companies or municipal public transport authorities themselves. Over the next ten years, the rail industry is expected to grow at a real growth rate of 2% per year. The most important growth markets will be Eastern Europe, CIS and Asia Pacific. According to a Roland Berger Strategy Consultants study commissioned by UNIFE (Association of the European Railway Industries), the continuing liberalization of the rail market as well as railway maintenance needs will create new opportunities for the supply industry. The study examined the markets of 41 countries, which represent approximately 1.5 million kilometers of tracks and 4.1 million units of rolling stock.

"Over the next ten years, the rail supply industry will grow for a number of reasons. First, the growing rail traffic volume will play a role, as will heavy urbanization and economic growth in emerging markets. Second, governments are showing increasing support for the development of railways and public transport," says Andreas Schwilling, Partner at Roland Berger Strategy Consultants' Transportation Competence Center. "This is because rail transportation plays an important part in the sustained development of their economies."

Strong demand in Asia and CIS

Markets in Eastern Europe, CIS and Asia are showing the strongest growth. Within the next few years, these markets are expected to see annual growth exceeding 3%. This can be explained by the economic and population growth in these regions, where the rail infrastructure is outdated or underdeveloped. "China is the clear forerunner and is quickly developing its rail and subway network," Schwilling points out.

In Western Europe and the NAFTA countries (US, Canada, Mexico), where the rail network and rolling stock are well developed and firmly established, markets remain important because of their sheer absolute volume. Despite low annual growth rates that hover between 0.5 and 1%, Western Europe remains the rail supply industry's biggest market, accounting for 32% (EUR 34 billion) of total business. The light rail segment sees the highest growth in the Western European market, with annual growth rates of 3%. The service, rolling stock and passenger car segments are also growing at above-average rates. The NAFTA region accounts for 22% (EUR 22 billion) of market volume.

Growth through maintenance

The total rail supply market is divided into four segments: the services (market volume of EUR 50 billion) and rolling stock (market volume of EUR 28 billion) segments are the biggest, followed by infrastructure (EUR 18 billion) and rail control (EUR 7 billion). In the future, the rail vehicle segment will see average annual growth of 2% per year. Passenger coaches, shunters and light rail vehicles are in particularly high demand.

The service segment will see the highest growth over the next ten years, with real annual growth rates of 2-3%. "Liberalization and the growing number of private railways in Western Europe will make the rail market more accessible to suppliers. State-run rail companies will increasingly outsource services to external companies," rail expert Schwilling explains. Up to now, only about half of the world market for services has been made accessible to private suppliers.

Maintenance and parts replacement will continue to create opportunities for the supply industry in the future. Up to now, services for rolling stock and infrastructure make up more than half the market.

Economic growth and politics will play a decisive role

The future development of the rail supply market not only depends on economic growth in general, but also on national rail transport policies and major projects, for instance the passenger dedicated railways that are planned in China. In mature markets such as Western Europe, the need for replacements will also play a major role. Even with replacement intervals of 30 years or more, replacement of large fleets and infrastructure makes up the bulk of market volume. For this reason, the industry must be able to adapt to cyclical investments, just as it did in the past. The growth of the European railway market is also in the hands of politics – Europe must be willing and able to open the railway market throughout the continent and harmonize technical regulations.

For further details about the study, go to: www.unife.org