Germany: the shop window for the worldwide rail industry
Posted: 11 April 2014 | | No comments yet
The German Railway Industry Association (VDB) purposefully and emphatically represents the interests of German railway technology manufacturers, thus contributing to the dynamics of the worldwide rail industry. The branch is very established in the international business arena with an export ratio of approximately 50%. Whether for rolling stock, rail infrastructure or communication technology – German railway manufacturers contribute to the climate- and environmentally-friendly aspects of rail transportation spanning all five continents. In Germany alone, the more than 170 VDB member companies with their above 50,000 employees achieved a turnover in 2012 of nearly €11 billion.
The German railway industry is one of the most dynamic and innovative industries in Germany. The sector develops and produces a wide range of globally leading railway technology which includes high-speed trainsets, locomotives, regional trains, wagons, metros, city railways and trams, fully-automated underground railways, track systems and electrification, control and safety systems, electrical and mechanical equipment for rail vehicles, information and communication technology, telematics systems for intermodal networking of transport carriers, turnkey systems as well as various railway-engineering components. The German railway industry is essentially characterised by the cooperation of system houses and a broadly positioned medium-sized supplying and system industry. Several efficient system houses emerged from the intensive concentration process within the railway industry in the 1990s. These companies deliver their vehicles and products to railway operators all over the world. Each of them is able to provide an entire turnkey railway system. These system houses are the technology and market leaders in the worldwide railway industry.
However, the success of the German railway industry is also based to a very large extent on the medium-sized supplying industry that has become one of the most productive and innovative industries in Germany over recent years. If you consider that up to 60% of the value added to a rail vehicle today is gained from the purchase of components, the huge contribution of the supplying industry will become obvious. The German supplying industry comprises more than 150 specialised companies of various sizes. Due to their increase in productivity and decreases in costs, the medium-sized companies have made a great contribution to the improved competitiveness of their customers. The medium-sized businesses are also unique within the German railway industry because of their diversity: the German suppliers provide everything that is necessary for manufacturing railway systems in cutting-edge technology.
Despite cyclical fluctuations the railway industry was able to expand its business considerably over the past decade. The German railway engineering manufacturers set a new order record in 2011. The orders received increased in that year to the new all-time high of €14.5 billion, which was also due to winning new large orders for rail vehicles. The German railway industry was also able to continue its general growth course with a view to the turnover despite a cyclical decline.
An industry with more than 130 years of experience
Approximately 80% of the railway engineering manufacturers in Germany are organised under the umbrella of the VDB. Its member companies include the system houses and all important medium-sized enterprises in the industry – presently more than 170 member companies. The VDB represents the interests of its members towards the politicians and the media, railway transport companies and institutions, and has been doing so for more than 130 years.
The German Railway Industry Association dates back to the Verband der Deutschen Lokomotivfabriken (the Association of German Locomotive Factories) founded in 1877. In January 1991, the Verband der Deutschen Lokomotivindustrie (VDL – the Association of the German Locomotive Industry) and the Verband der Waggonindustrie e.V. (VdW – the Association of the Wagon Industry) merged into the Verband der Deutschen Bahnindustrie e.V. (VDB – the Association of the German Railway Industry). In October 1999, the VDB changed its name to the current Verband der Bahnindustrie in Deutschland e.V (VDB – the German Railway Industry Association). Despite the concentration in the industry, the number of locations of companies organised in the VDB is increasing. In December 2002, the German Railway Industry Association relocated its headquarters from Frankfurt/Main to Berlin, based on a unanimous decision made by the members’ general assembly.
One of the various goals and tasks of the VDB is to establish the preference of the railways both in the German and the European transport policy. The role that rail is playing is more important than ever in view of the requirements of the environmental and climate protection and the conservation of resources. Liberalisation and controlled deregulation of the European rail transport markets are an important precondition for the growth of rail transportation. Together with the technical harmonisation of the European railway area, this political demand also means that the development of the Technical Specification for Interoperability (TSI) and the standards in Germany and Europe must be designed in such a manner that their use leads to cost reductions and improvements in quality. The driving commitment of the Association with regard to the reformation of the approval process for railway technology that is pending in Germany and Europe is of immanent importance. After having been completed it will lead to a further increase in the competitiveness of the companies.
The VDB is organised into 20 technical groups and working teams to which the member companies send their experts. In the regular meetings of the working teams, the Association and the representatives of the companies develop contributions to further the development of the now already environmentally- and climate-friendly railway technology. Deutsche Bahn AG (DB) is the most important domestic customer in the German railway industry, plus a number of privately and publicly financed short- and long-distance transport operators. Through the dialogue between representatives of the industry and railway operators, the Association continuously promotes relationships with customers on all levels for their mutual benefit. This also includes the improvement of the competitiveness of the railway industry through technical cooperation in the pre-competitive phase and the optimisation of business processes. The most recent positive example was the quality partnership between DB AG and VDB concluded in January 2014.
However, the Association does not only act externally, but also within the industry. One of the objectives of the VDB is promoting fair business conditions between system houses and suppliers. In addition to that, particular assistance is provided for the export activities of medium-sized member companies, for example by obtaining funds from the Federal Ministry of Economics and Technology. Every year the VDB initiates business trips to emerging railway markets. In this way the medium-sized railway engineering manufacturers have been able to establish business contacts with Poland, the Czech Republic, Hungary, Romania, Croatia, Turkey, the Ukraine, China, Russia, Brazil, and India during the past 10 years. In addition to that, the VDB participates in industry trade fairs every two years in order to expand the export business of the branch.
Germany: the shop window for the worldwide railway industry
Despite current worldwide activities, the railway industry does not lose sight of the domestic market. Its dynamics contribute essentially to the further development of the global technological leadership of the German railway industry and ensure the necessary workload of the German companies. A lot of projects for the domestic railway industry can also be used as a reference for the international markets. In this way Germany has become the ‘shop window of the railway industry’ which is used by customers from all over the world.
The InnoTrans trade fair in Berlin is the main trade show and communication platform for the railway industry on a global scale. Its number of participants is steadily increasing and the 10th event of this specialised fair trade in September 2014 will again provide a highly sophisticated range of technical innovations, solutions and services for rail transportation. Exhibitors from all five continents cement the fact that railway engineering has become a growing global business. It also becomes apparent that InnoTrans has developed into a firmly established and unique exhibition for the global railway engineering market. The continuous growth of the exhibition is also a manifestation of a steadily increasing demand for efficient and environmentally-friendly mobility – be it for rail freight, the high-speed connections between metropolises, or the regional and local traffic in the booming megacities and large cities all over the world.
The railway industry and its developments takes the demand of modern societies for mobility and prosperity into account. The globally increasing rail freight sector is the basis for the growth of many economic areas; also in the cross-border railway traffic with a share of more than 60%. Also, local traffic has an increasing demand for efficient transport carriers such as metros and trams. The expansion and optimisation of these systems can bring about shorter travel times and higher convenience for millions of people in towns and regions. For all these requirements the railway industry provides intelligent solutions for sustainable mobility for today and for the future.
Environmentally- and climate-friendly rail transport
Just yet it must be possible to pit innovative mobility against its climate-friendliness. In 2011 the share of the traffic in the overall CO2 emissions in the EU countries amounted to about 20%. At the same time there is an inherent avoidance potential. Therefore the transport sector is of great importance when it comes to the climate and environmental protection policy.
Due to technical developments over recent years, rail transportation has become particularly environmentally- and climate-friendly. Its share of carbon dioxide emitted by traffic in Europe is just 0.2%. Lorries and passenger cars together amount to more than 94%. Therefore, if these transport modes were to be shifted from the road to the rail, the amount of carbon dioxide in the air could be instantly reduced. For example, a freight train drawn by a modern multi-system locomotive on the Alps transit route over the Brenner Pass can take over the transport capacity of 28 lorries, thus reducing the CO2 emission by almost two thirds.
As for the railway industry, sustainable mobility goes hand-in-hand with excellent and economic high-technology and the German railway industry has certainly reached a peak in this field. Thanks to its innovative strength, the railway industry is, and will be, the shop window for the world’s excellence in railway engineering.
Railway interoperability has to be boldly implemented
The trigger for these dynamic developments in the global railway markets is, if nothing else, the strong economic growth in the globalised and interconnected global economy. Based on this it can be predicted that – on a global scale – still more goods, commodities and people will have to be transported over the years to come. For Germany alone, the Federal Government has predicted an increase in rail freight transportation of 65% between 2004 and 2015.
However, in order to be able to cover the demand for passenger transportation in metropolitan areas, people will need to work at full speed on the construction and extension of efficient local public transport systems around the globe. This leads to a great demand for underground railways, trams and regional trains and the appropriate infrastructure. The current 465km-long metro network in Beijing is planned to be extended by another 100km by 2015. According to schedule the Beijing metro network will have reached a length of 1,000km by 2020 after all planned lines will have been completed. Shanghai, like many other metropolitan areas in China, is going to extend its existing metro network quickly by an additional tram and city railway system with a length of about 500km. Also, in North America there is a renaissance of rail traffic. The estimated investment needed for railway infrastructure for the most important North American freight transportation companies over the next 20 years amounts to at least €6 billion per year. At the same time there is an increasing demand in the large cities for environmentally-friendly city railway systems, plus the connection of megacities with fast high-speed networks is being intensely discussed.
An essential challenge for the further development of rail is the free access to railway networks. Some countries have already liberalised the railway markets to a large extent, whilst others – many of them in Europe – are undergoing a transformation process. In some less liberalised countries there is less intra-modal competition which will lead to less rail traffic in the future. It is therefore necessary to continue to strengthen European cross-border passenger and rail freight transportation. Politicians and national railway network operators have to implement the necessary interoperability of rail as a transport carrier with courage and commitment – only then will people all over the world take advantage of future-oriented mobility according to the motto of the VDB which is: with excellent and economic railway systems for more sustainable rail transport.
Prof. Dr. Ronald Pörner is Managing Director of the German Railway Industry Association (VDB) in Berlin. Till 2007 he was full professor for industrial marketing and strategic management at the University of Applied Sciences (HTW) in Berlin.