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Russian Railway Industry Development is Impossible without Long-term Demand

The report of Vladimir Savchuk, Head of IPEM Railway Transport Research Department, IV annual CIS Rolling Stock Market conference, Moscow, 15/11/2013

IPEM presented the proposals for updated Strategy for Railway Industry Development until 2030 commissioned by the Ministry of Industry and Trade.

In 2012 share of freight cars production in total value of shipped railway industry goods and services was 33%, repair services – 27%, production of spare parts – 13%, production of locomotives – 11%, production of motor cars – 9%, production of passenger cars – 6%, production of track machines – 1%.

Systemic issue of Russian railway industry is the lack of long-term prepaid demand for modern railway and tram rolling stock produced in Russia. In the medium term, Russian producers will face difficulties competing with international companies for procurement contracts on terms of economic conditions. Absence of domestic production of high-quality components is also a serious problem.

Different parts of systemic issue are relevant for different sectors of railway industry. For example, development of locomotive and tram cars building slows down due to the lack of long-term prepaid demand. Although locomotive and tram fleets renewal should have been completed long ago.

Problems in production of rolling stock for metro are different. The main difficulty for Russian companies is competition with international companies within tender system on economic terms. Updated Strategy is meant to find solutions for systemic issue of Russian railway industry.

Implementation of the Strategy will meet the following objectives:

• Ensure the growth of railway industry domestic market
• Stimulate effective investments in railway industry
• Stimulate development and production of innovative rolling stock
• Improve competitiveness of Russian railway industry in both domestic and global markets
• Create conditions for growth of export of Russian railway industry products
• Develop the market of high-quality components
• Improve personnel policies and attract skilled workforce in the industry
 

According to IPEM, average size of rolling stock market will amount to RUB 630 bln in 2020, RUB 737 bln in 2030 (it can be compared to RUB 465 bln in 2012). If the state supports Russian manufacturers, their share in domestic market will increase up to 90% in 2020, and 92% in 2030. In case of lack of state support, share of Russian producers will fall from 80% to 59% in 2020, and 50% in 2030. Share of components produced in Russia will increase by 40 percentage points with state support (from 45% to 85%) and decrease to 25% in 2020, and 20% in 2030 without state support.

Implementation of the Strategy will increase effectiveness of transportation system, improve competitiveness of Russian railway industry plants, develop manufacturing industry and ensure diversification of Russian economy. In the long term, if the Strategy is implemented successfully, railway engineering will contribute to GDP growth and economic development.

 

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For the full version of the study or any additional information please contact: +7 (495) 690-14-26, ipem@ipem.ru