Mitsubishi Corporation

Urban Transport Systems Making Cities More Convenient and Comfortable

Urban Transport Systems Making Cities More Convenient  and Comfortable

More environmentally friendly compared with airplanes and automobiles,
rail systems are gaining favor as the most desirable form of transit infrastructure around the world.
Amid this rail renaissance, what kind of role can Japan play as one of
the worlds most rail-linked countries?
Mitsubishi Corporation (MC), working together with partners in
various countries and regions around the world,
contributes to the realization of convenient and comfortable societies
through its transportation systems business, which is represented by rail systems.
Projects that MC has engaged in this field are presented herein.

Bringing Competitive Technology and Products to Global Markets to Meet the Growing Needs of Urban Transportation Systems

The railway business is comprised of several main business sectors: (i) civil engineering and construction including constructing station buildings and installing rail tracks; (ii) mechanical and electrical equipment including manufacturing rolling stock, signaling, communications and power supply; and (iii) operations and maintenance. In the rail industry the actual work is undertaken by contractors; civil engineering is carried out by general contractors, rolling stock and mechanical and electrical equipment is manufactured by specialized manufacturers, and operations and maintenance are undertaken by specialized railway operators and maintainers. A key feature of the railway business is that all processes should be totally optimized to achieve maximum performance as a business.

The Railway Business Value Chain

The market size of the global rail industry is about 16 trillion yen on an annual basis , close to 60% of which is held by the "Big Three" European and North American companies, Bombardier Inc. (Canada), Alstom S.A (France) and Siemens AG (Germany).Japan has about a 10% of the share of this global market. Traditionally in Japan, railway operators have conducted their own in-house processes from track planning to system design, and have only outsourced manufacturing of specialized equipment such as rolling stock and signaling systems.The reason behind Japan's low share of the global railway market, where bidding is generally conducted on the basis of an entire system(on turn-key basis), is that no single Japanese company has the capability of acting as a main contractor of a project for the entire system including planning, track construction, supply of rolling stock, signaling and communications.All of the Big Three are basically rolling stock manufacturers. As the size of the rolling stock market is limited to about 4 trillion yen annually, these companies have been expanding their market share by acting as system integrators and covering the entire system.

With the rising awareness of the environment, soaring oil prices and the gravitation of populations to the cities in emerging countries, there has been an increasing demand across the world for urban transit systems that have a low environmental impact.Recently the Japanese government has been enthusiastically encouraging Japanese companies to participate in the overseas rail market, and projects in which the public and the private sectors collaborate, such as PPPs (Public Private Partnerships), have increased .In addition, some Japanese rolling stock manufacturers are beginning to assume the role of system integrator.

Status and Outlook of the Global Rail Market

The size of the rail industry market is estimated to be 22 trillion yen in 2020. Demand in emerging countries, in particular, is expected to increase sharply. Unlike in Japan and Europe, in many emerging countries, rail systems have long remained undeveloped as urban transit systems, even though these rail networks were constructed long ago during colonial rule for the transportation of resources. While in China, rail infrastructure is mostly constructed utilizing Chinese capital (Chinese manufacturers and corporations), now is the time for development in the regions of Brazil, South East Asia, and India.

Our Role as Total Rail Systems Developer Forming the Most Powerful Team through Consortiums

Comparing automobiles and rail as transit infrastructure, the automobile is a standardized product, while rail systems need to be tailored made. Rail systems must be designed and proposed to meet the specific needs of the customer, a railway operator. Moreover, as it is a business that takes 7–8 years before operations begin; 2-3 years required for designing, and 4-5 years for construction, the companies involved need to take root in that country or region, earn the trust of the local people and the project's customers and make a continued long-term commitment to the project.

Backed by its global network of more than 200 offices in 80 countries, MC operates its transportation systems business represented by rail projects with a strong commitment to meeting the specific needs of each country and region. The foundation of its business is the trust that MC has developed with local partners through longstanding ties in various business fields.In the transportation systems business, much expectation is placed on MC to play the role of total rail systems developer. In this role, MC brings together partners with knowledge and competitive strengths from across the world to form consortium to work closely with local partners and meet the customer's needs. It is MC's role to propose the best solution that will lead to the most suitable transit system for the people living in those regions. While further market growth is expected, MC will pursue a new investment business model in which MC acts as a project owner and which require some level of risk taking.

Railways are not only recognized for the direct benefits they have on citizens' lives; they are also regarded as major milestone of a country's development. In the regions where rail systems were launched, we have noticed that people express greater-than-expected gratitude and show pride towards their rail system. While meeting the expectations of people by implementing rail systems, MC aims to contribute to solving a global challenge faced by today's world: the realization of a low-carbon society.

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Contents Produced in Cooperation with Nikkei Business Online Special / Cross Architects, Inc.

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