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Worldwide Rail Market



2

Cologne, October 2003Maria LeenenMark DöingKarl StrangNicolas Wille

© SCI Verkehr GmbH, Cologne Office

Phone (+49-221) 931 78-0 · Fax (+49-221) 931 78-78

www.sci.de



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Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3 Mobility trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.1 Growth in transport demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.2 Infrastructure—a scarce resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4 Renaissance in rail transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5 Deregulation driving the market worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

6 The rail market’s structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

7 Existing inventories and structures worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

8 The market for infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

8.1 Infrastructure for the standard-gauge railway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

8.2 Electrification of the standard-gauge railway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238.3 Infrastructure for urban transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248.4 Electrification of urban transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

9 The market for engineering systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

9.1 Standard-gauge railway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289.2 Urban transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

10 The market for rail vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

10.1 The vehicle market in high-speed transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

10.2 Electric locomotives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3610.3 Diesel locomotives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3910.4 Electric multiple units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4210.5 Diesel multiple units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4410.6 Passenger cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4610.7 Freight cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4710.8 Light rail vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5010.9 Metro vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

11 The worldwide rail market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

12 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57



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1 Introduction

Vossloh AG has successfully specialized in transport technology activities, particularly in high-growthniche markets of the railway industry. With a 4,600-strong workforce, the Group is a world-leadingmanufacturer of rail fasteners and switches as well as Europe’s biggest producer of diesel locomo-tives. Suburban railway and tram equipment also form part of this company’s product portfolio,as do information technology and interlocks. The stock of this company, which is targeting sales ofalmost €2 billion by 2005, is listed on the Frankfurt stock exchange among the 50-member MDAX.In fact, Vossloh shares have been among the best performers in recent years.

In virtually no other branch of industry has the paradigm change of the globalizing world economybeen as radical as in the railway sector, the key focus of Vossloh’s activities. Just a few years ago,the railway and thus the rail industry was a strategic ”core business” of every nation state, not leastowing to its military importance. It was not until the 1980s that increased transport requirementsworldwide, both qualitatively and quantitatively, exposed the efficiency shortcomings of ”state-runrailways,” thus resulting in far-reaching reforms. This includes the EU Railway Package as wellas the privatization wave in New Zealand or South America as well as the current reforms beingcarried out in Russia. The deregulation of large sections of the rail market is leading—at differingspeeds—to the denationalization of railway networks worldwide. Competitive advantages arefacilitating access to previously closed markets and creating new opportunities for the rail industry.At the same time, competition is also growing in formerly domestic markets. The companies of therail industry face the prospect of a fundamental strategic re-examination of their business activities

and their product and services portfolio.

Especially the agile and flexible SMEs with entrepreneurial vision command a sound strategicposition to occupy such attractive niche markets because—assuming that they possess soundcapital funding—they can identify and realize these opportunities far more quickly than majorconglomerates.

Decisions have been made to date based on either sound market intelligence of the company’sown segment or the production and marketing experience gathered in familiar markets. Crucialto, for example, Vossloh AG’s success in sales and development has been and remains its technical

expertise in the specialized market of railway engineering. This includes product know-how andknowledge of its own customers’ requirements and demands. In the worldwide rail market, however,the tools of market observation and analysis familiar up to now are coming up against limitingfactors. Unlike in other sectors, no sufficiently methodical surveys have been conducted in the railindustry to date which illustrate what is happening in the marketplace worldwide and make fore-casts especially relating to future trends.

Existing surveys are based above all on information material gleaned from sources open to thepublic, such as the data of UIC, the World Bank, competitors or private operators. This data is,however, still characterized by the outdated structures of state-dominated rail transport or

limited by the parameters imposed by a narrowly defined problem.



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The decision-making intervals in this constantly changing market are becoming increasingly shortand complex. It must be possible to develop quickly and meaningfully alternative scenarios for therespective task at hand which are based on sound information and data material. It is simply notenough to keep an eye only on (one’s own) familiar current markets in order to fully exploit theopportunities and potential.

This approach will succeed only with a systematic, continuous and comparative observation ofrail markets designed to underpin business decisions.

For this reason, Vossloh AG decided at the start of 2003 to establish a structured and regular analysisof the worldwide rail industry market together with an external service provider. The Hamburg-based SCI Verkehr GmbH was chosen as the partner for this project. The company has beenestablished as an independent rail industry expert for some years, maintaining a comprehensiveinternational network.

Any such extensive world market database needs to be continually updated. This calls for aninternational network of regional experts, reliable access to the railways and decision-makers anda review, annually at least, of the data and of growth forecasts and trends. This report provides forthe first time a complete systematic framework for the classification of worldwide rail markets andtheir products and services while offering a comprehensive overview of rolling stocks worldwideand of the market shares and strategies of the players active in these markets. In addition, thechief national projects and underlying conditions as well as the central trends and development

prospects are described.

With this Worldwide Rail Market report, Vossloh AG is granting a selected public an insight intothe approach of its systematic market assessment and into the most up-to-date findings andtrends in the sector. The abridged version published shows, of course, only the very aggregativeresults of the market study. Beyond the findings presented here, Vossloh also possesses country-specific data and assessments of the markets in the various segments. Based on the forecast-oriented database Vossloh AG is able to continually review its orientation and its product andcompany portfolio in relation to rail technology, thus obtaining a transparent, sound and reliabledata pool for strategic developments. In addition, the Group’s subsidiaries are provided through

the database with the most up-to-date market figures for the development of their own businesssegments.



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2 Methodology

The survey was conducted between April and September 2003. The following served as sourcesof data for the survey:– The evaluation of sources and statistics open to the public, such as the data of the World Bank,

UIC, UITP and UNIFE,– The expert knowledge of SCI Verkehr using SCI multi-client studies, including on such topics

as light rail vehicles, the market for short-distance passenger transit by rail and locomotives,as well as the evaluation of SCI rail data with over 15,000 rail-related entries since 1997,

– An investigation of rail engineering inventories, market volumes and market trends in selectedgrowth markets, including China, the CIS, India, and Poland. Via SCI’s network, independentexperts with extensive market knowledge in the particular countries were involved in thisinvestigation through a standardized questionnaire, which contained detailed informationabout the individual product groups within the rail industry.

The survey’s findings were compared with the experience of industry insiders both in Germanyand abroad. This includes independent experts but also, of course, the specialists employed byVossloh AG and its subsidiaries as well as the company’s own and associated sales organizationsworldwide.

The structured assessment of the current situation in the world market resulted in the creationof product-related databases in line with the product matrix as described later in this report.

The databases contain country-specific data on the inventory levels, procurement volumes, andmanufacturers’ market shares in the individual segments, based on which forecast and analysismodels outlining future market trends can be worked out.

Depending on the market segment, either a direct examination of the product level is carried out(e.g., with vehicles) or the demand for a product is deduced through the key data ascertained(e.g., average number of switches per kilometer of track). This survey is the aggregative represen-tation of the results at the level of individual world market regions.



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Generally, the average market activities over the past five years as well as the forecast for thenext five years form the basis of the description. In individual subsegments, such as high-speedtransport, the body of data available or annual fluctuations may make a different analysis periodappear sensible. In this case, this analysis period is explicitly indicated.

The formation of these databases is a continuous process which has not yet been completed. Withthe concentration on selected high-investment markets this year the foundations of the databasehave been laid, from which reliable estimates can be made. As the volume of data grows with thecontinual updating of the databases, changes in the market volumes in individual regions or sub-segments are perfectly possible, however.

The data contained in the survey together with the databases belonging to SCI Verkehr GmbH formthe foundations of a forecast-oriented database with which Vossloh AG can continually review itsstrategic orientation. In addition, the database also serves to support business operations, especiallyin the sales area, through a constant analysis of rail projects worldwide.



3 Mobility trends

3.1 Growth in transport demand

In mid-2002, there were some 6.2 billion people living on this planet. According to the latest UNpopulation forecast, the world population is set to increase to about 9.3 billion by 2050. In thenext 30 years, this growth will take place almost completely in conurbations. From 2007, there arelikely to be more people living in towns and cities than in rural areas for the first time. On a globalscale, the population is therefore not only growing generally but also becoming increasinglyconcentrated in a few locations.

The world economy is growing even more strongly than the world population, especially internationaltrade. The chief reason for this is the globalization process, which is reflected in the worldwidedismantling of trade barriers and the deregulation of economic processes. These trends facilitatean international division of labor between individual countries and regions with specific locationaladvantages and demand requirements, which allows the exchange of goods to rise on a massivescale generally.

In the course of the past 30 years,according to Deutsche Bank, the world-wide export of goods as a share of theworldwide production of goods has in-

creased from about 10 to over 25 per-cent. The proportion of internationallytraded services (such as insuranceor the extension of credit) has alsorisen on a similar scale. Whereas thecombined gross domestic product of allcountries has increased by a moderate14 percent since 1975, the volume ofworld trade climbed 320 percent overthe same period. Reaching US$4,000

billion in 2000, capital flows registered worldwide have actually risen thirty-fold.

With regard to mobility, the trends outlined above lead chiefly to rapidly increasing demand fortransport services. In passenger movement, as a consequence of urbanization and the increasedgeographical separation of life modes (e.g., accommodation, job, and recreation) associated withit, there is an increase not only in inner-city traffic and traffic between towns and the surroundingregions (e.g., in the form of commuter traffic) but also in passenger transport between variousconurbations, among other things owing to changing recreational habits and the proliferatingdivision of labor. In freight conveyance, the ever greater logistical breakdown of varying productionprocesses is leading to increased traffic.

100

150

200

250

300

350

Index

World trade in $1982 = 100

World population1980 = 100

Sources: UNO, Fischer Weltalmanach

1980 1985 1990 1995 2000

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Fig. 1: World population and world trade



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The transport sector, especially freight haulage, is dependent on economic factors. Stagnating oreven contracting output in the economy also results in sector shrinkage. The megatrends outlinedabove ensure growth in transport, however, irrespective of economic cycles. In the European Union(EU) alone, passenger transport is forecast to increase between 2002 and 2015 by 17 percent andfreight haulage by as much as 37 percent—given a 1.1-percent increase in the population.1

3.2 Infrastructure—a scarce resource

The key issue with the regard to the future is how demand for transportation can be met in theyears ahead. The scale of growth suggests that the combined capacities of all existing modes oftransport will be required in order to create a sufficient range of transport services for the future.The often still lauded competition among modes of transport is in many respects (urban traffic,for instance) a thing of the past.

For this reason, all the forecastsfor individual transport systemsare fundamentally based on stronggrowth. This applies to road-basedtransport as well as to air trans-portation or sea shipping.2

Coping with this growth is the

key task for the future facingevery mode of transport.

A significant constraint on theexpansion of transport services forall modes of transportation is theinfrastructure. This applies equally toroads, airports, ports, or railway lines. The construction and expansion of these installations is notonly extremely cost-intensive but also particularly in the especially congested conurbations oftenbarely feasible or completely impossible owing to lack of space alone.

100

110

120

130

140

150

160

170

Road: trucks/buses built

Air: number of passengersSea: containers (TEU)

20001999 2001 2002 2003 2004 2005

Sources: Boeing, Containerisation International, Standard & Poor's / figures partly projected

1 cf. Prognos AG, 2002.2 Since there is no uniform statistical data for the worldwide comparison of various modes of transport, Figure 2 shows the trend forecasts based onselected indicators. Direct mathematical comparability is not being claimed. For the development of rail services see the following chapter.

Fig. 2: Worldwide transport indicators



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In Western countries in particular, due to space problems, the construction and expansion of theinfrastructure is linked to planning and approval procedures which take up a lot of time or evenmake the relevant projects impossible, for environmental protection reasons, for example.

New infrastructure is viable especially in those regions with adequate space reserves and whereapproval proceedings are swift as in Central & Eastern Europe. In the conurbations, at least,any expansion of infrastructure to match the expected growth in transport demand is frequentlybarely possible. The future range of transport services will therefore focus on the modernizationand hence best possible exploitation of existing infrastructures. Reserve capacity in the networksneeds to be developed. All modes of transport must increase their specific efficiency especially atthe nodal points and interfaces as well as improving their intermodal interaction. The future focuswill be less on competition and more on efforts to combine means of transport intelligently.



4 Renaissance in rail transport

The growth in transport demand together with the infrastructure constraints have again put the rail-way industry increasingly at the focus of transport planners’ attention over the past ten years. Afterall, especially with regard to their infrastructure, railbound systems hold two crucial advantages:– Rail networks already exist in most regions and countries, but especially in metropolitan areas;

there is an accessible railway station to be found near the center of every medium-sized town,not only in Western Europe.

– The current utilization of the networks is—compared with the rate of utilization of roads andairports in many conurbations—relatively low. Most of the bottlenecks occur at the junctions.But here expansion is possible with at least moderate space consumption without requiringany vast extension of the rail infrastructure. Hence, the railways have an abundance of sparecapacity.

Fig. 3: Phases in rail history

Moreover, the technical advantages offered by the rail system, such as its mass transportationcapacity and potential for integration as well as traffic plannability, are making railbound transportattractive to many countries again.

2. Shrinkage and stagnationAutomobiles get to be affordable and reliable. A vastblanket of motorways facilitates private transport, allowingdoor-to-door road travel at consistently high speeds. At thesame time, air travel is fast becoming more affordable, andairports are expanding. Rail traffic goes into a state of stalland many local and secondary rail lines are shut down.

3. Recovery and renaissanceCongested motorways slow down traffic and inflate costs. Even the major airports have reachedthe limits of their capacity. And infrastructure expansions are limited by available space or madeextremely costly and time consuming due to preconditions to be observed. It is especially in andaround the cities, on routes connecting individual conurbations and, in the case of freight, over

lengthy distances, that the railways can claim two all-important advantages: an infrastructurethat exists even in central locations and their abundant reserve capacities.

1. Origins and evolutionThe railways are the only mode of mass transportation

and as such revolutionize the way people and goods move.For the first time ever, huge volumes can be carried

economically vast distances overland. The creation of acomprehensive rail network links even small, faraway places

with the nationwide network and inside the large cities,the network reaches right into the downtown areas.

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Rail transport’s greatest growth potential lies chiefly in inner-city transport operations (e.g., metroand light rail services), commuter transport, and services between towns and the surroundingregion (e.g., local and regional rail links), and the point-to-point connections between individualmetropolitan areas (e.g., IC/ICE services), as well as in high-capacity freight transportation.

As a consequence of this trend, passenger transport by the standard-gauge railways increasedbetween 1997 and 1999 by 5 percent worldwide, and in freight transportation by 6 percent,following a clear decline up to the mid-1990s as a result of the severe recession in Eastern Europeand in the Commonwealth of Independent States (CIS).3 The number of urban rail transport systemshas also risen by 6–7 percent since the mid-1990s.

3

These figures are based on World Bank data. For the period since 1999 there is an insufficient body of data on an international scale.



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5 Deregulation driving the market worldwide

The former state railways were responsible not only for transporting passengers and goods butalso for the vast majority of the services required for that purpose. This included the constructionand maintenance of vehicles as well as the building of the infrastructure and even the managementof station buildings. In some countries, such as India, this is still the case today. Virtually the wholerailway industry in that country therefore belongs to the state-owned railways.

Fig. 4: Outsourcing in response to deregulation

Owing to the developments described at the outset, a reform of the railways has been taking placein many countries since the late 1980s. The first great railway nation to modernize its rail industrywas Japan. This reform included the break-up into various operating companies. Reform has takenplace in virtually all parts of the world since then. In South America, for instance, it resulted notleast because of the public sector’s financial constraints in a privatization wave, especially in freighthaulage. In Western Europe, EU legislation has proved to be the engine of reform.

A chief consequence of virtually all reforms was the railways’ concentration on their ”core business,”the actual running of their services. Depending on the prevailing ideology and the requirementsin the individual countries, support functions such as the planning, construction and maintenanceof the infrastructure and vehicles were or are being outsourced or privatized. In some cases, theredefinition of interaction between the individual protagonists has given rise to completely newfunctions, such as the leasing of rail vehicles, which was previously largely unknown in WesternEurope.

Operators

R&DMaintenance

Rail industry

PropertyServices

providers

etc.State-ownedrailways

VehiclesInfrastructure

Engineeringsystems

Production

Rail operation

Maintenance

Otherservices

R&D



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This deregulation drive is set to continue in the future, not least owing to the inherent pressuressuch as the increasing lack of public sector funding or the growing need for cross-border traffic.This is also borne out, for example, by the EU’s current planned legislation for local public transport,which will bring deregulation for urban transport services following on from the standard-gaugerailway. Numerous privatizations, which have yet to be fully completed, have also been carried outin the accession states of Central and Eastern Europe in recent years.

For the companies of the rail industry the growth of their market through these reforms is currentlystill much more important than the overall growth in the rail segment driven by rising transportdemand.



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6 The rail market’s structure

As a result of the tendency of most national railway networks to cut themselves off from theircounterparts, greatly differing structures in terms of operation and technology exist worldwide.Whereas in a comparatively large country like Germany, there is still a distinction between long-distance and short-distance passenger transport, which is even reflected institutionally in thestructure of the former state railway, in its smaller neighboring countries this is often much lesssignificant or completely irrelevant. While the differing technological requirements between urbanrail transport and the so-called ”standard-gauge railway” are even enshrined in law in Germany,such a distinction in some of the urban transport systems in South America, for example, wouldbe hard to follow.

Fig. 5: Rail markets

In order to subdivide rail transport with regard to the development of the market for rail engineeringproducts, it is necessary to draw a fundamental distinction with the modes of traffic in the standard-gauge railway between passenger and freight transportation. In passenger transportation, a furtherdistinction can be drawn between local and long-distance traffic, with the high-speed segmentwithin long-distance traffic being treated separately.

Standard-gauge railway

Passenger

Long distance

Urban rail

Goods

Suburban/regional

High-speed

"Conventional" intercity

Light rail

Subway/metro



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All modes of traffic possess their own structure with their own requirements in terms of the relevantequipment—and correspondingly with a differing market development and relevance.

If investment costs of, for example, €3 million per kilometer are sufficient for the construction ofa new single-track, non-electrified railway line for freight haulage in Germany, the spending on anew ICE high-speed line can easily amount to €20 million per kilometer and more. The marketsurvey must also draw such distinctions. At the system level in the vehicle segment alone, thereare a large number of varying products with individual properties which are used in the differingmodes of traffic.

Fig. 6: Vehicles and modes of transportation

Based on the various modes of traffic, their requirements and product configurations, SCI Verkehrhas developed a product matrix from which a worldwide analysis of the rail market is possible withinthe meaning of a benchmark. The product matrix has three layers of analysis:– The breakdown of the rail market into various product groups,– the study of these product groups with regard to the physical inventories, the annual market

volume and the development of this volume– and the examination of the varying geographical markets worldwide.

Goods

Suburban/regional

High-speed

"Conventional" intercity

Light rail

Subway/metro

Locomotives/freight cars

MU

Locomotives/passenger railcars

High-speed MU

Locomotives/passenger railcars

(MU)

Light rail vehicles

Subways/metros

Diesel locomotives

Electric locomotives

Freight cars

Passenger railcars

Diesel multiple units (DMU)

Electric multiple units (EMU)

High-speed MU

Light rail vehicles

Subway/metro vehicles



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Abb. 7: Rail engineering product matrix

The rolling stock, meaning the vehicles themselves, the track infrastructure including its electricalequipment and engineering systems can be identified as the basic product groups in railway

engineering.

H i g h - s p e e d

Goods traffic

Service/retrofit New vehicles

Existing

inventory

Annual market

volume

Annual market

growth

EU C&E Europe CISNorth

America

Latin

AmericaAsia Australia/NZ

Africa/

N&M East

Vehicles

Intercity passenger traffic

Standard-gauge railway LRV/metro

Local passenger traffic City traffic

Infrastructure Engineering systems

Standard-

gauge railwayLRV/metro

Standard-

gauge railwayLRV/metro

E l e c t r i c l o c o m o

t i v e

D i e s e l l o c o m o t i v e

E M U

D M U

P a s s e n g e r r a i l c a r

F r e i g h t c a r

M e t r o

L i g h t r a i l

R a i l w a y i n f r a s t r u c t u r e

E l e c t r i f i c a t i o n

R a i l w a y i n f r a s t r u c t u r e

E l e c t r i f i c a t i o n

C o n t r o l / s a f e t y

T e l e c o m m u n i c a

t i o n s

C o n t r o l / s a f e t y

T e l e c o m m u n i c a

t i o n s



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7 Existing inventories and structures worldwide

With a few exceptions, rail systems exist in virtually all the countries of the world. The structure ofthese systems varies considerably, however.

Fig. 8: Existing infrastructure worldwide

The length of the worldwide rail network is some 1.2 million kilometers. The longest network is tobe found in North America on the long transcontinental overland routes, followed by Asia and theCIS. Western Europe, by far the most important market for rail products, comes only after all of them.

From the point of view of the market, however, the length of the rail network is only partiallyrelevant. In North America, for instance, freight traffic accounts for the majority of transportoperations. This means that the greater part of the railway network is single-track, not electrifiedand over long sections does not possess any points of intersection with other lines. In monetary

terms, this means that the railway lines are of the simplest design with only small market volumesin the superstructure and very low electrification and engineering systems requirements. There isa similar situation on vast sections of the railway networks in Asia, Australia, Africa, and SouthAmerica.

In Europe, on the other hand, the reverse is the case. The existing rail network is closely interlinkedin the densely populated metropolitan centers and used for passenger and freight transport alike.The physical demands on the infrastructure, in high-speed traffic for example, are extremely severe,requiring extensive control and safety technology for operational organization.

North America

311,732 km

W. Europe

176,685 km

E. Europe

83,710 km

CIS

193,925 km

Asia

263,384 km

Australia/Pacific

63,523 km

Latin America

108,474 km

Africa/N&M East

90,406 km

Source: SCI Verkehr



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The varying structures of the rail systems worldwide become clear, among other things, in the levelof electrification of the individual regions.

Fig. 9: Electrification worldwide

Differences in quality demands and safety requirements also lead to variable market sizes. In Asiaoutside of Japan, for example, passenger transportation primarily takes place through locomotive-hauled multi-unit trains with a high proportion of domestically produced passenger railcars. Theselatter are usually comparatively simple in terms of their engineering, keeping costs low. In contrast,much higher standards exist in Western Europe and increasingly in Eastern Europe as well.

Fig. 10: Transport by regions

Source: SCI Verkehr

Source: SCI Verkehr

North America

1%

W. Europe

49%

E. Europe

38%

CIS

30%

Asia

26%

Australia/Pacific

5%

Latin America

3%

Africa/N&M East

12%

Asia1.2 mill.

E. Europe0.1 mill.

W. Europe0.1 mill.

CIS0.2 mill.

Rest of the world0.2 mill.

N. America2.4 mill.

W. Europe0.2 mill.

E. Europe0.1 mill.

Asia1.6 mill.

CIS1.5 mill.

Rest of the world0.3 mill.

Share in passenger traffic (in passenger-km) Share in freight traffic (in tonne-km)



– 20 –

The railways are increasingly using, in passenger transportation for example, flexible railcars insteadof the locomotive-hauled trains, while passengers demand quiet and comfortable compartmentsfitted with such facilities as air-conditioning equipment.

Crucial to Western companies is the accessible or acquirable proportion of a regional market volume.In Asia outside of Japan, for example, comparatively simple vehicles in terms of their engineeringare not only used to a high degree but also produced at local plants. Foreign technology is purchasedchiefly in such high-tech areas as control and safety systems (e.g., in China), in the high-speedarea (e.g., in Korea) or for light rail services (e.g., in Taiwan).

In Europe, on the other hand, with theliberalization of rail transport, com-panies’ access to previously closedmarkets is growing. Competitivepressure is rising, with competitorsin the rail industry repositioningthemselves through mergers andacquisitions.

Especially with regard to the futuredevelopment of the industry, thegrowth in the respective regions of

the world is also ultimately of greatimportance. The EU accession countrieswere one of the most dynamic regionsworldwide. Linked to the railway’ssignificance in these countries and the pent-up demand as a consequence of the economic slumpin the early 1990s, they are regarded as an exceedingly attractive growth market.

The worldwide analysis of the railway technology market, the individual segments of which aredescribed in the following chapters, was conducted taking all these factors into account.

0

5

10

15

20

25

30

%

28.5

4.0

Fig. 11: GDP growth 1997–2002

C&E Europe EurolandSource: EU



– 21 –

8 The market for infrastructure

8.1 Infrastructure for the standard-gauge railway

The infrastructure of the standard-gauge railway chiefly includes rails, switches and crossings,sleepers, ballast or slabbed tracks as well as fastening systems, such as clips.The greatest demand worldwide for these materials arises from the maintenance of existing railnetworks. The building of new lines or the upgrading of existing sections, to allow a higher speedfor example, provides significant growth impetus.

Fig. 12: The world market for standard-gauge rail infrastructure

Western Europe is the most important market for such infrastructure. The reason for this is the highstandard of this infrastructure, as stipulated by UIC. In addition, a comparatively high proportionof the rail network in Western Europe is double-track, with the high-speed network now comprising

several thousand kilometers. On these lines the trains reach a speed of up to and over 300 km/h.The infrastructure must therefore be suitably dimensioned to absorb these loads. The decision tofurther expand this high-speed network represents exactly the same growth factor as the creationof European transit corridors for freight traffic.

North America has the world’s largest rail network. Despite a few new projects in high-quality localand long-haul passenger transport, the railway is, however, chiefly a long-distance means of trans-port for freight traffic in that region. The axle loads are often much higher than in other parts ofthe world, even at relatively low average speeds frequently placing high demands on the trackinstallations. However, the greater part of the lines is single-track, with the number of crossing

North America

€4,442 mill.

+5%

W. Europe

€7,734 mill.

+5%

E. Europe

€1,503 mill.

+5%

CIS

€1,977 mill.

+3%

Asia

€4,687 mill.

+8%

Australia/Pacific

€381 mill.

+5%

Latin America

€568 mill.+2%

Africa/N&M East

€400 mill.

+3%

Source: SCI Verkehr



– 22 –

points and stops comparatively small relative to the line length. The equipment requirements andthus the market volume of the North American infrastructure are moderate relative to its length.

In Asia, it is necessary to distinguish between the Japanese and in parts also the South Korean marketand the rest of the continent. Especially in Japan, the rail network is developed to a similarly highstandard as that in Western Europe and owing to the price levels in parts has an even greatervolume relative to the scale of the market. South Korea is moving toward this position not only withthe expansion of its high-speed network. In large parts of Asia, however, a comparatively simpleinfrastructure predominates with a focus on freight transportation. The standard of these networksis low, as shown for example by the maintenance intervals. In virtually no other part of the worldare new lines being planned at present on such a scale as in Asia. Even if only a proportion of thisplanned investment is actually realized, this will lead to substantial market growth.

In Eastern Europe, the main development at present is the numerous modernization projects beingplanned and implemented on the pan-European corridors, as the chief East-West transport links areknown. These measures are intended above all to increase the speeds on the respective lines andform part of the preparations for the entry of most of this region’s countries into the European Union.Accordingly, a large proportion of the financial resources required for this purpose comes from theEU. In the accession countries at least, unlike in Asia for example, the likelihood that the plans willbe implemented is comparatively high in most cases. Once the first states have been admitted in2004, the volume of investment through EU subsidies will increase considerably once again.

In the CIS, the need for an overhaul of the often ramshackle railway lines is similar, and even greaterin some parts. Unlike in Eastern Europe, the funding available from international sources is muchlower, however, as is reflected in the smaller current size of the market. Even though a stabilizationof the economic situation in the CIS can be expected in the medium term, the growth prospects arenot as promising as in the accession states of Eastern Europe.

Australia has a relatively small rail network, large sections of which are used exclusively for freighttransportation. Growth potential arises chiefly from the further harmonization of track gaugesbetween the different parts of the country. Some major regional projects are also planned in Africaand the Middle East, such as the construction of a new railway line in Libya and extensions in the

Maghreb states. In South America, the privatization process is resulting in the modernization ofnetworks in individual systems.



– 23 –

8.2 Electrification of the standard-gauge railway

Electrification includes the overhead wires (less frequently power rails) of the railway as well as theupstream supply systems such as traction current conductors or switchgear.

The main reason for choosing electric traction is higher vehicle efficiency, which is reflected amongother things in improved acceleration. This is a great advantage in suburban rail transport forexample because with frequent stops and short journeys the rail systems depend on powerfulacceleration. In both the construction of powerful lines for high speeds or high freight tonnagesthe provision of electric power for traction purposes plays a crucial role. Moreover, there are evenpolitical reasons in some cases for electrifying railway lines. Before the collapse of the communism,for example, many countries in Eastern Europe sought to reduce their dependence on crude oilimports by pressing ahead with the electrification of railway lines.

Fig. 13: The world market for standard-gauge electrification

Due to its high level of electrification, Western Europe represents the largest market worldwide.In most countries the main lines are almost completely electrified, with electric traction alsofrequently being used in the links between towns and the surrounding countryside in majorconurbations. Above all, the expansion of the high-speed network is spurring on the electrificationof additional lines, leading even at the existing high level to still comparatively substantial growthin percentage terms.

North America

€3 mill.

+8%

W. Europe

€719 mill.

+6%

E. Europe

€322 mill.

+7%

CIS

€409 mill.

+3%

Asia

€683 mill.

+9%

Australia/Pacific

€5 mill.

+3%

Latin America

€3 mill.

+5%

Africa/N&M East

€17 mill.+3%

Source: SCI Verkehr



– 24 –

In Asia, too, the electrification of the rail network has been tackled for some years now, the aimbeing to increase efficiency. One of the largest projects to be completed in recent years is theconstruction of the new rapid transit railway ring around Beijing. Further projects include theinstallation of high-speed lines in South Korea or the building of Taiwan’s new high-speed rail link.Continued investment activity will also result in substantial growth in market volume in this regionin the years ahead.

After Western Europe, Eastern Europe has the highest levels of electrification worldwide. In the EUaccession states, the main lines along the pan-European corridors are currently being modernizedand expanded. The lines in question are all electrified. Accordingly, considerable market growth isalso to be expected in this region in future.

In contrast, much worse financing preconditions for the modernization of electrified main lines haveto be assumed in the CIS. The just recently completed electrification of the Trans-Siberian Railwayshows that the necessary measures can be implemented despite these constraints. However, theforecasts remain much more cautious generally than in Eastern Europe.

In the Africa/Near&Middle East region, above all the Maghreb states, which are currentlymodernizing their track installations, and South Africa are striving for electrification as part of anefficient infrastructure. There are also construction plans in North and South America, chiefly inthe urban conurbations in suburban transport, which result in comparatively high growth forecastsalbeit from a low starting point. The extensive place-to-place connections will be mainly used for

freight transport in future and are not envisaged for electrification. The size of the marketcompared with other regions remains very small.

8.3 Infrastructure for urban transport

Due to the shorter network length, the tracklaying market in the urban transport segment is muchsmaller than that of the standard-gauge railway. The market is also more heterogeneous. A tramtrack, for example, is integrated into the road and at other places in the light rail service segmentthere may be a separate trackway with its own ballast bed, the construction costs and maintenance

of which are very comparable with the investment required for the standard-gauge railway. A needfor rail fastening systems, for example, as with standard-gauge railways exists only in the secondcase.

Generally, the investment volume is distributed among the over 300 tram and light rail systems aswell as around 90 metro systems worldwide. Since the metro systems are usually much greater insize than the light rail vehicle (LRV) networks, this subsegment’s importance in track constructionis almost just as great.



– 25 –

Western Europe has the most systems worldwide in both the light rail and metro segments, givingrise to the largest market volume for tracklaying. This volume comes predominantly from maintenancemeasures, including from network expansions or upgrading. New systems are being constructedonly in the light rail segment, mainly in France and to a smaller extent in the UK as well. Alreadyat a high level, the track construction market in Western Europe is therefore advancing only at amoderate rate.

Fig. 14: The world market for LRV infrastructure

Asia also has numerous urban transport systems, with the metro segment accounting for a muchmore significant share than in Western Europe. Nevertheless, there are still many cities and capitalswhich do not possess their own efficient urban rail network. The construction of new systems insuch cities as Guangzhou in China and the Malaysian capital Kuala Lumpur has fueled the marketfor track construction to quite some degree. New systems and the extensive expansion of existingsystems, such as the metros in Shenyang in China and Bangkok in Thailand, are also planned for

the future.

Even North America has seen the construction of some new urban transport systems in recent years,for cost reasons however solely in the light rail systems segment, examples being Houston andMinneapolis. The success of the new-generation light rail rapid transit systems recorded to date inthe USA will lead to additional network expansions in the years to come as well as acting as a signalfor those cities which still have no railbound mass transit system. Unlike Western Europe, the privatesector is also involved in the financing of projects to a greater degree in the USA, for examplethrough BOT models as in the case of Portland. This reduces the implementation periods oftensubstantially.

North America€222 mill.

+4%

W. Europe

€2.320 mill.

+3%

E. Europe

€150 mill.+3%

CIS

€40 mill.

+2%

Asia

€703 mill.

+5%

Australia/Pacific

€19 mill.

+2%

Latin America

€113 mill.

+2%

Africa/N&M East

€20 mill.

+5%

Source: SCI Verkehr



– 26 –

Eastern Europe has a number of often very extensive urban transport systems, some with rigorousoperating standards, which place correspondingly high demands on the maintenance and modern-ization of the track installations. These challenges are accepted without exception and often evensupported by additions to the network, meaning that a corresponding market volume can beassumed. Unlike in the standard-gauge railway segment, there is, however, much less internationalfinancial assistance currently available for the expansion of urban transport systems in the acces-sion countries because urban transport is often perceived as a local or regional affair. For the EU,urban transport therefore differs from the international transport corridors, for example, in termsof its importance. For this reason, the forecasts in this case are somewhat more cautious than fortrack construction in the standard-gauge railway segment.

Even greater caution is required when assessing the situation in the CIS, where apart from a fewmetro systems predominantly on a small scale the tram dominates as the chief mode of trans-portation. The networks concerned all display relatively simple engineering parameters and havebeen expanded at low investment and maintenance costs. Whereas in the major systems, such asin Moscow, network expansions do take place, the future of individual systems in medium-sizedtowns is somewhat uncertain owing to the financial preconditions. In isolated cases, the systemsmay well be abandoned in favor of lower-cost bus transport. Owing to the very low investmentactivity over the past 10 years, however, even individual measures financed from abroad lead toconsiderable market growth.

In South and Central America and Australia as well as Africa and the Near&Middle East, there are

isolated systems in a few major cities, such as Melbourne, Buenos Aires or Algiers. Due to thecomparatively small market volume, expansion plans in individual systems can boost overallmarket growth substantially, as was to be seen, for example, with the preparations for theOlympic Games in Sydney. Known development plans, such as in Cairo, therefore often lead toa temporary distortion of the size of the market, which viewed over longer periods is more likelyto remain small.

8.4 Electrification of urban transport

Urban transport systems are operated electrically almost without exception. The high transportcapacity of these vehicles and their frequent stops is otherwise barely feasible. The use of vehicleswith combustion engines in inner cities poses environmental problems. Their use in metros com-prising largely enclosed tunnel systems is totally prohibited as a rule.

Unlike with the standard-gauge railway, direct current is normally used with urban transport systems.This is for safety reasons firstly. With the overhead wires in urban areas, especially in streets, locatedmuch more closely to road traffic for example, a specific voltage—600 V being most widespread—must not normally be exceeded. In addition, the overhead wires in towns are usually located in the

direct vicinity of the supply network. The higher loss of voltage in d.c. lines compared with a.c. lines



– 27 –

is less problematic thanks to this nearby supply network, because there is a higher density offeeder points. In the standard-gauge railway, on the other hand, such a dense supply networkwould result in considerable extra costs. In general, the cost of the traction power supply equipmentin light rail systems is thus lower than that of the standard-gauge railway, the market volumeresponding accordingly.

Fig. 15: The world market for LRV electrification

Since in the suburban railway segment the track infrastructure and electrification are largely linkedtogether as a matter of necessity, the markets in these two subsegments also behave very similarly.Western Europe again represents by far the largest market in this area, ahead of Asia and NorthAmerica.

Exceptions exist only in a few areas. For example, slight network expansions have a greater impacton the market for tracklaying than for electrification. The reason for this is that in the case of elec-

trification existing installations such as supply equipment can often be utilized, meaning that theadditional costs are restricted to the actual overhead wires and their connection. Consequently,the percentage growth in Western Europe, which is characterized by network expansions, is slightlysmaller for electrification than for the track infrastructure.

In some systems, on the other hand, standard-gauge railway tracks are rededicated when networksneed to be expanded, for example at a number locations in North America. The primary measureduring expansion is to electrify these lines, meaning that in this case electrification accounts forslightly higher market volume growth than tracklaying.

North America

€57 mill.

+5%

W. Europe

€647 mill.

+2%

E. Europe

€81 mill.

+3%

CIS

€10 mill.

+2%

Asia

€342 mill.

+5%

Australia/Pacific

€4 mill.

+3%

Latin America

€33 mill.

+3%

Africa/N&M East

€6 mill.

+1%

Source: SCI Verkehr



– 28 –

9 The market for engineering systems

9.1 Standard-gauge railway

The chief product groups in control and safety systems are the interlocks and signaling equipmentalong with the train protection and warning systems plus the required supply networks as well asthe whole underlying control technology and operations control centers, not to mention the gener-ation of the necessary software. This is to be distinguished from the telecommunications sector,which includes the railway’s internal telephone network as well as radio frequency communication.Control and safety technology is closely linked to telecommunications because of the transfer ofthe required information. Such developments as the introduction of the European Train ControlSystem (ETCS) or of operations control technology based on electronic signal boxes will furtherstrengthen this trend. Up to now, such technologically advanced innovations have been largelyconfined to Europe and a few parts of Asia. In the rest of the world, developments in these twoareas are still pursued separately, with telecommunications sometimes taking on the functionsof control and safety systems. With freight transportation extending over long distances in NorthAmerica, for instance, train radio systems often act as a replacement for line-related signalingequipment.

Accordingly, the market volumes for control and safety technology vary greatly, whereas in tele-communications a basic infrastructure is provided even in regions where network use is not sointensive.

Fig. 16: The world market for train control/safety systems (standard gauge)

North America

€208 mill.

+1%

W. Europe

€1,230 mill.

+5%

E. Europe

€407 mill.

+4%

CIS

€334 mill.

+3%

Asia

€959 mill.

+11%

Australia/Pacific

€126 mill.

+5%

Latin America

€15 mill.

+3%

Africa/N&M East

€132 mill.

+5%

Source: SCI Verkehr



– 29 –

The most important market for control and safety technology as well as telecommunications remainsWestern Europe with its relatively well utilized networks and high safety standards. The continuedincreasingly intensive use of the existing infrastructure will cause demand for control and safetysystems to keep rising in future too. In Germany alone, in 2002 some 22 electronic interlocksworth a total of around €500 million went into operation. This demand is supplemented by theharmonization efforts mentioned in the cross-border traffic between countries, for example throughthe introduction of ETCS. The two developments together will lead to continued strong growtheven given the high starting level. Thanks to the merging with control and safety systems mentionedabove, the market for telecommunications is also growing. An example of this is the new GSM-Rinformation transmission system based on cell phone technology. Increased requirements in suchareas as passenger information systems or advance notification of delays are supplying furthergrowth momentum.

The situation in Asia varies greatly from region to region. With the often very high-quality buildingprojects, such as the construction of high-speed rail links in Korea or Taiwan, control and safetysystems take high priority out of necessity. The market volumes in this area are correspondinglyextensive. On the other hand, a large part of the transport demand is met by relatively simplesystems in the standard-gauge railway segment, as in the case in India for example. The use ofmodern safety technology plays only a minor role here. Especially in metropolitan areas in Asia,the increasingly intensive use of the existing infrastructure with its outdated equipment in manyplaces is almost becoming unmanageable, however, leading to serious safety risks. This gives riseto significant growth potential for control and safety systems.

Fig. 17: The world market for telecommunications systems (standard gauge)

North America

€150 mill.

+2%

W. Europe

€241 mill.

+6%

E. Europe

€101 mill.

+5%

CIS

€141 mill.

+2%

Asia

€230 mill.

+8%

Australia/Pacific

€30 mill.

+2%

Latin America

€8 mill.

+8%

Africa/N&M East

€155 mill.

+2%

Source: SCI Verkehr



– 30 –

Eastern Europe and the CIS are in a similar position. Even though sections of the extensive networkof branch lines are to be closed down for cost reasons, there is still a significant need for the up-grading of the control and safety systems on the electrified main lines serving national and inter-national traffic. In the EU accession states, these modernization needs can be increasingly metthrough international assistance among other things, but in the CIS the necessary funds are lackingin many areas. A further growth factor in Eastern Europe is that the European harmonizationmeasures aimed at inter-operability are already being implemented in this region as well, as iscurrently the case in Hungary and Poland.

In North and South America as well as Africa, there are often extensively used and very simplenetwork geometries with only a few junctions, reducing the need for control and safety technologyand enabling the use of comparatively unsophisticated equipment, including minimum control andsignaling systems. The rights of use of the respective lines at specific times are laid down throughresponsibilities delegated to staff and communication. The telecommunications markets of theseregions are correspondingly extensive, especially when compared with their share of the marketfor control and safety systems. In individual regions with high traffic levels, such as Cairo, invest-ment in higher-quality safety technology is nonetheless necessary in the medium term. Relative tothe small current market size, this will lead to high percentage growth. The importance of thesemarkets will however remain small in future.

The largest supplier of control and safety systems worldwide is Siemens with an estimated shareof the global market amounting to some 20 percent. Other major international suppliers include

Alstom, Ansaldo Signal, and Alcatel.

The structure according to which the safety functions of the equipment is calculated (interlocklogic) is similar despite widely differing signaling systems internationally and will become furtherharmonized in some regions in the medium term. This makes it possible to design the systemarchitecture largely in modular form. As a consequence, almost all manufacturers traditionallyoffer their products in uniform designs, the components of which can be grouped according to therequired application, although within a unit they are usually only compatible with other componentsby the same manufacturer. In this way, some suppliers have been able to build up relatively strongmarket positions in particular regions, as reflected in Germany, for example, by system contracts

between Deutsche Bahn AG and individual suppliers.

The widest possible applicability of a product platform places natural limits on unrestricted pre-fabricated modularity. In such market structures, additional suppliers have an opportunity belowthese limits to offer much lower-cost solutions for particular applications, such as in the secondarynetwork. One such supplier is Vossloh AG.



– 31 –

9.2 Urban transport

The technical and operational diversity of urban transport systems is most clearly expressed in theircontrol and safety systems. Generally, the costs in this market segment rise disproportionately asthe reference system becomes more developed and its operating load increases. For this reason,metro systems with their usually more frequently operating services and faster speeds also have agreater need for control and safety technology than systems in the light rail segment.

Viewed on an international scale, the regional system differences are less significant, however.Unlike in the standard-gauge railway segment, in dense urban traffic a guarantee of basic safetystandards with simple minimum control and signaling systems is not possible as a rule. Consequently,the light rail rapid transit systems in North America, Africa or Australia also require high-qualitycontrol and safety technology.

Fig. 18: The world market for train control/safety systems (LRV)

Urban transport systems are for the most part operated in public roads, often allowing the controland safety technology to be combined with road traffic signals. This largely eliminates the needfor additional special systems. A constant exchange of information between the vehicle and thecontrol center, which can also cover simple control and safety technology functions, is necessary,however.

This need generally explains the relatively strong position of the telecommunications marketsegment compared with control and safety technology, although this strength is diminishing asurban transport systems become increasingly efficient. There are also clear trends, as in the

standard-gauge railway segment, of a convergence of the respective market segments.

North America

€45 mill.

+5%

W. Europe

€560 mill.

+3%

E. Europe

€61 mill.

+5%

CIS

€3 mill.

+3%

Asia

€480 mill.

+9%

Australia/Pacific

€9 mill.

+2%

Latin America

€12 mill.

+1%

Africa/N&M East

€11 mill.+2%

Source: SCI Verkehr



– 32 –

The largest market in this segment is again Western Europe, which has the most metro and sub-urban railway systems as well as safety standards that are regarded as the highest worldwide.In Asia, similar to the infrastructure situation, the development of new urban transport systemsis also leading to clear growth in the volume of the engineering systems market. Singapore, forinstance, commissioned in June 2003 a driverless metro system which is scheduled for furtherexpansion.

For the other regions of the world, the comments made in relation to the infrastructure applycorrespondingly.

Fig. 19: The world market for telecommunications systems (LRV)

North America

€21 mill.

+4%

W. Europe

€121 mill.

+2%

E. Europe

€25 mill.

+4%

CIS

€1 mill.

+2%

Asia

€92 mill.

+8%

Australia/Pacific

€2 mill.

+3%

Latin America

€4 mill.+2%

Africa/N&M East

€5 mill.

+5%

Source: SCI Verkehr



– 33 –

10 The market for rail vehicles

10.1 The vehicle market in high-speed transport

There are some 1,650 high-speed and tilting trains capable of speeds of over 200 km/h in useworldwide, including about 1,000 power car/trailer and around 650 multiple-unit trains. Almost100 new high-speed trains are purchased every year at present. At some €1.4 billion per year, themarket for high-speed trains therefore represents a small but strongly growing segment in railvehicle manufacturing.

Fig. 20: The world market for high-speed rail transport

The two dominant sales markets for high-speed trains are Western Europe and Asia, with Japanpurchasing multiple-unit trains exclusively to date whereas Europe has historically shown apreference for the power car/trailer alternative. This trend has modified, however, because in the

past five years a large number of multiple-unit trains have also been procured for high-speed railtravel in Europe.

All other continents with the exception of North America (with the Acela Express) and EasternEurope (with tilting trains in Slovakia and the Czech Republic) have no high-speed rail products.A planned project in Australia was halted, and Russia is still in the middle of planning theMoscow–St. Petersburg line. In Turkey, the cities of Ankara and Istanbul will be linked by a high-speed line, which is to be completed by 2006.

North America

€10 mill.

+7%

W. Europe

€850 mill.

+6%

E. Europe

€10 mill.

+8%

CIS

–

Asia

€500 mill.

+5%

Australia/Pacific

–

Latin America

–

Africa/N&M East

–

Source: SCI Verkehr



– 34 –

South America and Africa have no financial resources either at present or in the foreseeable futurefor this cost-intensive high-speed transport linking urban areas.

In Western Europe, some €850 million is spent on the purchase of new high-speed trains annually.Spain, in particular, is investing heavily at present in expanding its fleet of high-speed trains,following on from Germany, which was the main sales market for new intercity express (ICE) trainsin recent years. Italy is expected to purchase new TGV trains in future while France is to replace itsexisting fleet of first-generation vehicles, both on a substantial scale. Continued dynamic growthin this segment can therefore be assumed, although this will be closely tied to the commissioningof new high-speed lines.

In Asia, Japan dominates the market for high-speed vehicles. Replacements for the Shinkansentrains built between 1960 and 1980 are already being phased in, although an expansion of thefleet structure is only to be expected on a small scale. On the other hand, particularly the newprojects in South Korea and Taiwan as well as the high-speed network planned by the Chinesegovernment represent considerable expansion potential for high-speed rail transport in Asia.Two prototypes of the high-speed train China Star, which is to operate at a scheduled speed of270 km/h, have already been built. At the same time, a Japanese consortium involving Hitachiand Kawasaki is making strenuous efforts to market the Shinkansen technology in China so as toprevent Alstom (TGV) or Siemens (ICE) from entering the market. Unlike in Europe, it is difficult atpresent to assess the momentum of development in Asia. However, owing to the growth of Asianmarkets, this momentum could quickly develop into an appreciably growing sales arena for high-

speed trains.

The Acela Express started operating in the USA on the Boston-Washington route in 2000. Ten high-speed corridors covering some 13,400 km are planned for the USA. Up to now, 20 of the Acela trainsbuilt by Bombardier and Alstom are in use. In Canada, the construction of a high-speed line isplanned, on which the Jet Train built by Bombardier is to be used. It is a power car/trailer typeof train operated with a gas turbine which is to run at a scheduled speed of 240 km/h betweenMontreal and Toronto from 2009.

It is not easy to assess the demand potential for high-speed trains in the CIS, because it depends

substantially on the (currently difficult) budgetary situation facing public authorities and on thebuilding of a new rail infrastructure or the upgrading of existing facilities. According to the Russianrailway, it is expecting to need 70 to 90 high-speed trains by 2010. To date, however, only a proto-type exists of the high-speed train Sokol.



– 35 –

The market shares of manufacturers of high-speed trains are distributed worldwide as follows(owing to the greatly project-dependent fluctuations the units sold over the past 15 years weretaken into account):

Fig. 21: World market shares in high-speed rail transport

Alstom dominates the market with its TGV product, because especially in France, its home market,an extensive expansion of the high-speed network has taken place over the past two decades. Interms of the number of units of the ICE product, which was introduced on the market only aboutten years ago in various consortium projects involving Bombardier (or Adtranz), Siemens is well

behind. However, Siemens and especially Bombardier from their respective national locations havealso supplied a large number of smaller high-speed train fleets (to Italy, Spain, Switzerland, Sweden,and so on), gaining additional market share with these products. The Japanese consortiums lead-managed by Kawasaki or Hitachi have been supplying their domestic market since the 1960s butoutside of Japan have been able to market their products only in Taiwan. However, the first extensivereplacements are pending in Japan. The market share held by Japanese manufacturers may wellincrease in future, above all in other Asian markets.

Talgo has positioned itself in the marketplace as a new supplier of high-speed vehicles. In coopera-tion with Bombardier, it is currently delivering 16 Talgo 350 trains to Spain. Unlike the 16 Velero

trains handed over by Siemens at the same time, the Talgo 350 is a power car/trailer train with adistinctive continuous low-floor design at a height of 760 mm (above the upper edge of the rail).

With the aim of reducing the procurement and maintenance costs of new-generation vehicles inEuropean high-speed transport, the major railways in France, Germany and Italy (SNCF, DB AG andFS Trenitalia) have come together in order to develop a joint high-speed rail vehicle, known as theHigh Speed Train Europe (HTE).

Others3%

Alstom

44%

Siemens/Bombardier34%

Kawasaki/Hitachi19%

Source: SCI Verkehr





– 37 –

This can be viewed as a competitive advantage for the domestic locomotive manufacturers fromEastern Europe or the CIS states. Traditionally, the locomotive builders from Russia and Ukrainehave been successful not only in their domestic marketplace but also in Eastern Europe. At present,the situation of these manufacturers has to be assessed as difficult, however, even though locallyproduced locomotives are favored in Russia for the most part. There are no large-scale state projectsthough, and a lack of liquidity is preventing the necessary technical innovations. An attempt istherefore being made through cooperation with Western manufacturers to guarantee the necessarytransfer of technology. For example, Bombardier and Siemens have already supplied vehicles to theCIS or been involved in the development of prototypes.

The second-largest market for electric locomotives is the Asian region, where there are also largefleets of electric locomotives in China (11 percent of the world total) and India (6 percent), whichare to be continually expanded and renewed. In procurement, local manufacturers are also usuallypreferred in these countries. For the globally operating systems suppliers it is therefore difficult tomake inroads into these markets. They get involved mainly through joint ventures or, with smallnumbers, they operate successfully as independent players.

Due to their low levels of electrification, both America and Australia each with an annual marketvolume of approx. €20 million on average represent only insignificant sales markets for electriclocomotives.

On the African continent, only South Africa with a fleet of almost 2,000 electric locomotives can

be viewed as an interesting sales market offering promising sales potential. The major systemssuppliers are positioning themselves in this region by taking on modernization projects.

Generally, in terms of the development of electric locomotives it can be stated that in view of thesevere slump in prices in recent years modularization strategies are being implemented most con-sistently in this segment. It remains to be seen whether the cost savings thus achieved and thestreamlining of production processes among the major systems suppliers will improve their com-petitive position in the more price-sensitive markets in future. Owing to their dominance in thekey Western European market, they have a hold on significant sections of the market for electriclocomotives. Leading the European market is Bombardier with a share of some 40 percent, clearly

ahead of Siemens with about 30 percent and Alstom with almost 25 percent on average in recentyears.



The European market shares held by the manufacturers of electric locomotives—for the periodsince 2000—are distributed as follows:

Fig. 23: European market shares for electric locomotives

The sale of electric locomotives is highly cyclical, with major contracts from (former) state railwaysaffecting market share considerably. This means that any examination of market shares has to bebased on a lengthy period. At present, Bombardier in particular is enjoying great market successwith its electric locomotives thanks to the completion of major contracts as well as a large number

of orders from smaller privately owned railways. Siemens has also benefited from some majorcontracts in recent times but has yet to attract any follow-up orders on a significant scale. Alstom,on the other hand, is currently experiencing a sales dip following strong locomotive sales in the1990s. However, this situation is likely to be overcome when the French state railway SNCF placesnew major orders in the near future, thus helping to stabilize the market shares in the electriclocomotives segment.

– 38 –

Others3%

Bombardier41%

Siemens30%

Alstom22%

AnsaldoBreda4%

Source: SCI Verkehr



– 39 –

10.3 Diesel locomotives

There are almost 92,000 diesel locomotives in working order worldwide, which compared with otherrailway traction vehicles have a much longer service life on average. The market for diesel locomo-tives worth more than €3.5 billion on average every year thus represents a very promising marketsegment in rail vehicle manufacture, the third-largest after freight cars and electric multiple units.

Fig. 24: The world market for diesel locomotives

In Western Europe, the largest market potential for the sale of diesel locomotives is in Germanyand France, each of which account for some 15 percent of the total diesel locomotives in the wholeof Europe. The two large state-owned railways in France and Germany, SNCF and DB AG, are aboutto embark on a fundamental modernization of their diesel locomotive fleets. SNCF Fret, for example,plans to procure 124 diesel locomotives by 2006. Options also exist for the purchase of additionaldiesel locomotives, because SNCF Fret intends to buy a total of 850 new diesel locomotives in the

medium term, half of which will be medium performance with the other half belonging to the high-performance class. Deutsche Bahn AG has invited bids for the delivery of 203 main-line diesellocomotives by 2006 with an option to purchase a further 263 units.

Eastern European countries with large diesel fleets are Poland and Romania, each of which holdssome 9 percent of the total diesel locomotives in Europe. However, owing to the uncertain financialsituation in these countries, large-scale procurements are not to be expected in the near future.Especially in relation to Eastern European countries as well as many privately owned railways inEurope as a whole, it should be commented that the procurement of traction equipment willconcentrate in the years ahead mainly on the modernization of existing vehicles as well as the

hiring of traction units from pools of locomotives.

North America€920 mill.

+4%

W. Europe

€810 mill.

+4%

E. Europe

€333 mill.+4%

CIS

€229 mill.

+3%

Asia

€841 mill.

+4%

Australia/Pacific

€104 mill.

+4%

Latin America

€185 mill.

+5%

Africa/N&M East

€145 mill.

+5%

Source: SCI Verkehr



– 40 –

In the CIS, a rising demand for diesel locomotives of up to about €230 million annually is to beanticipated in the coming years. Owing to the upcoming delivery of a large batch of locomotivesto the Russian state railway, the Russian market is of interest not only to national suppliers butalso to such foreign groups as General Electric. This company has, in fact, announced plans toconstruct a plant of its own in Russia as soon as the negotiations with the government have beensuccessfully completed.

In North America, sometimes as many as 1,000 diesel locomotives annually have been sold inrecent years. Demand has now dropped slightly, causing the market’s appeal to wane. This appliesespecially to European suppliers because the North American market with its different safety stan-dards and two dominant operators GE and GM can be described as closed and differs greatly interms of its structure and requirements (similar to the market in Great Britain) from the market incontinental Europe.

Even though the demand for diesel locomotives can be quantified at under €200 million per year ineach case, South America, Africa and Australia can certainly be seen as promising future marketsfor diesel locomotives. In Australia, the proportion of electrified lines is very small, meaning thatinternal combustion traction dominates at a ratio of 7:1 for locomotives. Africa and South Americarepresent growth markets in which various countries have acquired diesel locomotives in largenumbers in recent years in order to renew their fleets. A continuation of this trend toward moreintensive procurement activity can be expected at present.

Asia constitutes an interesting sales market especially due to the high demand for diesel locomotivesin the growth markets of China and India. Even though particularly Bombardier and Siemens havesucceeded time and again in recent years in securing various contracts in Asia, it must be assumedfrom the high importance of the local content that the major systems suppliers are able to exploitonly a small proportion of the sales potential and national operators will continue to dominatethese markets.



– 41 –

The European market shares held by the diesel locomotive manufacturers—relating to the periodfrom 2000 to 2003—are distributed as follows:

Fig. 25: European market shares for diesel locomotives

Vossloh has managed to boost its sales of diesel locomotives in the European market considerablyin recent years and to increase its annual production to some 120 locomotives. For the past threeyears, Vossloh has dominated the diesel locomotive market in Europe with an over 50-percentshare of the units delivered. Vossloh is followed by GM, which does not however possess its own

production facilities in Europe and has been able to sell high numbers of units chiefly thanks to amajor contract in the UK, as well as Siemens, which recently increased its market share throughthe delivery of large numbers of Rh2016-type units and is set to replace GM as the second-largestsupplier in the European diesel locomotive market.

Others4%

Vossloh52%

GM18%

Siemens13%

Alstom10%

Bombardier3%

Source: SCI Verkehr



– 42 –

10.4 Electric multiple units

There are almost 40,000 electric multiple units (EMUs) in use in regional and intercity transportworldwide. With an annual volume of some €4.2 billion, this market segment is the largest forrailway traction vehicles and is growing chiefly owing to the urbanization of settlement structuresand the increasing electrification of railbound transport. Electric multiple units are also used inhigh-speed transport and in metro and light rail vehicles, which are treated separately in this surveyand further increase the market volume for electric multiple units.

Fig. 26: The world market for EMU

Asia and Europe are the chief sales markets for electric multiple units, each with a share of thetotal procurement volume exceeding 40 percent. Just as elsewhere, the sales market is expectedto continue to grow in the wake of increasing urbanization.

In Western Europe, in particular, with an annual market volume for electric multiple units of some €1.7 billion, sales of these vehicles are gaining additional momentum because private railwaycompanies, which have procured diesel traction units almost exclusively until now, are acting asconsumers. Now that these companies also require vehicles for the operation of main lines and(electrified) partial networks, they are giving the demand for electric multiple units additionalimpetus. A continuation of this trend and growth of the sales market by some 4 percent can there-fore be expected.

In contrast, the market for electric multiple units in Eastern Europe is only one-tenth of the size aswell as being still very underdeveloped. Structural changes in the railways as well as the first signs

of regionalization may have begun but their effects on the procurement of new vehicles should still

North America

€195 mill.

+5%

W. Europe

€1,703 mill.

+4%

E. Europe

€166 mill.

+5%

CIS€243 mill.

+4%

Asia

€1,767 mill.

+5%

Australia/Pacific€44 mill.

+4%

Latin America

€72 mill.

+5%

Africa/N&M East

€41 mill.

+5%

Source: SCI Verkehr



– 43 –

be described as marginal thus far. In the long term, however, thanks to the operating advantagesof the multiple-unit train concept over the locomotive-hauled train in individual areas of applica-tion, the proportion of electric multiple units will increase even in Eastern Europe, with the salespotential set to rise substantially. The leading market in this region is Poland with over 1,200 electricmultiple units.

Completely different is the situation in the Asian market, where the proportion of multiple-unittrains with electric traction is very high. With over 12,000 electric multiple units and an annualdemand volume of more than €1.7 billion, this vehicle type dominates the traction vehicle market.It must be stressed that especially Japan but also India and South Korea are the chief users ofelectric multiple units.

Whereas in the African market South Africa is the only significant consumer of electric multipleunits, in South and Central America, Brazil and Argentina as well as Mexico fall into this category.The annual demand volumes on these continents as in Australia amount to €50 million and are setto rise in the years ahead by about 5 percent annually because demand in these regions will alsobe strengthened owing to changes in settlement structures.

The same trend can be registered for North America and the CIS states, even though they eachshow a market volume which is four to five times that of the markets cited above. The USA andRussia are the dominant countries in this segment, however (with about 80 and 180 vehicles peryear, respectively).

The European market shares held by the manufacturers of electric multiple units—in the periodfrom 1999 to 2002—are distributed as follows:

Fig. 27: European market shares for EMU

Bombardier52%

Siemens26%

Alstom

14%

Stadler2%

Others6%

Source: SCI Verkehr



– 44 –

The bulk of orders had been handled through consortium projects in the past, making it difficult insome cases to assign individual batches of vehicles to a specific manufacturer. If these orders aredistributed on a pro-rata basis among the respective consortium members, Bombardier’s dominationin this market segment is nonetheless clear because it often acted as the consortium leader as well.Especially thanks to major contracts in the UK, Siemens has strengthened its second position,whereas has Alstom lost market share recently.

10.5 Diesel multiple units

There are some 15,000 diesel multiple units in operation worldwide. Even though this segmentwith an annual sales volume of just over €1 billion is the smallest in the railway traction vehiclesector, it is showing the most dynamic growth because multiple-unit sets are being used increasinglyin short-distance passenger transit by rail in place of locomotive-hauled trains.

Fig. 28: The world market for DMU

Western Europe accounts for more than half of the market volume for diesel multiple units. Whereasa large number of vehicles have been procured in recent years in this region, in future SouthernEurope, but especially Eastern Europe and South America, will rank among the most promisinggrowth markets in this segment.

About 200-250 diesel multiple units are delivered in Western Europe every year. Whereas the staterailways of Central and Northern European countries as well as a large number of private railwaycompanies already possess a high proportion of new vehicles in their fleets, in Southern and Eastern

North America

€10 mill.

+5%

W. Europe

€552 mill.

+4%

E. Europe

€102 mill.

+6%

CIS

€39 mill.

+3%

Asia

€289 mill.

+5%

Australia/Pacific

€10 mill.

+5%

Latin America

€30 mill.

+6%

Africa/N&M East

<€10 mill.

+5%

Source: SCI Verkehr





– 46 –

Alstom and Bombardier dominate the European market for diesel multiple units and are benefitingespecially from the sale of high numbers of units in their home countries of France and Germany,respectively. In addition, Stadler and Siemens are two operators which particularly through theirsuccessful market positioning in recent years have managed to increase their market share.

10.6 Passenger cars

It is difficult to talk about a world market for passenger cars, the reason being their very simpletechnology.

Since passenger cars do not possess traction as a rule, they age less quickly than other vehicles.Apart from their special load (e.g. friction), the driving elements are above all technology- andinnovation-intensive.

Fig. 30: The world market for passenger railcars

Passenger cars do wear out of course. Unlike with other vehicles, however, with passenger cars,refurbishment of the vehicle is often favored in order to combat this deterioration. In the courseof a passenger car’s service life, virtually all its vehicle components (e.g. bogies, interior fittings)except for the chief elements such as the chassis are replaced. Even though the vehicle has beenre-equipped several times in most cases during this service life, no procurements have been madeover this period. This vehicle modernization is still frequently undertaken by the railways them-selves, however, and with only little involvement by outsiders.

North America

€60 mill.

+/-0%

W. Europe

€600 mill.

–2%

E. Europe

€240 mill.

+1%

CIS

€320 mill.

+2%

Asia

€500 mill.

+/-0%

Australia/Pacific

€10 mill.

+/-0%

Latin America

€40 mill.

–1%

Africa/N&M East

€180 mill.

+/-0%

Source: SCI Verkehr



– 47 –

Especially in Western and increasingly also in Eastern Europe, locomotive-hauled trains with pas-senger cars are being replaced, particularly in regional transport, by power railcars which can oftenbe operated more flexibly thanks to their own traction capability. In long-distance transportation,above all high-speed vehicles are replacing the conventional passenger cars.

Market growth can be forecast solely in those countries where there is pent-up demand for pas-senger cars and the financial resources for the higher-cost power railcars are not always available.This is the case in the CIS above all. In Eastern Europe, however, such countries as Romania andHungary are already favoring power cars when they place their new orders.

Due to their simple technology, passenger cars are usually produced locally in all countries. Suchcountries as India or China continue to have a considerable need for them, with some 3,000 pas-senger cars still being purchased every year in China alone. These are very low-cost domesticallyproduced railcars, which do not offer a market for Western companies.

A chief exception is the double-deck variety, which has been a very successful product for Bombardierin Western Europe in recent years, for example, especially in Germany. With unit prices of about €1 million, this product is a major reason for the comparatively high market volume in WesternEurope. By comparison, a simple passenger car manufactured in India costs about €90,000.

10.7 Freight cars

There are some 4.8 million freight cars worldwide, equivalent to over 90 percent of all rail vehicles.With an annual volume of about €4.3 billion, the freight car segment does not even represent aquarter of the total world market for rail vehicles, however.

The reason for the relatively limited market is the low unit prices of freight cars. Individual cus-tomized designs such as car-carrier or low-loader wagons can achieve prices of up to and over €120,000, whereas widely used wagons in a standard design are much lower in cost. In WesternEurope, owing to the higher technical requirements stipulated by UIC, they cost about €70,000,in North America this figure reduces to €43,000 on average, and in Russia they can cost as little

as about €20,000.

Due to freight transport’s direct dependence especially on the manufacturing sector, the marketfor freight cars is very cyclical, particularly when compared with the markets for rail vehicles inpassenger transport.

By far the biggest market for freight cars is North America. As recently as 1998, as a result of eco-nomic growth and the rising demand for transport services, over 75,000 freight cars were deliveredhere. As a consequence of the cyclical downswing following September 11, 2001, this figure fell tobelow 18,000 in 2002. In 2003, demand is already on the rise again. If a ”usual” market volume of

about 50,000 vehicles is taken as a basis for the domestic market, a figure of some €2 billion can



– 48 –

be put on the North American market. As for the long-term trend, the high procurement volume atthe end of the 1990s led to very high inventories, so that all the necessary replacements will notactually be carried out in the years ahead.

Fig. 31: The world market for freight cars

Western Europe is a key market above all owing to the high unit prices. The fulfillment of UICrequirements raises the price of vehicle production, especially for the bogie. Despite rising invest-ment by private operators, above all the underinvestment by state railways is allowing the totalmarket to fall short of the necessary replacement levels. With a good 13,000 freight cars beingprocured every year in Western Europe, SCI Verkehr assumes an annual market volume of about €1 billion.

There is still a very mixed picture in Eastern Europe. Whereas in Bulgaria the state railway intendsto sell off several thousand of its existing freight cars for liquidity reasons, the Hungarian MÁV AG

is currently seeking to hire dedicated freight cars to meet the increased demand. All in all, themarket has grown substantially over the past 2–3 years.

Considerable growth in freight transportation by rail has been registered in Asia in recent years,even though in many places there are insufficient resources to remove capacity bottlenecks. Inorder to meet the bulk transport requirements, simple and low-cost domestically produced wagonsare used mostly. In China alone, some 30,000 freight cars have been produced annually in recentyears. Based on a 10-percent growth in procurement, the market volume remains comparativelysmall at some €500 million, however.

North America

€2,000 mill.

–2%

W. Europe

€970 mill.

+1%

E. Europe

€350 mill.

+6%

CIS

€450 mill.

+8%

Asia

€540 mill.

+3%

Australia/Pacific

€40 mill.

+/-0%

Latin America

€150 mill.

+6%

Africa/N&M East

€100 mill.+2%

Source: SCI Verkehr



– 49 –

In the CIS only a proportion of the wagons on hand are in fact fit for use. In Russia alone, of thearound 475,000 freight cars at the state railway’s disposal some 200,000 are used as a stock ofspare parts rather than for transporting freight. After 1991, no actual procurements were madefor over 10 years. Consequently, over 30 percent of the wagons are now more than 30 years old,and 80 percent of all wagons are regarded as defective. Since the turn of the millennium, however,the first signs of recovery have started to emerge. In 2001, privately owned companies in Russiapurchased about 10,000 freight cars, and in 2002 the state railway also ordered some 1,400 wagons.Procurements on an even greater scale are budgeted. As a conservative estimate, a procurementvolume of about 25,000 freight cars with a market size of some €500 million is anticipated for thewhole CIS in 2003.

Since freight cars are relatively simple mechanical vehicles without a drive of their own, their pro-duction is widespread. In virtually every major state-dominated market, there is at least one majormanufacturer such as the Russian Uralvagonzavod or the plant in the Chinese city of Zhuzhou.The accessible market from the Western point of view is traditionally restricted chiefly to NorthAmerica and Western Europe. Thanks to the changes mentioned in recent years. South and CentralAmerica, but especially Eastern Europe, have emerged as new markets.

The market leaders in this bulk transport segment are the major US producers Trinity/Thrall andGreenbrier, which manufacture their products not only in the USA but also increasingly in locationswith lower wage costs, such as Mexico. With the spectacular purchase of capacities in Poland,Romania and the Czech Republic, both companies have the European market firmly in their sights,

although in the case of Greenbrier, which is currently winding up its European interests, the calcu-lations proved to be overoptimistic.With the increasing liberalization worldwide, more and more previously state-owned major pro-ducers will be entering into international competition and stepping up the price pressure on simplefreight cars through massive overcapacity. A large proportion of the wagons used in WesternEurope already come from Eastern Europe. Western plants remain restricted to the production ofhigh-quality custom-made designs such as chemicals and pressure tank wagons and car-carrierand low-loader container-carrying wagons.

The freight car market is set to increase overall, owing to the growing demand for transport services

alone. In contrast, the number of units sold may fall, however, the reason being the worldwidetrend toward freight cars with a higher loading capacity through higher axle loads (above all in theUSA) or more axles (mainly in Europe). Another reason for rising market growth is the trend towardhigh-quality special-purpose freight cars in place of simple flat or covered wagons in a standarddesign. Worldwide growth of 5–6 percent overall is certainly likely.



– 50 –

10.8 Light rail vehicles

Light rail vehicles (LRV) are primarily used on suburban railways and tramways. Whereas in the1960s and 1970s, LRV systems were shut down in many places in Western Europe, this means ofurban local transport has been experiencing a sustained and long-running revival since the 1990s.Owing to their higher service capacities (in terms of passengers in each direction) railbound systemshave a clear advantage over buses. Light rail rapid transit and tram systems are also much cheaperthan metro systems, where expensive civil engineering work accounts for a large part of the costs.

Fig. 32: The world market for light rail vehicles

The largest market for light rail vehicles is Western Europe. In Germany alone, there are almost 60operators, with over 200 vehicles—albeit with great fluctuations—being ordered every year. Inrecent years, however, France, the UK, Italy and Spain have supplied the greatest growth momentum.Unlike in Germany, there are still comparatively large towns in these countries without light rail

rapid transit systems. Due to the great success of the systems built in the 1990s, further networkexpansions or even the construction of new systems are to be expected in this region in future.We are setting a conservative estimate of growth at a moderate 2 percent.

By far the most systems and vehicles in the light rail sector are to be found in Eastern Europe andthe CIS, where all in all there are some 160 systems with ”officially” about 30,000 vehicles. If thecustomary procurement periods and vehicle costs for Western markets were taken as the basis foran estimate, astronomically high market volumes far removed from the reality would be the result.In fact, very few purchases have been made over the past ten years and predominantly from localmanufacturers, such as Skoda. In most cases, systems were operated until they wore out or the

North America

€190 mill.

+4%

W. Europe

€660 mill.

+2%

E. Europe

€60 mill.

+6%

CIS€20 mill.

+6%

Asia

€130 mill.

+5%

Australia/Pacific€20 mill.

–5%

Latin America

<€10 mill.

+4%

Africa/N&M East

<€10 mill.

+/-0%

Source: SCI Verkehr



– 51 –

most serious deficiencies were kept under control through low-cost overhauls. In Eastern Europeespecially, this picture has changed recently. The projects in Poznan und Lódz show that Western-type vehicles are preferred in the long term in these countries, too, and the financial basis isconsolidating owing to economic growth. In future, markets with exceedingly favorable growthprospects will develop here, especially in the CIS, but still at a low level for the time being.

North America has developed into a genuine boom market for LRV in recent years. Especially in theUSA, the land of the automobile, it was recognized in many places that inner-city traffic congestioncould no longer be dealt with using conventional means, above all motorcars. Extensive new systemsand the upgrading of existing systems, in Calgary, Salt Lake City or Houston for example, have notonly greatly boosted the vehicle market in the past but also serve as a model for cities with similarplans. We are setting a conservative estimate of at least 4-percent growth in this region.

In Asia, too, the inner-city traffic problems are leading to increased demand for rail-based solutions.Owing to the size of the cities, an even more efficient metro system is preferred in many places inthis region. However, light rail rapid transit projects are being tackled in isolated cases, such asin Taipei or Kuala Lumpur.

Worldwide the LRV market comprises an annual volume of some €1.1 billion. We are setting acautious estimate of 3-percent growth for the next five years.

The most important manufacturer worldwide is Bombardier Transportation. As the pioneer of

standardization, Siemens has lost significant market share in its domestic German market butgained acceptance internationally,having secured over 500 orders for itsstandard Combino vehicle. Alstom hasbenefited greatly from the light railservices boom in France but is not yetwell represented internationally.Vossloh Kiepe has not acted as an OEMto date and was therefore not consideredin this survey. Overall, the data records

from often closed markets such asChina and Japan are not yet compre-hensive. The share of local manufacturersis therefore presumably somewhathigher than estimated here.

0

5

1015

20

25

30

35

40

%

Bombardier AlstomSiemens Ansaldo Others

Fig. 33: World market shares in light rail vehicles

Source: SCI Verkehr



– 52 –

10.9 Metro vehicles

Similar to the light rail and tram systems, the market for metro vehicles is also benefiting from thegrowth of urban conurbations and the associated increase in commuter traffic. Metro systemsdiffer from light rail vehicle services in two chief respects:– As a closed system (underground as a rule) metro services have no intersection points with

other traffic. They can therefore operate at closer intervals and with higher average speeds,making them much more efficient than LRV systems. The vehicles are consequently heavierand at the same time more powerful.

– Owing to these characteristics, but also because of the civil engineering work required, metrosystems are much more cost-intensive than LRV systems.

Fig. 34: The world market for metro vehicles

As the name suggests, metros are most suitable in densely populated metropolitan areas with a

need for an extremely efficient means of public transport. There are some 90 metro systems inoperation worldwide, most of which are in Western Europe (25) and Asia (24), ahead of NorthAmerica (13) and the CIS (12). Specific systems, such as the people movers that are often usedto take passengers to and from airports, are not taken into account in these figures.

There are great variations, however, in the size and sophistication of metro systems. Taking marketaspects into account, the major Western systems in such cities as New York, London, Paris or Berlincontinue to dominate. Japan with its nine systems is also a very significant though largely closedmarket. New systems have been built almost exclusively in Asia in recent years, because it has

North America

€350 mill.

+2%

W. Europe

€730 mill.

+2%

E. Europe

€250 mill.

+6%

CIS

€30 mill.

+7%

Asia

€450 mill.

+8%

Australia/Pacific

–

Latin America

€40 mill.

+4%

Africa/N&M East

–

Source: SCI Verkehr



– 53 –

numerous cities with over a million inhabitants which are dependent on such an efficient meansof urban transport. The wage-intensive civil engineering work involved is also still more feasible inAsian countries, above all China, than in Western industrialized nations. In the West, such as in thecase of the USA or the ”traditional” metro country France, LRV systems are now being built chiefly.No new networks are being built in the metro systems segment, but some existing networks arebeing upgraded and extended.

The dominance of the major Western systems is reflected in the market share distribution amongthe leading system suppliers, namely, Alstom (Paris, London) and Bombardier (New York, London).

Fig. 35: World market shares in metro vehicles

Siemens, on the other hand, has established itself as a turnkey supplier especially for new systemswhile also increasingly taking on the role of vehicle supplier (e.g. in Guangzhou, China).

Japan has several domestic suppliers which dominate the home market but are barely effectiveabroad, the chief exception being Kawasaki in the USA.

Source: SCI Verkehr

0

5

10

15

20

25

30

35

40

45

%

% Bombardier AlstomSiemens Ansaldo Japanesecomp.

Others



– 54 –

11 The worldwide rail market

Based on the analysis of markets in individual countries, SCI Verkehr estimates the worldwide railmarket at currently about €56.7 billion per annum. The annual growth over the next five years forall regions and submarkets is assessed at about 4 percent.

Even though the infrastructure and vehicles form the biggest individual markets, the fastest grow-ing subsegment is engineering systems. This also illustrates the great challenges facing the intelli-gent organization of rail traffic in the future.

Fig. 36: The world market for railway engineering by segments

Western Europe will remain the most significant market for rail industry products. The growthin transport demand described will continue to ensure substantial growth in market volume. Inabsolute terms, this growth is the biggest worldwide but owing to the region’s high stock levels

is moderate in percentage terms.

Asia is also of outstanding importance with its enormously extensive rail networks. However,demand for solutions from Western manufacturers exists only in subsectors within this region.In many markets mass transportation exists in the form of very simple solutions which can beprovided by domestic manufacturers at low cost, such as in freight transportation in China orIndia. The greater part of the markets in individual countries is largely closed to Western suppliers.Exceptions exist in areas where high-quality solutions are needed which cannot, however, beprovided by domestic suppliers.

Engineering systems

€5.9 bill.+6%

Vehicles €22.2 bill.

+3%

Infrastructure €28.6 bill.

+5%

World market €56.7 bill.

+4%

Source: SCI Verkehr



– 55 –

F

i g . 3 7 : T h e w o r l d m a r k e t f o r r a i l w a

y e n g i n e e r i n g b y r e g i o n s

2 1 . 4 7

2

5 . 9 1

+ 4 %

4 . 5 1

5 . 6

4 . 8 6

4

. 1 6

1

+ 5

+ 3

%

%

9 . 4 2

1 0 . 7 7

+ 3 %

y e a r l y

y e a r l y

y e a r l y

y e a r l y

y e a r l y

1 . 2 9

1 . 5 1

+ 3 %

0 . 8 2

1 . 0 0

+ 4 %

1 3 . 7 3

1 8 . 6 6

+ 6 %

1 . 3 8

1 . 6 0

+ 3 %

W . E u r o p e

E . E u r o p e

A s i a

A u s t r a l i a / N

Z

A f r i c a / N & M E

a s t

L a t i n A m e r i k a

N o r t h A m e r i c a

C I S

y e a r l y

y e a r l y

y e a r l y

S o u r c

e : S C I V e r k e h r



– 56 –

This is especially the case with engineering systems as well as in some specific segments, such ashigh-speed transport or in some instances in the metro sector. Substantial growth is to beexpected in this area due to the rapid pace of development.

North America is of interest to European manufacturers chiefly in those segments where there ispent-up demand compared with Europe, as is the case in passenger transport. Significant marketopportunities exist for foreign companies in suburban standard-gauge railway transport, in the lightrail rapid transit segment and in high-speed transport. The dominant freight transport segment, onthe other hand, with its specific North American volume-dominated character is already wellcovered by domestic manufacturers.

Eastern Europe and the CIS offer the most interesting prospects worldwide. After railway transportsuffered a drastic slump in the early to mid-1990s, the first signs of recovery are already starting toemerge above all in the accession states. In Hungary, for instance, both freight and passengertransport services have been rising again since 1996, whereas other countries, especially in the CIS,will need a few more years for this process. Due to scarce financial resources, very few or no pro-curements were made in these countries in the 1990s, in which the railway still represents the back-bone of distribution in many transport areas. As a result of this situation, both the infrastructureand rolling stock are in a state which makes investment urgently necessary despite the shortage ofavailable funds. In the EU accession countries, investment has increased over the past 2-3 yearschiefly in the form of EU subsidies. The first large-scale invitations to bid for the upgrading of mainlines are currently being put out, with a clear increase in vehicle orders also being registered. As

the locomotive and power car procurements in Hungary and Romania show, high-quality productsfrom Western suppliers are being opted for increasingly. This is not least linked to the fact thatsome of the funds for capital investments come from the EU. For this reason, the forecast for theEastern European market in the next five years is comparatively optimistic. For the CIS, such growthin market volume will presumably occur in the years that follow.

Australia and South America remains comparatively small markets with promising growth in indi-vidual segments. In South America, the main such segment is freight transportation which owingto the privatizations of recent years in such countries as Argentina and Brazil has gained new scopefor investment. In Australia, the harmonization of regionally differing network structures is leading

to growth chiefly in the infrastructure.



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12 Summary

The rail market will remain an exceedingly attractive future market for those companies whichpossess specialized experience and proven expertise as well as the required certifications in thissegment and are able to adapt to the increasing internationalization of markets. This favorableassessment is based on the following findings:

– Thanks to the rising demand for mobility, worldwide rail traffic is also growing, as is thedemand for railway technology products and services;

– Through the opening-up of world markets new transport routes are being created and existingroutes largely renewed and modernized as part of extensive national and supranational invest-ment programs. This will create continuous significant growth for the foreseeable future,including for the rail sector;

– Thanks to the deregulation of rail traffic, the market volume for private sector companies isrising even more strongly not least because of reform and procurement bottlenecks, similar tothe situation that existed in telecommunications or the energy supply industry in recent years.

– Railway technology is a specialized market with specific requirements, which result chieflyfrom high safety standards linked to the transportation of passengers and goods. Technicalexpertise together with the required certifications are the basic capital of the companiesoperating in the rail industry. In a relatively restricted (world) market with a limited totalvolume, this creates very high entry barriers which deter newcomers or those coming inthrough the back door from other industrial sectors while benefiting established specialists.

In the world market for rail equipment, average growth rates of about 4 percent will continue tobe realized, although this is only a mean value. Especially in Western Europe, the largest and mostattractive market for railway technology products, there are signs in some countries of a stretchingand reduction of public investment budgets due to continued economic problems. Nevertheless,major transport schemes always represent national prestige projects as well, which as in the caseof high-speed lines, for example, are treated as a priority. In contrast, in the same countries againsta background of increasing competition for the operation of lines and networks in both municipaland rail transport the successful players are investing heavily in measures aimed at boosting theappeal and efficiency of the railway system. In the EU accession states, large-scale financed invest-

ment is about to be effected in the infrastructure especially. In Asia, capital spending is focusingon efforts to cope with local urban transport as well as commuter traffic between towns and thesurrounding areas, with some high-speed rail links also being funded.





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