Demand from emerging economies over the next five years will benefit the industry
Los Angeles, CA (PRWEB) November 22, 2013
The Train, Subway and Transit Car Manufacturing industry experienced a decline in the five years to 2013. The industry faced sharp demand declines during the worst of the recession, leading to an annualized decrease in industry revenue of 3.5% over the five years to 2013. The recession hit railroad operators particularly hard. According to IBISWorld Industry Analyst Lauren Setar, “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, and without sufficient business investment, 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 in storage and stopped ordering new locomotives and railcars.
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. This helped mollify the impact of volatile input prices that damaged the profitability of other manufacturing industries. Revenue has begun to recover since 2011 due to improved demand from rail transportation, trade values and industrial production. As such, revenue is expected to grow 2.0% in 2013 to reach $14.2 billion.
The next five years are expected to be better for the industry. In addition to benefitting from gains in industrial production and a shift toward sustainable infrastructure such as railroads, major players are increasingly looking overseas for growth opportunities. “Emerging economies are growing at much faster rates than Western economies, presenting potential markets for the industry,” says Setar. China, which represents the largest growth opportunity for manufacturers, has a booming energy and industrial market, and its railroads will continue to increase demand for industry products to fulfill freight shipments across the country. These shifts to emerging economies will boost US industry growth prospects, leading revenue to grow in the five years to 2018.
The major companies in the industry are General Electric, Trinity Industries Inc. and Siemens AG. There is a moderate level of concentration within this industry. Most industry players compete in other transportation markets and infrastructure-related businesses; therefore, the stark drops in levels of trade and commerce that were caused by the recession led to lower freight volumes. In response, industry operators shifted their focus to repairing existing railcars and locomotives and expanding their presence in emerging economies. These trends have caused industry players to look elsewhere for revenue growth. Over the past five years, market share concentration has decreased slightly as major players downsized manufacturing capabilities domestically to meet demand. Companies have been following the explosive growth of the transportation market in China.
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IBISWorld industry Report Key Topics
The Train, Subway and Transit Car Manufacturing industry primarily raises chickens for egg production. The eggs produced may be sold for use as table eggs or hatching eggs.
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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