Hitachi received orders for 866 Intercity Express Program (IEP) carriages and for 234 carriages for Abellio’s ScotRail program, following 174 “Javelin” carriages

Hitachi Rail putting competitive pressure on Europe’s rail established rail manufacturers: Hitachi Rail has “on time delivery” at the top of the list of commitments to customers

by Gerhard Fasol

Winning a series of train contracts, Hitachi Rail invested £82 million (= approx US$ 130 million) in a train manufacturing plant in Newton Wycliffe, Country Durham, UK.

Hitachi Rail Europe announced contracts for the following train carriages to be built in the Newton Aycliffe facility:

• 866 Intercity Express Programme (IEP) Class 800 and Class 801 train carriages for the UK East Coast Main Line (from 2018), and the Great Western Main Line (from 2017) to be maintained for 27.5 years by Agility Trains
• 70 AT200 commuter trains (46 three-car trains and 24 four-car trains) for Abellio‘s ScotRail program

The £ 5.8 billion ($ 10 billion) Intercity Express Programme (IEP) was initiated in 2005 by the UK Department of Transport.

Earlier in 2004, Hitachi received an order for 29 6-car high-speed Class 395 “Javelin” trains (a total of 174 carriages), which went into regular service on 30 December 2009 on the Integrated Kent Franchise, between London St. Pancras Station and Ashford International Station, traveling this approx. 100km distance in 37 minutes, an average speed of 162 km/h.

For a background of the international business aspects of Hitachi, read an essay by the emeritus Chairman of Hitachi Europe, and emeritus Board Member of Hitachi Ltd. Sir Stephen Gomersall.

Hitachi Rail to challenge European rail manufacturers Siemens and Alstom

Europe is one of the world’s biggest rail markets, and has a number of established rail manufacturers including:

• Alstom
• Siemens
• AnsaldoBreda, recently acquired by Hitachi Europe
• Talgo
• Stadler Rail

There has been a series of recent problems in Europe’s established rail industries, which may have contributed to Hitachi’s considerable business success in Europe:

• Failure of the Cisalpino trains operated unsuccessfully between Milan/ Venice and Zurich, which showed many breakdowns and delivered unreliable service, and many resulting complaints.
  See: “A train that fails to arrive“.
• the failed and abandoned Fyra high-speed service between Amsterdam and Brussels using AnsaldoBreda V250 trains, which resulted in an avalanche of legal issues between the Governments, the rail operators, and the train manufacturers.
• Delayed delivery of trains by SIEMENS to Germany’s rail operator Deutsche Bahn, with Deutsche Bahn reported to be “angry” about the delivery delays – note that Hitachi has “one time delivery” at the top of its list of commitments to customers.

Rail in Europe and in Japan are very very different stories

European rail services are predominantly owned, operated and controlled by Government agencies, and to some extent operations are contracted out for limited periods to private service operators, almost none of Europe’s rail services are fully privately owned and operated – a rare and very successful exception is the Jungfraubahn mountain railway.

Rail services in Japan on the other hand are largely owned and operated by a large number of private railways companies, most of which are very successful and profitable and growing and listed on the stock exchange.

Thus Hitachi Rail is used to satisfying the tough needs of very competitive and privately owned commercial rail operators, while Europe’s rail manufacturers to a large extent sell to Government controlled agencies, or directly to Governments, or under Government programs, such as UK’s Intercity Express Programme (IEP).

The Hitachi investment in context: maybe we see a shift in investment value from traditional manufacturing to intellectual business such as insurance and pharmaceutical research

Compare Hitachi’s £82 million (= approx US$ 130 million) with the recent acquisition of UK insurance company Amlin by Mitsui Sumitomo Insurance Company for £2.5 billion (approx. US$ 3.85 billion or ¥642 billion), or the acquisition of Cambridge/UK Heptares Therapeutics Ltd by the Japanese Sosei Group for US$ 400 million (US$ 180 million in cash plus up to US$ 220 million in incentives).

Of course we are comparing apples and oranges here, and the overall Intercity Express Programme (IEP) is on the order of £ 5.8 billion ($ 10 billion), but we may witness here a shift of investment value from traditional manufacturing to intellectual business such as insurance and pharmaceutical research here.

More about Japan’s electronics and electrical machinery industries

Report on Japan’s electronics industry sector (approx. 237 pages, pdf file)

Japan electronics industries: mono zukuri

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