OVER the last decade, CAF has become a true international success story for Spain. When the global financial crisis struck in 2008, domestic business accounted for 63% of the company’s €4.14bn order backlog. As Spain’s economy contracted, domestic rolling stock orders quickly dried up, yet CAF continued to grow through the downturn by focusing its attention overseas.

Today, international contracts account for 85% of CAF’s €6.2bn order backlog and revenues continue to build, climbing 9% year-on-year in the third quarter of 2017 to reach €1.05bn. Exports accounted for 86.4% of total revenue in the third quarter and CAF is now present in 36 countries. The company has eight manufacturing sites with a new assembly plant in Britain due to open by next summer.

CAF ArizkorretaCAF says the results of its operational excellence and efficiency programmes are beginning to show, with improvements in manufacturing management, optimisation of supplier quality and delivery, improved management and globalisation of purchasing, and more effective inventory management. Further improvements are expected in these areas this year.

CAF anticipates a double-digit compound annual growth rate in 2017-18, with increased activity at its European plants, a strong order intake and a steady order backlog expected to maintain an upward trend in profitability over the next few years.

“We need to be more profitable, and above the sector average,” chief executive Mr Andrés Arizkorreta told IRJ. “At the moment we are pushing new markets and developing our offer in areas such as signalling and automation, reinforcing our competencies not just in rolling stock but in other subsidiaries. We’re looking to grow both geographically and in market segments.”

Consolidation continues to be a theme as the industry enters 2018, and with the merger of the world’s second and third-largest suppliers due to conclude at the end of the year, major changes are afoot. However, CAF insists that it will not respond to the combination of its two big rivals by changing course. In September Arizkorreta said the company’s current strategy was developed with further industry consolidation in mind and that a merger between two large players was “practically taken for granted.”

“I have been in this industry for 37 years and we are always talking about consolidation, it’s a constant process,” Arizkorreta says. “Of course, this time there will be a big new competitor and it’s not easy to say exactly what the impact will be on the market. A bigger company is not necessarily more competitive in all situations. Some clients might not be too positive about dealing with a bigger company, and might not be comfortable with a scenario where you have one big Chinese supplier and one big European supplier. On the other hand, big companies have more resources to develop new things. For CAF, we need to continue developing our own strategy and keep listening to what our customers want.”

Arizkorreta says demographic trends and the opening of rail markets in Europe favour the prospects for investment in new equipment. “I see liberalisation and urbanisation as two key trends that will be good for rail,” he says. “I’m also convinced that digitalisation will be a key driver in reducing lifecycle costs in the years ahead and it will enable us to offer new services to our customers. Automation will affect every aspect of train operation as we start to take advantage of advances in machine vision technologies and AI. It will lead to lower operating costs, higher frequencies and less congestion.”

The benefits of digitalisation will extend to rolling stock manufacturing, and Arizkorreta believes the Fourth Industrial Revolution will have a transformational impact on how trains are built. “In the future we will have higher integration of design and production and a much more efficient manufacturing process,” he says. “There will also be opportunities for rail to develop manufacturing processes and new materials in cooperation with other industries.”

Like its competitors, CAF is working on the development of innovative traction solutions. The Greentech range developed by CAF Power & Automation encompasses energy recovery and onboard energy-storage solutions for catenary-free operation. The latter has already been adopted for light rail lines in a number of cities including Zaragoza, Luxembourg, and Birmingham, and CAF sees potential main line applications for the technology. “We’re developing this idea a lot because we want to extend it to other products,” Arizkorreta says.


CAF also sees significant opportunities for growth in the aftersales sector, which it considers to be less volatile than the OEM business. “This is a key market for us, and our goal is for these services to provide a third of our turnover,” Arizkorreta says. “We have a team developing this sector and we are active in more than 100 locations around the world.”

Arizkorreta believes liberalisation of the passenger rail market in Europe and the appetite for using PPPs for infrastructure projects are two trends that will generate opportunities for growth in this sector. “Private operators entering the rail market often don’t have the maintenance competencies they need to keep sophisticated rolling stock running reliably,” he says. “PPPs are attractive because they allow us to grow our presence in the train maintenance business.”

A key event for CAF in 2018 will be the opening of the company’s £30m British assembly plant, which will be located near Newport in South Wales. The 46,000m2 facility will initially employ 200 staff, increasing to 300 next year. Training and apprenticeship schemes will begin in the autumn, and when the plant comes on stream, it will assemble at least part of the fleet of Civity DMUs ordered last year for the West Midlands franchise.

Arizkorreta says the Newport plant demonstrates the company’s commitment to the British rolling stock market, which looks set to remain buoyant through 2018, with the awarding of the Wales & Borders, South Eastern and West Coast Partnership franchises likely to bring significant orders for new rolling stock. CAF has been shortlisted for a contract to supply 43 driverless trains for London’s Docklands Light Railway (DLR) and procurement will also begin this year for the next-generation Tyne & Wear Metro fleet. “There is a lot of activity in Britain at the moment,” Arizkorreta says. “As we set up our new facility we want to establish a strong local management and engineering capability in Britain.”

CAF goes into 2018 as a truly international business, and most of the company’s activity will continue to be outside the domestic market this year. Maintaining its order backlog at €5-6bn will be a priority, and CAF believes the global market for rail equipment will remain healthy enough to meet this target.