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Transport Equipment

Facing headwinds: Economic and geopolitical forces reshaping the industry’s dynamics

Last update – November 2025

Sector rating 


SENSITIVE RISK FOR ENTERPRISES

Strengths & weaknesses

  • Strong pricing power: The sector enjoys significant pricing power due to the limited number of manufacturers capable of designing and producing highly specialized transportation equipment, particularly in the aviation industry, which is dominated by a small number of globally recognized players operating within an oligopolistic market structure.
  • Robust growth potential: The global transportation sector offers substantial long-term growth opportunities, especially in rail transportation. Increasing government support for sustainable mobility solutions, including public investment in electrified rail systems, is expected to drive continued demand across both developed and emerging markets.
  • Stable client base through government contracts: In many cases, major transportation equipment contracts are signed directly with government entities or state-owned transportation companies. This provides greater assurance of payment reliability and long-term revenue stability, particularly in capital-intensive projects.
  • Long production cycles facilitate financial planning: Transport equipment typically involves extended construction timelines, often spanning several years. This allows manufacturers to plan production schedules strategically, forecast revenues with greater accuracy and manage working capital more effectively over the project lifecycle.
  • Capital-intensive nature: The transport equipment sector requires substantial upfront investment, both in research and development (to design and engineer cutting-edge models) and in capital expenditures, including specialized infrastructure for manufacturing and assembly. These high fixed costs create significant entry barriers and pressure on margins.
  • High leverage and working capital requirements: Due to the large scale and long timelines of contracts, companies in this sector often operate with elevated levels of debt. Extensive working capital is required throughout the construction phase, as full payment is frequently received only upon final delivery of the equipment, increasing liquidity risk.
  • Exposure to commodity price volatility: The sector is heavily reliant on raw materials such as steel, nickel and aluminum, making it vulnerable to fluctuations in commodity prices. While contracts are typically agreed on a fixed-price basis, sudden increases in input costs can compress profitability and strain financial planning.
  • Stringent quality and safety standards: The market demands exceptionally high standards for engineering precision, product quality and operational safety. Any defect, structural failure or accident (whether during testing or after delivery) can result in severe reputational damage, legal liabilities and financial losses for manufacturers.
  • Cyclical demand patterns: The sector is closely tied to broader economic cycles. Demand for new transport equipment tends to rise during periods of economic expansion, when transportation operators are more inclined to invest in fleet upgrades. Conversely, investment levels typically contract sharply during downturns, leading to revenue volatility.

Sector overview

What to watch ?

 

  • Tightening environmental regulations: As global awareness around climate change intensifies, the transport sector (responsible for approximately 20-25% of global CO₂ emissions) is increasingly subject to stricter international regulations. In response, manufacturers must accelerate investment in R&D to develop cleaner technologies, such as hydrogen-powered and electric aircraft or ultra-low-emission vessels. These innovations are expected to disrupt the market landscape (although not in the short-term), potentially increasing competition in traditionally oligopolistic segments like aviation.
  • Supply-chain stabilization: Supply-chain disruptions that plagued the industry after the pandemic have eased significantly, enabling faster equipment deliveries and improved cash-flow generation as order backlogs are converted into revenue more efficiently. However, challenges persist in the aviation segment, where overstretched suppliers continue to miss delivery deadlines, hindering production targets for aircraft manufacturers.
  • Volatile commodity prices: After peaking in 2022 until mid-2023, the price of key metals such as steel and nickel declined through 2024 amid the weakened global economic outlook. However, volatility remains elevated, with recent upward pressure on aluminum and copper prices so far in 2025. These fluctuations pose a short-term risk to profit margins, particularly in fixed-price contract environments.
  • Labor market dynamics: Labor shortages and hiring challenges observed in 2022–2023 gradually eased in 2024, particularly in engineering and skilled manufacturing roles. Nonetheless, the aviation sector now faces rising wage pressure, as companies are compelled to increase compensation to attract and retain specialized talent—a trend that could weigh on operating margins throughout 2025 and 2026.
  • Central bank divergence shaping financing conditions: Inflationary pressures have moderated, but still-restrictive credit conditions in developed markets like the US and the UK will continue to challenge companies’ ability to refinance debt and fund expansion plans. In contrast, European firms may enjoy greater financial flexibility as the European Central Bank (ECB) maintains its trajectory of interest rate cuts.
  • The new space race: Competition in the space transportation domain is accelerating, fueled by geopolitical ambition and technological advancement. Emerging players, particularly from China, are joining established powers such as the US, Europe and Russia in the push to develop space-capable transport systems, including reusable rockets and lunar transport solutions. This segment could represent a major innovation frontier for aerospace manufacturers.
  • Expansion of the defense market: Demand for defense-related transport equipment (such as fighter jets, military helicopters, submarines, aircraft carriers, and combat vehicles) is rising amid growing geopolitical tensions. Aviation and maritime manufacturers are increasingly capitalizing on this trend, with the US, China and Russia leading global military expenditure. Defense contracts often provide stable, long-term revenue streams and may help offset cyclical volatility in the civilian segment.

Challenges influencing market dynamics: Overall, the transport equipment sector's performance in 2025 is being influenced by a combination of regional dynamics, strategic investments (notably in defense) and broader economic factors. While certain regions and companies report strong order backlogs, indicating sustained demand, others face challenges such as declining new orders due to the economic uncertainties. Indeed, persistent policy uncertainties and rising costs, particularly related to higher tariffs, should lead businesses to delay or scale back investment plans, reducing demand for some types of equipment.

Aviation: Since 2024, the aviation industry's supply chains have been grappling with persistent disruptions in sourcing critical components amid geopolitical tensions and fluctuating raw material prices. Safety issues, strikes and other industry-linked difficulties such as the push for greener technologies (straining existing supply chains to adapt swiftly) have also heightened output constraints. New aircraft delivery rates continue to disappoint the market. Only 1,266 aircraft were delivered in 2024, a -8.1% decline from 2023. For 2025, 1,692 aircraft are expected to be delivered globally, an increase of +33% y/y (the highest level since 2019: 1,407 planes). Yet this is almost -26% lower than the estimates initially made a year ago. Indeed, downward revisions have been occurring on a continuous basis and should remain given that supply-chain issues should persist in 2026.


Shipbuilding: The industry has faced strain in recent months due to US–China trade tensions, with the US initially imposing fees on Chinese-built or vessels operated by Chinese carriers calling at American ports to curb China’s dominance in dry bulk and containership production, reshaping global shipbuilding demand and prompting a shift toward South Korea, Japan, and emerging markets such as India. LNG carriers remained exempt from US fees, creating selective opportunities. China also responded with retaliatory port fees on US-linked vessels. Nevertheless, in November 2025, both countries agreed to a one-year suspension of these reciprocal measures, including certain duties on ship-to-shore cranes and cargo-handling equipment, providing a temporary reprieve for operators and shipowners. The truce is expected to allow both governments to continue negotiations, giving stakeholders time to adjust plans and easing immediate regulatory and financial pressures on the global shipbuilding market. Despite the tensions observed this year, demand remains robust, underpinned by the urgent need to decarbonize the shipping sector through fleet renewal toward more energy-efficient vessels. Nonetheless, vessel prices have moderated from the peaks seen in previous years. In 2025, the correction has been particularly pronounced for ships transporting commodities: tanker prices have declined by approximately -14% y/y, while bunker vessels have fallen by around -4% y/y. In contrast, containerships continue to experience price growth, with average values increasing by roughly +10% y/y.


Commercial vehicles: Commercial vehicle manufacturers are grappling with a mix of economic uncertainty and shifting regulatory demands. Slower global growth is dampening demand, while ongoing supply-chain issues are causing production delays and cost increases. At the same time, tougher emissions and safety regulations are accelerating the push toward electrification and alternative fuels, requiring significant investment in new technologies. Rising material costs and geopolitical tensions further complicate operations, making it challenging to balance innovation, compliance and profitability. The EU commercial vehicle market is facing significant declines in van, truck and bus sales. For instance, in Q1 2025, new van sales dropped -12%, primarily impacted by Italy (-15.2%), France (-10.7%), and Germany (-10.7%), while Spain bucked the trend with a +12.6% increase. Truck registrations fell -16%, largely due to steep declines in heavy trucks (-16.6%) and medium trucks (-12.5%), with Germany (-25.4%) and France (-17.6%) hit hardest. Bus sales dipped slightly by -1.8%, with Germany and Italy seeing declines but France showing marginal growth and Sweden and Greece experiencing strong increases. Overall, the market environment remains uncertain across key EU regions.

Subsectors

  • Aircraft manufacturers (aeronautics): Companies involved in the design, engineering and assembly of any kind of vehicle that is manufactured to fly in the air, including planes (commercial and cargo planes, private jets, military jets and propeller planes) and helicopters (civil and military). The US and France are the world's largest producers of aircraft.
  • Shipyards: Companies that build and repair any type of water-transport vehicle, such as yachts, cruise ships, container and dry bulk vessels, military vessels, oil and chemical tankers, ferries, ice-breakers etc. By revenue, this market is vastly dominated by South Korean, Chinese and Japanese companies, followed by European companies.
  • Rolling-stock manufacturers: Companies involved in the entire process of designing, manufacturing, assembling and testing rolling stock. Wagons/trains can be used for both passenger and cargo transport and can be high-speed or not. This market is led by China and Europe.
  • Truck OEMs: Manufacturers of trucks or camions, which are normally used for cargo transportation, for carrying other vehicles or dry-bulk commodities. Trucks vary in size, power and configuration. While most are still powered with diesel fuel today, electric trucks are gradually being introduced to the market.

Contact 

Contact Allianz Trade
Economic Research Team
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Maria Latorre
Allianz Trade
+33 1 84 11 50 50
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