As production shifts to emerging economies over the next five years, US revenue will shrink
Los Angeles, CA (PRWEB) April 28, 2012
In the midst of the global recession, the Train, Subway and Transit Car Manufacturing industry experienced a slight decline during the five years to 2012. The moderate annualized decrease in industry revenue of 1.7% masks the sharp demand declines experienced during the recession. However, locomotives and railcars are built when ordered, which causes order backlogs that can last an average of three years. Before the recession, the expanding economy led to a large backlog of railcar orders as rail transport companies ordered more industry products in response to growing demand for commodities. In 2009, says IBISWorld industry analyst Lauren Setar, “Most industry players did not receive any orders but were able to generate revenue from backlog railcar production.” As such, revenue is expected to reach $13.2 billion in 2012.
The recession hit railroad operators particularly hard. As the US economy entered the downturn, banks were reluctant to hand out loans. Meanwhile, capital-intensive businesses pulled back on investments, waiting on the sidelines for a better investing environment. Additionally, trade slowed to minimal levels. “Without sufficient business investment,” Setar says, “industrial production fell significantly.” Railroad operators derive most of their revenue from shipping industrial products, including coal, machinery and other industrial mainstays. With dropping demand for shipping industrial products, railroad operators left unused railcars for storage and stopped ordering new locomotives and railcars. The end of the backlog will continue to result in revenue declines for the Train, Subway and Transit Car Manufacturing industry, and revenue is estimated to decrease 2.9% from 2011 to 2012.
The next five years are expected to be even worse for the industry. Despite expected gains in industrial production and a shift toward sustainable infrastructure like railroads, major players, most of which operate outside the United States, are increasingly looking overseas for growth opportunities. The largest domestic industry firms, General Electric, Trinity Industries Inc. and Siemens AG, hold a combined market share of about a third of industry revenue. Emerging economies that were left relatively unscathed from the global recession are growing at much faster rates than developed Western economies. China, which presents the largest growth opportunity for manufacturers, has a booming energy and industrial market, and its railroads will continue to increase demand for freight shipments across the country. These shifts to emerging economies will limit US industry growth prospects, leading revenue to fall in the five years to 2017. For more information, visit IBISWorld’s Train, Subway and Transit Car Manufacturing report in the US industry page.
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IBISWorld industry Report Key Topics
Companies within this industry manufacture or rebuild locomotives and parts, railroad cars and streetcars, along with railway track maintenance equipment. Specific products include industrial, mining and railroad locomotives; railroad, light-rail, subway and transit cars; railroad rolling stock; and railroad equipment.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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