Now we will continue our mission to tell you everything you need to know about buying trains. Having explained last how and why a new rail operator might go about purchasing used material, this time we’ll be focusing on new equipment – both its advantages and disadvantages.
Buying new is exactly what new Italian rail firm Italo did. In January 2008, two years after it was founded, Italo placed an order of no less than 25 carriages from Alstom. To start with, this solution offered the immediate advantage of providing easy access to material (by contrast with the scarcity of available used carriages and equipment) and also the fact the interior layouts are more flexible (it can appear simpler to start from zero than to start from an existing set-up, often far removed from the operator’s ambitions). And yet, as for used material, nothing is as simple as it seems.
The railway carriage construction business has historically had a habit of developing a new product on the basis of a list of criteria from a given client and to finance it off the back of that initial order. Once developed for the client, the product can then be resold by the developer to other operators, as if they were simply plucking it off the shop shelves. Any structural change that might be required by a new operator on this product can have a big impact on the cost and lead to delays in production and approval.
The idea that the same product could be sold to multiple operators makes differentiation between them very difficult (beyond the colours and material used in the interiors). Although that might not be so important on trains that run during the day, which are all laid out in a similar way with first and second-class seats, this can pose more of a problem for night trains. The very notion of the bedroom in fact makes the possibilities for interior renovation pretty much infinite – just private bedrooms, a mix between bedrooms and reclining seats, private or shared bathrooms and showers – and the requests will differ from one operator to another, depending on its strategy, target market and the level of service expected.
Any specific request not already included in the product originally designed by the developer and any further amendments to the layout will lead to further design, research and development costs for the developer, which will inevitably match up with global production prices – with an impact for the operator. And even if we’re kindly going to spare you an explanation of the complex process of approval of trains, you should know that a train must be officially certified before it circulates on the network, usually by national or European rail safety authorities. That certification will only hold for a very specific product and any request for further modifications can take you back to square one.
In sum: any new operator that has opted for buying new must also decide between the various existing products offered by developers, whether or not to make changes to an existing product, or whether to create an entire new product from scratch. One of the key factors in this decision process will be the volume of the order. The bigger it is, the more likely the operator is likely to go into specifics to offset the additional R&D and approval costs. The smaller it is, the more likely the operator is to fall back on pre-existing models.
When it comes to new night train operators, the advantage new carriages bring in terms of flexibility (especially when compared with used ones) doesn’t necessarily hold, and neither does the argument that they are easier to get hold of, as it is very unlikely that many developers have a suitable product available that perfectly suit the operator’s needs.
So there you have it. We hope you now understand a little more about what train companies have to consider when it comes to buying trains – new or old. The rail sector is complex and our aim with this series of articles is to let you in on some of the less-understood industry issues. Next week, we’ll be explaining how exactly firms go about funding a venture like this.
P.S. Railway experts, we’re very aware we’ve described the buying process in very broad terms and can confirm that many other important factors are involved.
