Demand threatened by weak macro environment, but high backlog levels will ensure income in the short-term

Last update – December 2022
Business environment risk
Political risk
Commercial risk
  • Pricing power since there are few manufacturers with the know-how, capable of engineering and building tailor-made transportation equipment, especially in the aircraft sub-industry
  • Significant growth potential overall, but especially for the rail equipment market as governments seek to encourage green mobility
  • In some cases, contracts made with governments (state-owned transportation companies), making payment more reliable
  • Construction contracts are usually for several years, which allows companies to anticipate their production levels and forecast their income
  • Capital-intensive sector as it is necessary to invest both in R&D and in capex and infrastructure for construction and assembling
  • Highly leveraged market, with companies requiring a lot of cash during the construction period as they are only paid fully on delivery in most cases
  • Vulnerable to price volatility of essential commodities such as steel and aluminum as sales agreed on a fixed-price contract basis
  • The market expects precision and high quality for the finished product as any failure of a structural component, manufacturing defects or accident can have negative consequences for both the operator and the manufacturer
  • Cyclical sector, with sales accelerating during periods of prosperity as transportation companies enlarge capex and vice versa
Contact Allianz Trade
Economic Research Team
Maria Latorre
Allianz Trade