The Importance Of Trains
Industrial Role
The entire industrial era was built on the back of one technology: railroads and trains. By creating a low-cost way to move goods inland, railroads and trains boosted productivity massively. Later, the combustion engine for cars and trucks and then the jet engine for planes would take the spotlight.
But to this day, every industrial economy relies on trains to sustain its manufacturing beyond the coastal regions (which are supported by sea trade). Trains are especially crucial for moving raw materials and bulk industrial products like steel, cars, etc.
In some cases, it can take extreme forms, like the 704-kilometer (437 mi) railway line linking the iron mining center in the middle of Sahara in Mauritania, with a 3-kilometer-long train, carrying 200-300 200 – 300 freight carriages, carrying a total of 25,000+ tons of material in one go.
Source: Tourifique
For that matter, train-based logistics is also crucial to all modern armies, as illustrated by the importance of strategic railroads in the Ukraine war, which carried thousands of shells and ammunition daily to the front line.
High-Speed Travel
Modern trains have also evolved beyond the massive heavy industrial workhorse to compete efficiently with highways and airports.
No place is this more evident than in China, which has the world’s most dense high-speed railway network. At the end of 2023, the network had a total length of 45,000 km (28,000 miles), making up 2/3rds of the world’s high-speed railroads.
High-speed railroads, with speeds in the 200–380 km/h (120–240 mph) range, provide efficient transportation between cities.
Contrasted Geography
Train networks are highly dependent on public policy and national investment decisions. This is due to a combination of factors:
- Most rail networks are nationalized or oligopolies due to the centralized nature of the technology.
- Railroads require complex permitting and often force landowners to sell land or give access rights to make new projects possible.
- The high investment costs for new railroads are amortized over decades, making most private investors unwilling to wait that long.
- Railroads will often change the demography, economy, and overall development of entire regions and urban centers, making their path highly political.
So it is maybe not a surprise that the more centralized a country’s politics, the more successful trains are in overtaking cars and highways.
China
China stands at the top of the railroad network. Not only does it have this 45,000km high-speed railroad network, but it also has another 114,000 network of slower railroads dedicated to servicing local areas and industrial facilities.
Source: Reddit
By the end of 2035, China is planning to reach 200,000 kilometers (124,274 miles) of railway tracks, including about 70,000 km of high-speed railway.
All cities with a population of over 200,000 will be covered by the railway network before 2035, and those with a population of more than 500,000 will be connected to high-speed tracks, according to the latest plan.
China will also promote railway construction in places dominated by ethnic minority groups, as well as border areas and underdeveloped regions in central and western China, to help alleviate poverty and revitalize the countryside, the company said.
Source: Reuters / State-owned China State Railway Group
The same importance of railroad can be seen in Asia, with for example India’s 132,310 km of tracks, albeit of the much slower kind.
Europe
Another train-friendly region is Europe, with a 202 131 km network but only 11.666km of high-speed railroads, mostly located in Western Europe.
The EU aims to triple high-speed rail traffic by 2050, viewing it as pivotal for a more efficient transport system amidst urbanization.
Source: Wikipedia
In Europe, trains can however lag in international trade transport, due to a complex set of multiple voltage (both AC and DC) and signaling systems, as well as different gauges (the spacing between rails) with for example Portugal + Spain using its own, and Finland + the Baltic States using the Russian gauge. Nevertheless, 70% of the (mostly international) freight traffic across the Swiss Alps is done through railways.
Source: Wikipedia
North America
Lastly, North America, especially the USA, is lagging in train network for passengers, with mostly slow-moving Amtrak and freight railroads.
The US, however, has the largest rail transport network in the world, with 260,000 km of tracks (160,000 miles). Historically, this has been key in the US development and the conquest of the West, notably with the first transcontinental railroad with train tracks central to connecting the hinterland to the coastal regions.
From Steam To Electricity
The first trains were powered by the very first steam engine, deriving their energy from coal. This was a revolution from the previous transport network only powered by wind and animal muscles, and created a massive economic boom everywhere it was implemented. Later on, it switched to diesel for more powerful and less polluting locomotives.
Finally, a new stage would be achieved with electrification, allowing for the train to not anymore carry its own fuel, and instead use more efficiently energy produced directly at power plants.
Source: Mesas Stamps
Electrification also opened the way for trains powered by fossil fuels, whether from nuclear energy or renewable. This makes modern trains a much less polluting alternative mode of transportation, with a radically lower carbon footprint.
For example, in the UK, despite the decarbonization of the electric still lagging behind, every type of rail transport, from national railroad to tram and subway, emitted only 35-28 grams of carbon dioxide-equivalents per passenger kilometer, below EVs (47g) and 5x less than diesel & petrol cars (170g).
Source: Our World In Data
The Future Of Trains
Maglevs
Far from a stagnant and aging technology, train transportation is at the forefront of technological evolution and electrification.
A key innovation is the maglev train (magnetic levitation), first launched commercially in 2004. This science-fiction-looking technology allows the trains to literally levitate above the tracks.
This provides a few unique advantages compared to regular railroad and any other land-based transportation:
- Much reduces friction, reducing the overall energy losses.
- Less friction also reduces heat production, allowing for much faster speed.
- With no contact, the only speed limits are linked to air resistance and the capacity of the maglev system.
- No contact creates a very smooth experience, with much less vibrations than on steel wheels, even at very high speeds.
The way maglev works is by generating massive magnetic fields, using superconductive magnets (displaying no electrical resistance). To do so, the magnets need to be cooled at -450F / -267C.
Source: Department Of Energy
Another big benefit is safety. Maglev trains are “driven” by the powered guideway. Any two trains traveling the same route cannot catch up and crash into one another because they’re all being powered to move at the same speed.
Similarly, traditional train derailments that occur because of cornering too quickly can’t happen with Maglev. The further a Maglev train gets from its normal position between the guideway walls, the stronger the magnetic force pushing it back into place becomes.
The maglev train market is estimated at $2.17B in 2023 and is expected to grow to $3.13B by 2031, or a 4.7% CAGR.
Unlimited Speed?
The highest speed achieved by a maglev was achieved by Japanese JR Central’s L0 superconducting maglev, which reached a top speed of 603 kilometers per hour (375 mph) in 2015.
This is probably somewhere close to the top achievable limit for maglev, due to increasing air resistance the higher the speed goes.
In any case, travelling above the speed of sound (1,235 km/h / 767 mph) would create a supersonic boom that would be damaging to both the railroad infrastructure and its surroundings.
Mass adoption?
Maglev is still a relatively rare technology, with most high-speed railroads achieving their speed with conventional methods.
Still, turning to mass installations of maglevs could eliminate most of the need for regional air transport like inside Europe or across the North American continent, as 400-600km/h can be a match to planes, especially when taking into account the delays associated to airports and boarding planes (security checks, boarding luggage, etc.).
And combined with the decarbonization of the electric grid, it could have a massive impact on global carbon emissions.
The ideal locations would probably be inside and between the world megalopolis, notably on US coasts, North of India, Java island (Indonesia), and Western Europe.
Source: Pinterest
Hyperloop
What if maglev trains were not constrained by the speed of sound?
This idea might initially sound outlandish, but there is a way to avoid creating a sonic boom and suffering from excessive air friction: Simply remove the air. This is the concept of hyperloop, popularized by Elon Musk in a white paper in 2013, proposing a trip from Los Angeles to San Francisco in only 30 minutes.
Source: The Verge
The idea is to encase the maglev train into a depressurized tube or tunnel. This way, the maglev system can accelerate without being limited by air friction.
The idea immediately gathered a cult following and was under development by Hyperloop One, formerly Virgin Hyperloop. However, this company closed definitively in 2023, after running out of money.
This setback has led many to prematurely claim the death of the concept, calling it (pun intended) a pipe dream. This was premature, as other hyperloop-like initiatives are moving ahead.
Hyperloop Prototypes
The first one is Dutch Hardt Hyperloop which announced that it has successfully tested its hyperloop vehicle in September 2024. This is only proof of the vehicle moving and vacuum being maintained, but a first step.
Other active companies on this topic in Western countries are Musk’s Boring Company and Italian HyperloopTT.
In train-enthusiast China, a maglev train recently completed a test at a 2-kilometer-long (1.2-mile) pipeline with a low-vacuum environment in the Shanxi province. This was tested by China Aerospace Science and Industry Corporation (CASIC).
The design is aiming for a speed of 1,000 kilometers (621 miles) per hour. The system also previously achieved a record-breaking speed of 623 kilometers (387 miles) per hour in a test run under non-vacuum conditions.
The goal would not be to stop at 1,000km/h but to go as far as 4,000km/h in the long term.
So in theory, it could be used for intercontinental travels putting it to par with not-yet existing commercial hypersonic spaceplanes, bringing for example Berlin to Beijing to only 2-3h travel time or LA to NY in just 1-2h.
However, hyperloop systems will need a lot of progress in design and engineering to become a reality. Among the few difficulties will be:
- Safely maintaining a strong vacuum on the entirety of the line.
- This includes managing the risk of unwanted sudden vacuum loss after an accident or even a terrorist attack.
- Supplying safely and efficiently the phenomenal amount of energy required by the system.
- Integrating hyperloop to the existing network of railroads and train stations.
- Building dedicated infrastructures.
- The extreme speeds involved will limit the path options, forcing the hyperloop developer to rely on expensive super-bridges and tunnels to cross through any obstacles.
Other Innovations
Train transportation is a technology that has historically always benefited from innovation in other industries. It first leveraged the steam engine used for pumping water in coal mines, then the newly invested diesel engine, and then electricity and superconductor magnets.
So, it makes sense to look at the future of trains in the broader context of other technological progress.
High-Temperature Superconductors
A key part of the maglev and hyperloop system is the need for superconductive magnets. These require today’s ultra-low temperature, which is technically difficult and energy-intensive.
This might change soon, with superconductor materials requiring less cold or even room temperatures. We discussed in detail their development and the latest news in “Progress In Superconductivity Making Way For A New Technological Revolution”.
Overall, would superconductivity be achieved at a much higher temperature, this would make maglev a far superior option to the classical high-speed railroad.
It would also make trivial the transmission of absurd quantities of power over long distances, making a lot more economical renewables, hyperloop, as well as helping develop other civilization-altering technologies like nuclear fusion.
AI, Self Driving Trains & Smart Railways
Automation and AI are other quickly progressing technologies. As we are envisioning the development of self-driving cars, able to handle the complexity of urban roads, it makes sense that we should achieve self-driving trains even sooner. This is in particular because trains operate in a much more controlled and known environment, even if at an even higher speed.
AI, as well as 5G connectivity and IoT (Internet of Things), can help with a multitude of railroad-related tasks, including:
- Secure surveillance.
- Real-time updates and smart ticketing.
- Automated train services.
- Self-driving trains.
- Predictive maintenance.
- Connectivity, automated train control & digital signaling.
Another activity that could be boosted with digitalization, AI, and also blockchain is logistics. Loading-unloading freight cars, switching wagons between trains, cross-border transport, and interconnection to truck transportation, all could be semi or fully automatized, making rail freight a lot more efficient and cost-effective.
Tunneling
Another option we might see is a lot more transportation (including rail) through tunneling. This is another one of Elon Musk’s personal obsessions, with the Boring Company likely to have been founded to equally help solve transportation on Earth as it is to build habitat on Mars.
This might be a favored option for future hyperloop systems, as a tunnel will be more stable, less vulnerable to accidents, and overall easier to keep in a strong vacuum than a suspended tube.
Mass drivers
The key idea of a mass driver is that a shuttle could be sent into orbit by accelerating it enough on the ground that it would not need an onboard propellant.
In essence, it would be a hyperloop, but with the goal of reaching escape velocity to propel a spaceship in orbit without on-board propellants.
The launch track will also need to be hundreds, if not thousands of kilometers long, with the most promising candidate area being the Tibetan plateau.
Source: Acepedia
Maybe unsurprisingly, China is already looking at developing such technology, so it might be closer than we expect.
If successful, it could reduce by another 10x the orbital launch price already much lowered by SpaceX, with estimates putting costs at a mere $60/kg.
On a side note, this type of system could be first used with smaller-size models to propel airplanes at a speed where hypersonic scramjet engines can work, allowing for very quick hypersonic flights.
So if transcontinental hyperloops are not an economically viable option, it could be that mass driver / launch hyperloop for hypersonic flight might still use this technology.
Investing In Train-related Technology
Despite gathering a lot less attention than aerospace or EVs, trains, maglev and maybe in the future hyperloop are at the forefront or revolutionizing mankind’s means of transportation and the economy.
China has been so far leading the way, but the rest of the world is taking note and looking to massively expand their railroad capacity as well.
If you are not interested in picking train-related companies, you can also look into ETFs like SmartETFs Smart Transportation & Technology ETF (MOTO), iShares US Transportation ETF (IYT), or SPDR S&P Transportation ETF (XTN)which will provide more diversified exposure to capitalize on the strategically vital transportation and railroad industry.
Railroad & Train Companies
1. Siemens Aktiengesellschaft (SIE.DE)
Siemens is a strong company in the industrial sector, with activity in electronics heavy industries, infrastructure, mobility, and healthcare.
Source: Siemens
The company activities in IoT are spread in several segments, including automation (62% of total digital industries) and smart infrastructure.
The healthcare activity focuses more on imaging, analyses, and robotics, while the mobility segment is mostly train and rail infrastructure.
The company sees a large opportunity in automation from the globally declining population and “glocalization” (or “re-shoring” of industrial capacity closer to the final markets). The increasing presence of renewables in the electric grid also increases the demand for a “smart grid” able to handle these more intermittent and variable power sources.
In the niche where it is active, Siemens is a very strong competitor, ranking #1 for factory automation, rail automation, grid automation, and vertical industrial software (including 1,300 cybersecurity experts).
Source: Siemens
Siemens is a stock positioned to benefit from electrification, re-shoring, IoT, automation, railroads, and the increasing level of technology in industrial processes overall.
As a leader in railroad equipment manufacturing, it will benefit directly from investment in the sector, as well as indirectly from the re-industrialization trend.
Thanks to its wide range of technology, it will be at the forefront of building smart railways, leveraging its experience in automation and IoT from other already more digitalized industries.
2. Alstom (ALO.PA)
The French company was among the first to create a high-speed train, which became the world-famous TGV (“Train a Grande Vitesse”).
Today, it is the global #1 in Rolling stock (train vehicles, 4,600+ train cars/years), services, and turnkey systems, and #2 in signaling, partly thanks to its acquisition of Bombardier Transportation in 2021.
Source: Alstom
Alstom is the leader in train network automation, having achieved the highest automation level, GoA4, on French regional train lines by 2023.
Source: Alstom
It managed this through its “Automatic Train Operation,” which includes automatic train control, protection, and supervision.
This system results in 45% less energy consumption and 30% more passenger capacity per line.
While a leader in its industry, the company has had a few tumultuous years when it comes to financial results, starting with a €3.2 billion bailout from the French government in 2003.
Since then, the Alstom group divested its activities in shipbuilding and electrical transmission to nuclear giant Areva in 2004, and then its power and grid divisions to GE in 2014, and its heavy gas turbine business to Ansaldo Energia.
This makes the new Alstom a solely train-focused business, from the complex industrial conglomerate of the early 2000s.
The group has been working on rebuilding its profitability and its order backlog, with strong growth in future delivery since 2022.
Source: Alstom
Overall, the company sees up to >€230bn mid-term market potential for the 2025-2028 period, allowing it to pick which contracts will be profitable, as well as absorb the company ramping up in manufacturing capacities.
