Dr Arman Peighambari, associate consultant with SCI Verkehr, analyses the trends.
WHILE the number of high-speed trains in service is expected to grow by 5% a year in the near future as existing orders are completed, the number of trains being procured during the same period will decline. This is the conclusion of a study published recently by SCI Verkehr, Germany, entitled High-speed and intercity transport - global market trends.
Following a number of record years in the production of high-speed trains, particularly due to high demand in China and Japan (Figure 1), the reduction to a lower but steady demand for new vehicles in the long-term might appear to represent a substantial slump. However, the demand from established markets in western Europe will for the most part remain constant. Replacement of the first trains produced in the 1980s is becoming more important in these markets. In addition, new projects will emerge in the next few years which will significantly support the market volume.
The global market for new high-speed trains has reached record heights thanks to deliveries worth around €6.4bn in 2013, but this growth trajectory will not continue.
The completion of major projects and a change in economic reality worldwide will lead to a subsequent drop-off in the procurement of new trains.
The size of existing fleets in their respective markets will still increase or at least remain constant and a yearly growth rate of 5% in terms of units worldwide is expected. This will strongly support the after-sales market which is also being driven by the large-volume procurements in the last few years and is expected to grow at a solid annual rate just short of 9%.
Except for a few selected cases of failed deliveries or commissioning, no country plans to reduce its involvement in high-speed rail. Completed or almost completed deliveries of existing orders and a more hesitant approach to new projects will affect the demand for new vehicles, which can only partly be compensated for by the procurement of replacement trains.
Looking at the bigger picture, this short-term drop-off in demand is really only an indication of the market settling at a lower but stable level. A closer look at the dynamics over the past years reveals the remarkable development in the industry. Market volumes rose from €2.2bn in 2006 and €3.2bn in 2008 to today's record high. In 2013 and 2014, the global market for multiple units capable of operating at or above 190km/h will have reached its peak in this decade.
Today's distribution of high-speed train fleets is highly concentrated in western Europe and east Asia. Together, they account for 98% of the global fleet, or around 60% and 38% respectively. About 90% of the around 3200 trains in service worldwide operate in the seven largest markets in China, France, Japan, Britain, Germany, Spain and Italy. The average age of about nine years has remained nearly constant due to the high number of vehicles delivered in recent years. Only a few countries such as France and Japan have taken entire series of trains out of service.
In terms of market growth, western Europe and east Asia are likely to account for a minimum of 50% and 40% respectively. This development includes two trends: on the one hand, both regions will continue to expand their train fleets, though at different rates of growth, while on the other hand, countries outside these two established high-speed rail regions will begin or intensify their involvement in high-speed rail.
In less than 10 years, China has become the single largest market for high-speed trains worldwide with a network of around 10,000km, which continues to expand. The country's share of the global fleet has increased from zero to more than one-fifth in this short period. While this sudden surge in demand has strongly pushed the global demand for new high-speed trains to new heights, demand driven by the establishment of a new fleet will gradually decrease. From 2015, China will remain the most important market but with a considerably lower market volume than before. In addition, the focus will shift regarding the maximum speed of the trains being procured.
The Japanese market for high-speed trains is very different, based on a decade-long development and with corresponding effects on the fleet structures. While vehicles currently in service are older than those in China, the average age has been reduced significantly due to recent procurements. Except for a very few expansion projects, Japan's demand for high-speed trains will therefore focus on fleet replacement.
Due to completion of most of the new construction projects in China and fleet renewal and expansion in Japan which for the most part have been completed, a major part of the procurement of vehicles will disappear beyond 2014. As a result, these two countries will also show the largest declines in demand for new vehicles.
Western European countries have established extensive networks over the past 30 years. In some countries, such as France and Germany, this long-term process has gone hand-in-hand with the procurement of very large fleets which have now been in service for up to 35 years. In other countries such as Spain, high-speed rail is a more recent undertaking, with the majority of train deliveries taking place in the past five to seven years. While overall growth in Europe is largely unchanged, the drivers of demand for new units are changing.
France and Germany are no longer only expanding their fleets, but have started replacing older trains. With several train series having reached the end of their economic life, procurement to maintain the existing fleet size is becoming more important. Spain, on the other hand, has procured a large number of vehicles, which currently exceed passenger demand, which of course strongly affects future demand.
With the implementation of the Intercity Express Programme (IEP), Britain will become an important pillar of global high-speed demand in the late second half of this decade. The high-speed trains designed for intercity services at up to 225km/h will replace and expand the long-distance fleet on the East Coast Main Line and the Great Western Main Line.
A very interesting development in Europe is the establishment of open-access high-speed operator NTV and its .italo-branded services in Italy. Offering services on selected routes since 2012 in competition with incumbent Trenitalia, NTV has energised the Italian high-speed rail market. NTV procured 25 units of Alstom's TGV successor AGV. Trenitalia reacted immediately to the arrival of NTV by adjusting its pricing policy and is now procuring a new fleet of trains from Bombardier and AnsaldoBreda.
Outside the established high-speed rail markets in east Asia and western Europe, a few countries have already entered this railway segment successfully, and others will follow. However, a look at the individual projects shows very clearly that the realisation of new or additional high-speed projects depends on political and economic stability and backing.
The financial and world economic crisis starting in 2008 brought some projects to a complete standstill, such as in Argentina. In North Africa, on the other hand, political unrest has shifted the local focus, and the only country currently pursuing high-speed is Morocco where a 1500km network is envisaged by 2035 and the first 200km line with a maximum speed of 320km/h is currently under construction.
Nonetheless, there are some new market entrants which have defied restrictions. In Poland, the first Pendolino train has been delivered. Poland originally planned to build a high-speed network with trains running at up to 360km/h, but this was later scaled back to 200km/h trains running on existing lines.
Russia's ambitious plans for the construction of high-speed lines starting with a new line from Moscow to St Petersburg were halted. A new plan has since been drawn up for a new 770km line running east from Moscow via Nizhny Novgorod to Kazan at an estimated cost of $US 30bn.
Saudi Arabia not only has high-speed rail ambitions, but is also backing them up politically and financially, in particular with the Haramain project currently under construction between Mecca, Jeddah and Medina. This new line will mainly offer services to pilgrims, thereby providing a service along a corridor with an established transport demand. The lower demand outside the pilgrimage period will affect utilisation of both the infrastructure and trains, but will likely be of less importance to its initiators.
A typical example of the uncertainty concerning projects with significant investment and public interest is high-speed rail in the United States. Over many years, projects for new lines were proposed and sometimes extensively pursued, for example in Florida, the Midwest and additional routes on the East Coast. While all these projects failed, a decision was taken in favour of a 1300km network in California. Pre-construction work on the first phase has already begun. This does not mean though that all hurdles have been successfully overcome, as there is still considerable lobbying against the project and legal challenges.
In South America, Argentina was very close to signing contracts for the turnkey construction of a line, but the financial crisis in the country halted the project. Brazil has taken its place as the country most likely to build the first high-speed line in South America. Several issues delayed the start of the bidding process in 2013, making the first line on the continent unlikely to be completed this decade. Nevertheless, with the huge investment in the construction of a high-speed network in Turkey - the extension of the Ankara - Eskisehir line to Istanbul is due to open soon - and projects on the drawing board in India and southeast Asia, the market for high-speed trains is assured.