The 2009 Grenelle Transport  Summit had aroused great expectations but results so far show that the legibility of political and economic events in the railway sphere has become particularly complex.

In the wake of this Summit, a very powerful political concensus had emerged around the sustainable-development theme and the need to support "alternative" transport modes. Hence the blossoming of major projects such as those elicited by the SNIT or by the Greater-Paris  master plan.

This apart, in the infrastructure field, there was the  added prospect of continuity through the "Perben Plan" for rehabilitation of the conventional network, coupled on the rolling-stock front with  expectations of massive replacement of the fleet of First-Generation TGVs plus the invitation of tenders for 1000 TER Regiolis and 360 Regio2N sets, not to mention the government-backed plan for revamping inter-regional train services (TET project). In other words, the post-2015 French market seemed highly promising indeed.

The railway manufacturing scene thus looked set for an acceleration of the trend, observed since 2007, towards a steady expansion of the domestic market with a turnover of € 3.3 billion posted for 2011 (including €2.3 billion for rolling stock alone) aganst € 2.3 billion in 2007. Unfortunately several  events recorded between 2010 and 2012 have since dashed these optimistic prospects.

Putting the brakes on projects

Apart from the ongoing conventional rail-network rehabilitation programme (worth some € 1.8 billion annually for 900 km of lines), all the other major schemes have either been massively rescheduled or thoroughly revisited.

The Regions themselves, still smarting from the abolition of the business tax by Government, have  responded by arguing they could no longer afford to fund options exercised on TER sets already ordered (residual options for 835 Regiolis and 750 Regio2N sets).

The State, immediately after the Ayrault Government took office, made known its intention to revisit :

-  the SNIT project, deemed far too ambitious given the funds that could realistically be mobilised and  also the real needs for new infrastructure, particularly high-speed lines;

- the Greater Paris project, deemed oversized by reference to the production capacities of the building sector, and far too costly (investment of some € 30 billion) in terms of the public authorities'  ability to contribute ;

-  the TET  project with its investment requirement  of € 3 billion spread over 10 years, for use  in   funding replacement of the Intercity fleet (Corail, Téoz, Lunea fleet etc.), deemed incompatible with the Transport Ministry's  budgetary capacities;

-  the funding scenario for the third TCSP phase (€ 450 million), which underpinned the launch of some tramway projects over the next few years.

SNCF itself then responded that the combined impact of the ongoing crisis and of  the usage-fee hikes secured by RFF jeopardised the viability of the "TGV-for-all" business model, so precluding  any early commitment on its part to replacing the Paris-South East (PSE) fleet as  from 2017 (200 to 300 sets) representing an investment of between € 6 and 9 billion.

Tough prospects

Whilst the mood at the end of the Grenelle Railway Summit (December 2011) seemed   globally to favour the scaling-down of  French railway manufacturing targets, the  downturn in prospects  observed in Autumn 2012 nevertheless  was as spectacular as it was disturbing. Looking ahead, this trend if confirmed could well shrink  the French railway industrial market by between 30-40% as from 2016, particularly in the train-building sector initially much more impacted than infrastructure. Looking further ahead, the consequences could well be catastrophic in terms of activities and jobs for the sector.

Thankfully the forces at work during the  Autumn 2012- early 2013 period helped  rekindle  fresh awareness within the public authorities of the positive implications - for the future of the French railway manufacturing sector - of a partial or total relaunch of the programmes mentioned earlier. As pointed out in the "Ambition 2020" final report issued by the Railway Sector Strategic Committee in April 2012, the sector's future necessarily implies the existence of a domestic market that is both dynamic and offers multi-annual visibility on a par with the approach developed by the  two world leaders in the field, namely China and Germany.

The vital importance of a well-lined order book

For the record the annual domestic turnover of the Chinese national railway industry is expected to top the € 50 billion mark by 2015, made possible by the large investments incorporated into its five-year plan.

The German railway industry, ranked 2nd in the world league table and 1st in Europe, draws its strength from a domestic market worth over € 5 billion annually, and its order books are simply bulging. For 2011 alone, incoming orders reached a record € 14.5 billion, including € 10 billion for the domestic market.  The public authorities, conscious of the fact that a dynamic and sustainable market is a prerequisite for our railway industrial sector to remain competitive on the world stage, have rallied to put in place pertinent solutions, particularly in the financial engineering field, consistent with set objectives. Hence the following announcements made between December 2012 and January 2013 :

- funding of a first batch of TET sets via the AFITF route to the tune € 450 million ;

- funding of the third TCSP tranche to the tune of € 450 million ;

- finalisation (March 2013) by SNCF of the order for 40 TGV sets after protracted discussions started in January 2012 ;

-  targeted delivery of a "New-Generation" TGV to SNCF by  Alstom in 2018.

To complete the picture, the Industry Ministry and Transport Ministry have decided:

-  to qualify rolling-stock investments for money from the Savings Bank (dedicated to sustainable development projects) run by Caisse des Dépôts et Consignations (CDC);

-  to set-up a Rosco-type public rolling-stock company tasked with leasing trains to railway operators unwilling or unable to invest in trains (new sets in particular). The Transport Ministry has simultaneously set-up a "Mobility 21" Commission tasked with reappraising the main SNIT infrastructure projects.

The Ministry has also asked ARF Transport Commission Chairman Jacques Auxiette to come forward with solutions which the Regions can access in efforts to consolidate their role and their action when implementing TER investment initiatives.  The Greater Paris consultative bodies have also stepped-up the pace of their deliberations so that definite decisions can be reached as soon as possible (by March 2013).

The rail freight business on a slippery slope....

The one missing player in this ever-changing landscape is the rail-freight business whose market share has been shrinking steadily to the advantage of road transport, with freight volumes falling to below the 30-billion tkm mark. The freight rolling-stock market today faces near-collapse as a result, with no freight-loco deliveries expected on the French market during 2013-2014  and wagon-building activities continuing to be drip-fed. What a contrast with the picture across the Rhine where market demand ( orders for locos, wagons and freight equipment) annually represents a turnover of between € 500 million and € 1 billion for a traffic volume of some 112 billion tkm!

Focus on the French railway organisation

Finally, one of the major uncertainties still prevailing relates to the impact of the future reform of the French railway system on the railway industrial sector. Aside from the future choices to be made in terms of the governance and organisation of the new system, questions still need answering as to its economic performance and capacity to generate - or not - a powerful investment momentum comparable to that achieved by the 1994 German railway reform. From this standpoint, the priority already granted by Government to implementation of the rail-network modernisation policy will be viewed as a full-scale test of our collective ability not only to keep the obsolescence of the network in check but also significantly to boost its productivity and performance levels, so setting in motion a virtuous circle for rail-sector investors.

As to the body language used in the ongoing dialogue between France and the European Commission on the opening-up to competition, there is nothing to suggest or accurately predict when sector liberalisation will actually occur or how it will be phased-in as between TGV, TET or TER services. Just for the record, however, DB competitors in Germany  account for  € 1.5 billion worth of rolling-stock business (locos, wagons, regional trains....) , which represents on average over 40% of the German railway industry's turnover on this market segment.  Leaving aside this uncertainty factor, it is difficult at this juncture to predict how it will impact on future investment levels.... short of indulging in political fiction!

If high investment levels are to be secured, Group SNCF - at least in the initial phase - must necessarily prove its capacity and strategic determination to rely on the French market for its development. This will inevitably impact on the TGV and TET rolling-stock markets.

The domestic market must be prioritised

It can therefore be assumed that despite the very strong budgetary and financial constraints imposed by the economic crisis, the French railway industrial base is  now  viewed by the public authorities  as having a future and deserving of priority treatment. The decisions            already - or being - made should help sustain the momentum of the French railway industrial market until 2016-2017, which would then arguably translate into activities. worth between € 3 and 3.5 billion  on this market for the next four to five years. Yet leaving aside decisions on the level and pace of rail network modernisation (with their more immediate effects), major decisions liable validly to impact on  railway investment levels in France beyond 2017 are still pending. They concern:

-  the SNIT :  which projects will ultimately be selected?

- the Greater Paris  project:  what timescales? which modal choice: heavy rail, tramways, light rail, heavy metros, tram-trains?

- the eligibility of  railway rolling-stock procurement funding for  CDC Savings Bank money ;

-  the launch of a State ROSCO.

Some will hasten to recall, which is absolutely exact, that a successful industrial base cannot  predicate its future solely on the domestic market, and that competition is now global . Conversely, no national industrial sector can aspire to the status of leading world player unless supported by a strong national manufacturing sector, which has absolutely been the case in the railway industrial field up till now.