The rail transport market - France

1.2 A growing global market underpinning increased trade

Global market characteristics

The global rail transport market was estimated at ***.* billion US dollars in ****, and is expected to reach a size of ***.* billion US dollars by ****, with a CAGR (***) of *.*% over the same period. Passenger transport, in particular, is expected to grow at a CAGR of *.*% to reach US$***.* billion by ****, worldwide. [***]

Estimated growth in rail transport market sales World, ****-*****, in billions of US dollars Source: ****

The Swiss hold the world record for the number of kilometers traveled by rail: each inhabitant travels over *,*** km on the rail network every year. This network covers some *,*** kilometers[***]. This network is comparable to that of France, which boasts over **,*** km of track. Thanks to their well-developed rail networks, Switzerland and Japan stand out as the countries with the highest rail transport quality index, according to a user satisfaction survey.

Ranking of world countries by rail network quality index World, ****, in index (***) Source: ****

Latin American countries show the strongest growth in terms of infrastructure. This takes the form, for example, of the"Tren Bioceànico" rail project, designed to link the Atlantic to the Pacific by rail. This project consists of a *,*** km rail network, dedicated to both freight and passenger transport, ...

1.3 A mature French market

Since ****, the total length of rail lines operated in France has been steadily decreasing, falling in * years from over **,*** kilometers to less than **,*** kilometers. This decline can be explained by a number of factors: these may include a drop in demand for rail links in certain regions or areas, or the condition of certain rail lines that no longer allow trains to run, but also and above all the contraction of trade in certain specific areas. In fact, **% of train traffic is carried out on **% of rail lines. [***]

Trend in total length of rail lines in operation France, ****-****, in thousands of kilometers Source: ****

It makes sense here to study the annual sales generated by the SNCF, since this group had a monopoly until ****. For the following years, the opening up to competition (***) is likely to disrupt the established system.

SNCF (***) annual sales trend France, ****-****, in billions of euros Source: ****

We can see that, despite a strong upward trend since ****, the year **** has marked a brutal setback for SNCF. More specifically, the Covid-** crisis and the successive confinements it entailed forced the company to come to a standstill, or at least to a slowdown, for several months. The reduction in ...

2.1 Breakdown of demand for rail transport equipment

France is one of Europe's leading manufacturers of railway rolling stock, thanks to its industry and its leading railway equipment manufacturers (***).

The main source of activity for the French rail industry is rolling stock construction. This is followed by the manufacture of signalling, safety and control equipment, the manufacture of parts, and the manufacture of equipment. The remainder is made up of infrastructure work.

Breakdown of demand in the rail industry by turnover France, ****, in Source: ****

This breakdown of activity in France roughly follows that of European demand, of the order of **% for rolling stock construction, **% for the manufacture of vehicle parts and **% for the rest.

2.2 Passenger and freight transport: indirect determinants of demand for rail transport equipment

At national level, **% of passenger transport demand (***).

Naturally, as trains are used for longer, more occasional journeys, demand for rail transport is less regular:

Frequency of train and RER use by the French in their daily commute France, ****, in % Source: ****

Whether for personal or business travel, demand for rail transport is coming up against competition from other modes of transport. The SDES database provides the following breakdown of transport demand by passenger-kilometer.

Breakdown of domestic passenger transport by mode France, ****, in % of passenger-kilometers Source: ****

Similarly, demand for freight transport also faces competition from substitutes such as road or river transport. The chart below shows the breakdown between the different modes of freight transport, in terms of tonne-kilometres.

Distribution of land freight transport modes France, ****, in Source: ****

As demand for rail transport is mainly driven by commuter traffic, this is the main driver of the rail industry: demand for rolling stock is mainly driven by demand for vehicles such as metros, streetcars, TERs..., whose growth rate is four times higher than that of demand for trains. [***]

2.3 Demand for rolling stock boosted by government investment plans

As the leading player in regional development, the French government regularly invests in the development and maintenance of the rail network. Investments are made in the form of multi-year financing plans for various projects. These projects are designed, financed and managed not only by the French government, but also by local authorities in various sectors (***).

The main types of investment plans for the French rail industry currently under study or being carried out by the State concern :

TGV renewals and developments: the SNCF is investing massively in new, more energy-efficient trains and locomotives, as in ****, when it placed an order for *** TGVs with Alstom at a cost of €*.* billion[***] Trains d'équilibre du territoire (***): a €*.* billion renewal plan running from **** to ****, Renewal of urban transport vehicles: The Grand Paris Express project will create new transport lines. The investment involved is on the order of €** billion[***]. *** metro trains have been ordered from Alstom for a total of €*.* billion. The Ile-de-France region recently invested in ** RER trainsets, scheduled for delivery by ****; the order is worth €*.* billion[***]. Local authorities are also investing in the renewal of their local rail transport systems, investing more in streetcars and metros, with the city of Bordeaux ordering * streetcars ...

2.4 Direct determinants of national demand for railway equipment

The main determinants of demand for railway equipment are :

The obsolescence of the equipment used in France. An example of equipment that could be a source of a further increase in demand for rail equipment is the average age of rail tracks: ** years in France, almost twice as old as in Germany (***). [***] Rail infrastructure renovation and national train renewal programs: spending and investment by the French government and local authorities are the main drivers of national demand for rolling stock. Many passengers complain of a rail network in poor condition, due in particular to a lack of investment in train maintenance and upkeep. However, the French government is currently studying investment plans to remedy this situation. To date, for example, some *,*** worksites are scheduled each year to meet the needs of rising traffic and aging infrastructure across France. The Île-de-France region, where **% of passenger traffic is concentrated, is particularly concerned. Over and above the need for renovation, an increase in passenger and freight traffic automatically leads to a rise in demand for equipment. It's important to note that SNCF has historically enjoyed a monopoly in the passenger rail market, but this situation is about to change, as we'll see in the ...

2.5 Demand trends based on Covid-19 effects

Rail transport was heavily impacted by the health crisis at the start of ****, in the same way as other modes of transport. The regulatory measures introduced in the first half of **** (***) had a major impact on passenger transport, but also on overall economic activity, which may have had an impact on freight transport for both rail and other modes of transport.

Breakdown of trains running compared with the same period the previous year France, March **** - June ****, in % vs. same period in **** Source: ****

SNCF lost **% of its passengers in ****, said SNCF Voyageurs CEO Christophe Fanichet. Traffic also fell by **%, which broke down into a **% drop for TERs and a **% drop for main lines. [***]

According to the CEO, major efforts were made on prices, while SNCF had to bring several lines to a standstill and run others almost empty. Peaks in demand due to the return of passengers before the lockdown, then to vacation departures, made the situation very difficult, and it was hard to adapt the offer to them.

Between March and June ****, almost **% of transilien trains were maintained compared with ****, compared with **% of TER trains and **% of commercial services. For freight activity, the sector fell by **% in April ****. Over the ...

3.1 French rail market players and the upcoming overhaul

The players in this market can be divided into three categories:

Rolling stock manufacturers, such as Alstom, Bombardier, Siemens... Signalling and control equipment manufacturers, such as Thales, Hitachi via its subsidiary Ansaldo STS France... Equipment manufacturers (***), such as Wabtec, Knorr Bresme, KTK Seats...

The number of players in the rolling stock production market is fairly limited, due to the high barriers to entry in this sector. The funds required for such operations are substantial, and research and development is one of the main assets of such companies...

The French rolling stock market is oligopolistic: the volume of rolling stock manufacturing activity is mainly carried out by the Alstom and Bombardier groups.

Alstom's acquisition of its main competitor Bombardier Transport was finalized on January **, ****. The acquisition of the Canadian thus strengthens Alstom's leadership in the fashionable sustainable mobility market. Alstom is now a leader in all major segments of the rail industry: urban and mainline rolling stock, signalling, services and integrated solutions

Siemens is Alstom's main competitor in the global rail transport market; its expansion strategy focuses onautomation and signalling. Hitachi has also established itself as a global player, following the acquisition of Ansaldo Breda in **** and the complete takeover of Ansaldo ...

3.2 General structure of the French rail market

If we focus on the French railway structure and study the evolution of the number of locomotives, we see that both diesel and electric locomotives are decreasing in number sincelectric locomotives have been declining in number since ****, in roughly equivalent numbers, bearing in mind that electric locomotives are slightly less numerous than diesel locomotives.

Trend in the number of locomotives in the rail fleet France, ****-****, in units Source: ****

In terms of the number of railcars hauled in the French rail fleet, we can see * different trends: firstly, the graph below shows that the number of freight wagons has been falling since ****, dropping by almost **% between **** and ****. Conversely, the number of passenger wagons has been rising slowly since ****, from almost **,*** in **** to over **,*** in ****. The structure of the market therefore seems to be moving more in the direction of passenger transport than freight transport, even if the number of freight wagons remains well above the number of passenger wagons.

Change in the number of wagons in the rail fleet France, ****-****, in thousands Source: ****

3.3 Characteristics of rail companies

Within the French rail system, there are the rail companies responsible for passenger and freight transport, as well as the infrastructure managers responsible for the following tasks:

Access for railway companies to the rail infrastructure of the network for which they are responsible, including the allocation of traffic slots (***) Operational management of train traffic Maintenance of the network's infrastructure, including upkeep and renewal, development and renovation Management and enhancement of the service facilities they own

There are also a number of new infrastructure managers who have recently appeared on the national market and who also carry out some of these activities:

Holders of a works concession, a public-private partnership contract or a public service delegation agreement signed with the State or SNCF Réseau: Eiffage Rail Express (***) for the Bretagne - Pays-de-la-Loire high-speed line, LISEA for the Tours - Bordeaux high-speed line, OC'VIA for the Nîmes and Montpellier bypass line, LPF for the international section of the Perpignan - Figueras line Holders of agreements signed with SNCF Réseau for low-traffic lines or service facilities (***) On port rail networks, the port authority acts as infrastructure manager

In order to be authorized to carry out its missions, an infrastructure manager must ...

4.1 A range of products driven by needs and technologies

The characteristics of the trains marketed by manufacturers depend mainly on the type of transport and customer targeted (***).

The train prices offered by manufacturers are generally fixed intenders, and negotiations make these prices volatile.

It should be noted that the train offer is more extensive for passenger transport, which can be explained by the fact that the proportion of personal travel is twice as high as that of business travel:

The train offer is made up of[***] :

High-speed trains: the first models were manufactured in ****, and the latest innovations involve motorization distributed throughout the train, saving space and reducing energy consumption (***); there are network, duplex and POS TGVs Regional trains : the latest innovations have been designed to promote ecology (***), Urban trains: These trains can be used both above and below ground: Metros: above or below ground, manual or autopilot, RER: double-decker, high capacity, higher speed than the metro, Tramways, Commuter trains, Tram-train: a train that uses tramway tracks and can run on the regional rail network, Magnetic levitation train: a recent innovation, the train is not in contact with the rails.

Freight trains, also known as freight trains, are made up of wagons or passenger equipment to be transported in the ...

4.2 Summary of digital trends and developments

Good growth prospects for the French rail industry

Forecasts for growth in the international passenger and freight transport market, the sustained attractiveness of the French rail industry and government investment plans in the French rail sector are the main reasons behind the positive growth outlook for the French rail industry.

The rise of digital technology and the digitization of trains

New technologies and artificial intelligence are opening up a new segment of the rail market. Studies are being carried out to develop new on-board technology and monitoring tools to automate transport, collect data for better train operation, improve passenger service, and prevent equipment breakdowns and faults.

For some time now, we have been witnessing the emergence of much more personalized train offers, with wifi terminals available, access to several free services on trains via the SNCF wifi portal, and the digitization of tickets has become almost essential today.

This market is all the more buoyant asAltran shares the following forecasts:

*.*M: the number of new or renovated rolling stock over the next ten years, ** billion euros: the amount to be invested in this new segment between now and ****, ** billion euros: the market value of intelligent rail by the end of ****.

5.1 Regulations governing the rail market

Railway-related activities are subject to a number of legal constraints. The most significant legal texts are listed below (***). There is a growing convergence of rail standards and regulations on a European scale with the aim of harmonizing and facilitating the transport of people and goods.

Ona national scale, the law of August *, **** on the reform of the rail system has profoundly changed the organization of rail transport in France as of January *, ****. This law, codified in the Transport Code, and its implementing texts now constitute the framework for the organization of rail transport in France. This law created a public railway group comprising a "head" public establishment: SNCF, and two "operational" public establishments:

the railway infrastructure manager (***), the rail operator (***).

This segmentation makes it possible to apply more precise regulations, depending on the company's mission.

A further distinction is the Operating Agreement signed in **** between the State and SNCF Mobilités, which marks a collaboration between the State and the regions, which become the "Organizing Authority".gions, who become "Organizing Authority for a certain number of TET (***) lines whose offer is strongly intertwined with the TER offer". This gives them a decisive role in improving rail services across their territory. This ...

6.1 Segmentation

Main players in the French rail market :

• Société nationale des chemins de fer français (SNCF)
• Alstom
• Bombardier
• Siemens
• Wabtec
• Lineas France
• Captrain
• Millet Wagons
• Transdev
• Rail Logistique Europe
• Thales
• Trenitalia
• Le Train Voyage
• Lahaye global logistics
• TSO (NGE Groupe)
• RENFE
• Railcoop
• Getlink
• Europorte (Getlink)
• Eurostar
• DB Cargo France
• Colas Rail (Bouyghes)
• Railpool
• Ermewa Steem Group
• VTG
• Combronde Groupe
• Touax
• Eurotunnel Groupe