Opportunity Analysis of the Eastern European Rail Market: A 360-degree Perspective

Opportunity Analysis of the Eastern European Rail Market:

A 360-degree Perspective Interoperability in Pan-European Context Driving Market Growth

M8F3-13

June 2014

Czech Republic, Hungary, Romania, Poland, Ukraine

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Jagadeesh Chandran

Sr. Research Analyst

Automotive & Transportation

+91-44-66814058

[email protected]

Sundar Shankaranarayanan

Research Analyst


+91-44-66814171

[email protected]

Sandeep Kar

Global Director, Commercial Vehicle Research


+1 416 490 7796

[email protected]

Shyam Raman

Research Analyst


+1 416 495 2686

[email protected]

Research Team

Contributing Analyst Contributing Analyst

Research Director Lead Analyst

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Contents

Section Slide Number

Executive Summary 4

Research Scope, Objectives, Methodology, and Background 13

Definitions and Segmentation 20

General Rail Trends in Eastern Europe 23

Mega Trends and Industry Convergence Implications 34

External Challenges: Drivers and Restraints 38

Rail Track in Eastern Europe 44

Urban Rail in Eastern Europe 50

Mainline Rail Rolling Stock in Eastern Europe 61

Rail Signalling Systems in Eastern Europe 79

Conclusions 88

Appendix 92

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Executive Summary

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Executive Summary—Key Findings Overall growth in the rail sector is bottlenecked by factors such as low funding and low volumes.

Between 2012 and 2020, the region will possess an approximately €33.00 billion worth

opportunity for rail infrastructure development projects, with up to 70% of investment directed

toward the upgrading of lines. 1

Severe shortage of fleet is causing a bottleneck; consequently, passenger volumes have suffered

in Poland, Ukraine, and Romania. 3

There are approximately 13,000 locomotives in active service, However, the number has

decreased significantly over the last decade. Electric locomotives represent approximately 40% of

the total locomotives in every country of the region.

4

The decline of passengers and freight traffic has resulted in a decline over the past decade in the

number of wagons and passenger coaches. Even with new deliveries, the total number of wagons

and coaches in active service is expected to decrease by 2.1% and 2.7%, respectively. 5

2 With a combined total of 21,770 km of track length already electrified, Czech Republic and

Ukraine account for 86% of growth of electrified lines in the previous decade.

Although the European signalling systems market is highly monopolized, the Eastern European

rail signalling market has a strong presence of smaller local companies, such as as Funkwerk and

Scheidt & Bachmann, Kombud Radom, AŽD Praha, and GANZ Trans Electro. 6

Source: Frost & Sullivan

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Rail Market: Expected Rail Infrastructure Investment by Country and Type, Eastern Europe, 2020

New Construction is 21.4% of Total Investment The majority of rail spend is expected to go toward upgrading infrastructure. Total rail network lengths and

rolling stock in installed fleets are expected to decrease as rail operations become leaner and more efficient.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Poland Romania Hungary Czech Republic Ukraine

Rail

In

frastr

uctu

re In

vestm

en

ts (

€ M

illi

on

)

New rail construction Rail upgrade Development of intermodal nodes

€32.72 billion

21.4%

68.8%

9.8%

Mainly Warsaw, Gdansk, Katowice, Poznan,

and Bialystok nodes, optimization efforts, and

high-speed development

Primarily line double-

tracking efforts on Kiev-

Crimea connection

New line development

under TEN-T PP 22

between Sighişoara and

Gurasada

Total

Investment

by 2020

Note: Development of intermodal nodes includes new stations, interchanging terminals, storage space, appropriate controlling and monitoring systems.

Country


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Eastern Europe Invests Less in Rail Compared with Western Europe All countries in Eastern Europe have to invest heavily to increase competitiveness of rail and remain

sustainable.

0

20

40

60

80

100

120

140

160

180

200

0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8%

Ra

il I

nfr

astr

uc

ture

Ex

pe

nd

itu

re

per

1 k

m o

f L

ine

s (

€ ‘0

00

)

Rail Infrastructure Expenditures as a % of GDP

Slovakia

Czech Republic

Hungary

Poland

Romania Ukraine

Austria

Germany Russia

France

• Ukraine and Romania have been heavily under-investing in railway infrastructure.

• Poland, Czech Republic, and Hungary have to make the least effort to bring investments to levels comparable to

France, Germany, and Russia.

• Ukraine, Poland, and Romania have to make at least 3 times more effort (as a percentage of gross domestic product

[GDP]) for investment to be comparable to levels of France and Germany.

Rail Market: Investment in Rail Infrastructure as a Function of Rail Network Length and GDP,

Eastern Europe, 2012


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Majority of Light Rail Service is Less Frequent on Older Trains Severe shortage of fleet is causing a bottleneck, and consequently passenger volumes suffer in Poland,

Ukraine, and Romania.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

Nu

mb

er

of

Ro

llin

g S

tock p

er

km

of

Lin

e

Average Age of Fleet (Years)

Poland Ukraine Hungary Czech Republic Romania

Newer, fewer trains

Newer, more trains

Older, fewer trains

Older, more trains

Rail Market: Number of Rolling Stock per Km and Average Age of Fleet, Eastern Europe, 2012

• Ukraine and Romania have a fleet that is severely old and lacking in numbers.

• Poland’s rolling stock is moderately aged, and recent purchases have reduced the average ages of fleets.

• Czech Republic and Hungary both have more rolling stock per kilometer with a relatively younger fleet.

A

B

C


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Competitive Benchmarking LRV and electric locomotives are 2 of the most competitive segments in the region, where competition will

only intensify.

Manufacturer Light

Rail Metro

High-

speed

EMUs

EMUs/

DMUs

Diesel

Loco-

motives

Electric

Loco-

motives

Pragoimex, Inekon,

Protram, Solaris,

Moderus, HCP, Astra

Skoda

Pesa

Alstom

Siemens

Bombardier

TMH

CAF

Newag

Stadler

CMSK, Remarul

Softronic, DEVZ,

Electropure, TEVZ

Skoda and Pesa are

considering expanding

into the locomotive

business.

Siemens and Bombardier

are the only companies

with more than 10% in 3

segments.

< 10%

~ 50%

~ 100%

~ 75%

potential entries

~ 25%

Rail Market: Rolling Stock Competitor Benchmarking, Eastern Europe, 2012


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Light Rail Technology Roadmap Rapid modernization in light rail light rolling stock is expected by 2020.

Light Rail Technology Roadmap, Eastern Europe, 2012–2020

Wid

er

Op

era

tio

nal

Ran

ge

En

erg

y a

nd

Co

st

Eff

icie

ncy

Imp

rove

d

Co

mfo

rt

2012 2014 2016 2018

Line of sight

Radio infrastructure in wayside GPS-based control of traffic signals

Aluminum and stainless steel bodies, composites to reduce weight

Broadband wireless connectivity to control center, real-time

CCTV and monitoring

Electro-pneumatic friction brakes blended with electric regenerative braking, anti-skid valves,

brushless 3-phase induction motors, VVVF control

Jacobs Bogie that allows for 100% low floors

Catenary-free and induction-based

power transmission

Supercapacitors enable pantographless

inter-stop tram propulsion

Air conditioning

LCD displays,

mobile applications Wider doors

2020

Panoramic windows


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Signalling Systems Technology Roadmap Although there is increasing interest in upgrading to modern systems, implementation of ETCS is expected to

develop only after 2020.

Signalling Systems Technology Roadmap, Eastern Europe, 2012–2020

Intensified competition on the market

Rail vehicles operating on ERTMS

lines to be equipped with OBU

More complex systems covering bigger areas

High requirements for system safety and

reliability

Increasing length of the rail network equipped with ERTMS systems across CEEC

Improved quality of traffic surveillance

Diagnostic equipment with highly reliable

installation

Increasing coverage of GSM-R across CEEC

Demand on detectors with

centralized supervision

Inte

rlo

ck

ing

Sys

tem

s

Tra

in C

on

tro

l

Sys

tem

s

Wa

ys

ide

Eq

uip

me

nt,

Tra

in

Dete

cti

on

, a

nd

RM

&D

Aging infrastructure and outdated interlocking

systems ready for replacement

Move toward computer-based interlocking

Increasing need to adopt common technical specifications

for unified interlocking across Europe

ERTMS Level 1 under construction

ERTMS Level 2 implementation ERTMS Level 3 implementation

Diminishing demand on trackside signalling

2012 2014 2016 2018 2020


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Parameters Current Future

Market Status • There has been a steady decline in

rail freight passenger volumes.

• Increased investment, retirement of aged

fleets, and the operation of new fleets is

expected to increase rail traffic volumes.

Competition

• Competition is largely between local

manufacturers and technology

providers.

• Global leaders such as Siemens,

Bombardier have entered the market by

acquiring companies like PaFaWag and

CKD Tatra.

Solutions

• The average age of all rolling stock

is more than 20 years in active

service.

• The majority of signalling systems

are based on outdated mechanical

interlocking.

• Refurbishment is expected to be the major

method of extending service life of rolling

stock, compared with new fleet acquisition.

• Computer-based interlocking (CBI) is

expected to become the standard for

preparing for ETCS.

Barriers to

Entering Eastern

European Market

• Local manufacturers are favored in

the procurement process.

• Current regulations are biased

toward a closed market.

• The acquiring of local companies allows

foreasier entry of global manufacturers.

Executive Summary—Key Findings and Future Outlook The Eastern European rail market is expected to provide tremendous opportunities in terms of volume after

2020. Increased funding from EU for priority rail projects is expected to drive volumes and private investment.


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Research Scope, Objectives, Background, and

Methodology

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Research Scope

Rail infrastructure, rolling stock, and signalling Topics Covered

2013 to 2020 Forecast Period

2012 to 2020 Study Period

2012 Base Year

Geographical Regions

The following regional market is covered in this research service:

• Poland

• The Czech Republic

• Hungary

• Romania

• Ukraine

Poland

Ukraine

Czech

Republic

Hungary

Romania


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Research Aim and Objectives

Aim

The objective of this study is to evaluate the growth opportunities and the current market scenario of the

Eastern European rail market. The study offers a strategic market-sizing forecast for investment in rail

infrastructure; forecast of rail volumes; analysis of light rail, metro, and mainline rolling stock segments,

including market drivers and restraints; and market-share analysis of the above-mentioned segments.

Objectives

• To provide a strategic overview of the rail market in Eastern Europe

• To provide the market size and forecast of rolling stock deliveries for the mainline, light rail, and

metro, segments, with breakdown, from 2012 to 2020

• To analyze competitive factors, competitor market shares, product portfolio, and capabilities


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Key Questions This Study Will Answer

Which are the leading rolling stock suppliers in the light rail, metro, and mainline segments in

Eastern Europe?

Where are the new opportunities in rolling stock and signalling for rail?

What is the market share of the rolling stock in rail applications? What are the market leaders across

each rolling stock segment in Eastern Europe?

What is the business environment of the Eastern European rail market? What are its market

dynamics?

Rail Market: Key Questions This Study Will Answer, Eastern Europe, 2013–2020


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Research Background

This research study strengthens the coverage of the rail industry.

Year Study Code Existing Research Title Regional Scope

2013 M957-13 Rail Outlook Study 2013–2022 Global

2013 M663-18 Strategic Analysis of the European and North American Rail Infotainment Market Europe + NA

2013 P712-18 Transportation Modal Shift in India and Impact on Rail Logistics India

2012 NA5E-18 Strategic Analysis of the Global Market for Bus Rapid Transit Systems (BRT) Global

2012 M8BF-18 Future of Mobility—New Business Models, Opportunities, and Market Entrants in

Mobility Integration Europe

2012 9832-00-2C Strategic Analysis of Passenger Safety for Urban Rail in Malaysia APAC

2012 M77D-18 Strategic Insight on Global Rail Market Global

2011 M4DD-18 Strategic Analysis of the Global High-Speed Rail Market Global

2011 M64A-18

North American Locomotive Market: A Strategic Analysis of Powertrain

Technologies and Auxiliary Systems Considered by OEMs for EPA Emission

Compliance

North America

2011 M6DB-18 Strategic Analysis of Alternative Powertrain Technologies in the European Diesel

Locomotive and Railcar Market Europe

2011 9823-00-2A Strategic Insight on the GCC Rail Sector ME

2011 N92D-18 An Executive Analysis on Passenger Rolling Stock Market in the United States: A

Demand Analysis for Passenger Rolling Stock and Seating Systems US

2011 P488-01 Green Technologies and Developments in Rail Transportation APAC

2010 M649-18 European Rail Catenary Systems—Executive Analysis of Copper Requirement for

Electrification Across Strategic European Markets Europe


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Research Methodology

Company Designation

PESA Manager, Marketing

PESA Sales Engineer

Siemens Transportation Manager, Marketing

Protrams Marketing Executive

PKP Intercity Sales Manager

Skoda Transportation Marketing Executive

CNR Tangshan Railway Vehicle Manager, Marketing

Ukrainian Railways Manager, Administration

PKP Cargo Manager, Service

Hungarian State Railways Manager, Maintenance

Bombardier Transportation Manager, After-sales

Solaris Trams Manager, Sales

Transmashholding Manager, Marketing

Alstom Transportation Manager, Technology

Research Methodology:

Frost & Sullivan’s research services are

based on secondary and primary research

data.

• Secondary Research: Researchers

extracted information from existing

reports and project material within the

Frost & Sullivan database to include data

and information gathered from technical

papers, specialized magazines, seminars,

and Internet research.

• Primary Research: More than 10

interviews were conducted over the

phone by senior consultants/industry

analysts with original equipment

suppliers, regulation authorities, and

distributors. Primary research accounts

for 80.0% of the total research.

Rail Market: Partial List of Industry Participants,

Eastern Europe, 2012


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Key OEM/Participant Groups Included in This Study

Groups OEMs/Divisions

Alstom Alstom Transportation

Bombardier Bombardier Transportation

Siemens Siemens Mobility

PESA Pojazdy Szynowe PESA Bydgoszcz

Solaris Solaris Bus & Coach SA

Skoda Škoda Transportation a.s.

Inekon Inekon Trams a.s.

Pragoimex Pragoimex Trams a.s

Protram Remonty i Modernizacja Tramwajów Protram Wrocław Sp. z o.o

The following OEM groups and companies are compared in this study:


Opportunity Analysis of the Eastern European Rail Market: A 360-degree Perspective

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