Strategic Insight on Global Rail Market Trends and Opportunities Across Key Regions for Rail

M77D-18

April 2012

2 M77D-18

Shyam Raman Research Analyst

+914466814173

Shyamr@frost.com

Research Team

Surendar Chandrasekaran Team Leader

+914466814173

Surendarc@frost.com

Lead Analyst Contributing Analyst

Research Director

Franck Leveque Vice President, Automotive & Transportation

+49 (0)69 770 33 21

franck.leveque@frost.com

Praveen Chandrasekar Program Manager, Automotive & Transportation

+914466814129

cpraveen@frost.com

Strategic Review Committee Leader

3 M77D-18

Contents

Section Slide Numbers

Executive Summary 4

Rail Mega Trends 13

Evolution of Megacities: New Mobility Concepts 31

The Rail Advantage 43

Rail Market Trends in Europe 48

Rail Market Trends in North America 60

Rail Market Trends in Asia-Pacific 72

Rail Market Trends In BRIC and The Middle East 81

Competitive Landscape 105

Legal Disclaimer 110

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Executive Summary

5 M77D-18

Key Trends Across the Global Rail Markets

High speed, urbanisation and emerging economies will be the key enablers of the rail

industry through to 2020.

High-speed rail (HSR) will be the biggest market opportunity, with $900 billion potential for rail participants globally.

The BRIC and Middle East markets collectively will contribute to $1 trillion in rail investments between 2011 and 2016.

Urbanization in Asia has increased demand for urban rail systems such as metro, light rail and monorail. About 120 urban rail systems have been identified in the Asian Region, including the Middle East.

Chinese CSR and CNR will emerge as one of the top 5 rolling stock OEMs globally.

Increasing fuel prices and rail’s green tag will boost freight transport by rail globally. Considerable rail modal share gain will occur in North America and Europe by 3% and 5%, respectively, by 2020.

Rail IT deployment: smart ticketing, automated fare collection, and signalling will present the next wave of business opportunity in the rail sector globally.

Finally, North America’s opening up to passenger rail will create a demand for 14,000 passenger rolling stock over the next 10 years.

Source: Frost & Sullivan analysis.

6 M77D-18

Global Trends in Rail Industry

Emission reductions and automation are the key technology-related enablers of the rail

industry.

Impact on Rail Industry

Urbanisation

Mega Cities

Asia Booming

New Business

Model

C02 Footprint

Increasing Fuel

Prices

Geographic Variety

Innovating to Zero

•Urbanisation leads to expansion of city boundaries

•Three main concepts: megacities, mega regions, and mega corridors.

•Concept to shift from “GREEN” to “SMART”

•Energy efficiency and zero emissions as the basic premise of SMART initiatives.

Urban sprawl, rising disposable incomes, and chocking transport infrastructure are key

trends in the region

Next-generation business models will redefine future business propositions and influence

future technology and product development.

Europe and North America funding technologies and programs that will help to cut carbon emissions.

•Asian, Eastern European, and North American rail market expectations vary and are

considerably different from Western European expectations.

•Less usage of personal transport. Shrinking size of cars for city use only

•Increasing modal shift from road to rail

•Increasing use of more than two modes of transport on a daily basis in key European

and Asian cities. Next-gen AFC key to drive inter-modality in the future

Trends

•World with zero emissions, zero accidents, zero fatalities, zero defects.

•Companies will shift focus and develop products and technologies accordingly.

Implication

Multimodality

Increased travel and need for hassle-

free, high-speed transport

Multimodal transport demand,

integrated services, smart ticketing

Rising demand for transportation projects,

urban rail gains strong favour

Mobility integration, last-mile

connectivity services, on-board WiFi,

station retail

Hybrid locomotives, alternative fuel

powertrains, electrification of lines,

advanced drive systems

Increasing passenger and freight traffic,

automated signalling to boost capacity

New platforms, high levels of

customisation of rolling stock

construction

Improved station services, protected

bike parks, charging infrastructure for

Evs, onboard cycle portablility

Evolution to driverless trains, PRT

Source: Frost & Sullivan analysis.

7 M77D-18

Expenditure

on

Infr

astr

uctu

re (i

n b

illion $

)

Expenditure

on

Infr

astr

uctu

re (i

n b

illion $

)

Expenditure

on

Infr

astr

uctu

re (i

n b

illion $

) E

xpenditure

on

Infr

astr

uctu

re (i

n b

illion $

)

Expenditure

on

Infr

astr

uctu

re (i

n b

illion $

)

Expenditure

on

Infr

astr

uctu

re (i

n b

illion $

) Projected Global Infrastructure Investment 2005-2030

Transport investment will account for 19 percent of the total $41 trillion to be spent on

infrastructure.

Source: Frost & Sullivan analysis.

Water

Power

Road & Rail

Air/Seaports

$22,610

$9,000

$7,800

$1,590

Total in billions

North America

Latin/South America

Europe

Africa

Middle East

Asia/Oceania

Rail Market Trends: Mainline Railway Track Additions, Global, 2010 and 2020

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Global Passenger Rolling Stock Market

Mainline network growth will be pronounced in the Asian region as India and China expand

their freight corridors.

Rail Market Trends: Mainline Railway Track Additions, Global, 2010 and 2020

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan analysis.

30.8% 30.1%

22.3%

3.8%

7.1%

1,035,887

21.8%

26.2%

24.9%

3.9%

Ro

ute

Km

Op

era

tio

nal

1,010,767

USA

226,855

Canada

58,495

Mexico

26,704

Germany

33,806

France

30,001

Italy

16,959

Spain

15,243

UK

16,373

Poland

19,864

Others

83,160 Romania

10,776

Russia

85,894

Serbia

4,058

Ukraine

21,678

India

72,355

China

101,000

Japan

20,136

Australia

10,674

Korea

3,378

Others

63,875

All Afro-countries

39,814

Brazil

30,217

Argentina

25,523

Chile

5,752

Uruguay

5,752

Cuba

5,076 Others

4,028

10.9%

11.0%

7.2%

• Only a mere 0.2 percent growth in global mainline network length.

• Europe to maximise utilisation of its current network for freight; Asia to

add extra capacity in terms of track length

Note: Chart In Center Shows Mainline Railway Track Addictions By 2020 In Each Region

9 M77D-18

Projected Global Infrastructure Investment 2005-2030

Transport investment will account for 19 percent of the total $41 trillion to be spent on

infrastructure.

Source: Frost & Sullivan analysis.

An

nu

al

Ma

rke

t S

ize

($ B

illi

on

)

2008-2010

2011-2013

2014-2016

Legend

Rail CEO 360: Annual Rolling Stock Market Forecast, Global, 20082016

An

nu

al

Ma

rke

t S

ize

($ B

illi

on

)

An

nu

al

Ma

rke

t S

ize

($ B

illi

on

)

An

nu

al

Ma

rke

t S

ize

($ B

illi

on

)

An

nu

al

Ma

rke

t S

ize

($ B

illi

on

)

10 M77D-18

Global Rail Snapshot

Post-2008 crisis, both freight and passenger rail traffic have recovered well across regions.

North America Traffic Movement in

2010

Rail Market: Length of Railways, Freight and Passenger Turnover, and Growth, Global, 2010

Tra

ffic

(B

illi

on

tk

m

or

pk

m)

10.3% 6.5%

6.5% 3.1%

Tra

ffic

(B

illi

on

tk

m

or

pk

m)

Europe Traffic

Movement in 2010

Russia Traffic Movement

in 2010 8.1%

23.3%

8.9%

7.8%

India Traffic Movement

in 2010

9.5% 11.2%

China Traffic Movement

in 2010

Tra

ffic

(B

illi

on

tk

m

or

pk

m)

Tra

ffic

(B

illi

on

tk

m

or

pk

m)

Tra

ffic

(B

illi

on

tk

m

or

pk

m)

• China and India are the fastest-

growing rail markets.

• U.S. rail freight has registered the

biggest growth, but is yet to

surpass 2008 traffic levels.

• In Europe, traffic has surpassed

pre-recession 2008 levels.

• However, rail freight recovery in

EU 27 has been slow.

• Eastern Europe witnessed further

fall in freight traffic. Traffic Growth over

2009

Traffic Decline

over 2009 Source: Frost & Sullivan analysis.

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2011 to 2020

70.65

128.33

33.48 49.13

137.35 24.65

7.42

11.10

37.65

70.65

9.88

29.33

7.50

17.80

1.23

55.00

25.15

16.25

97.53

24 1.80

54.73

Europe Asia Pacific Middle East & Africa South America North America

High Speed Infrastructure Market

The global HSR market presents the biggest business potentials in the rail industry. Middle

East and North America are the most attractive turfs for Global OEMs.

High-speed Rail Market: Cumulative High Speed Rail Infrastructure Investments, Global, 2011-2020

$70 billion

$910.61billion

2011

This was total expected investment

in HSR. Most of the Obama

government ‘s planned HSR was

voted against in November 2011

ME

SA

NA

APAC

EU

EU

APAC

Turkey

Switzerland Sweden

Spain

Russia

Portugal

Poland Italy

Germany

France

China

India

Japan

South Korea

Iran

Saudi

Arabia

Morocco

GCC

Brazil

Argentina

ME

SA

NA

APAC

EU Europe, $338 billion

Asia Pacific, $166

billion Middle East &

Africa, $107 billion

South America, $87

billion

North America, $137

billion

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan analysis.

Total global rail infrastructure

investment between 20102020 is

expected to be $910.61 billion.

US

Canada 45

25

342.44

166.31

208

86.78

107.08

Note: Chart In Center Shows Investments In High Speed Rail Infrastructure By 2020 In Each Region

HSR is

currently

operational

in EU and

APAC

markets

only

12 M77D-18

Global Passenger Travel Trends

By 2050, every individual will travel about 6 km extra globally; high-speed public modes of

transport will be the largest gainers—expected to increase by 20 percentage points.

Low Speed

Public

Transport

35%High Speed

Public

Transport

10%

Private

Transport

55%

33.3 billion PKT

High Speed

Public

Transport

30%

Low Speed

Public

Transport

29%

Private

Transport

41%

2000 Global Passenger Km Travelled by Major Mode of Transport

2050 Global Passenger Km Travelled by Major Mode of Transport

PKT – Passenger kilometer trip

Private Transport – Cars, motorcycles, SUVs

Low-speed Public Transport – Bus, light rail, metro, mini vans

High-speed Public Transport – HSR, air travel, public rapid transit pods, Maglev, private jets

The relative importance of high-speed modes will rise from 10 percent to about 30 percent.

So

urc

e: C

am

brid

ge

Un

ive

rsity

2000

105.7 billion PKT Statistics 2000 2050 CAGR

World

Population

6.1 billion 9.3 billion 0.8%

PKT 33.3 billion 105.7 billion 2.3%

Each person will travel 5.9

extra km by 2050

Rail Mega Trends: Population vs. Passenger Travel, Global,

2000 and 2050

Note: All figures are rounded; the base year is 2010.

Source: Frost & Sullivan analysis.

2050 20% pts. Increase

In Modal Share

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