All aboard, fellow public transit aficionados!
As many of you know, I have a great interest for public transit, and while writing my article on JR Central, which you can read here, I did some additional research on other train giants that I didn't want to go to waste.
In the fascinating world of trains and rolling stock, there are two Japanese giants that stick out: Hitachi and Kawasaki.
Though these giants encompass much more than just their train divisions, my love for public transit calls for a playful examination of their train businesses. As neither company break out their rolling stock (train carriages) revenues and profits, this is more of a fun comparison than a full-on stock analysis. However, if you intend to invest in either, I still think you'll find some great info in this article!
So, let's fasten our seatbelts and embark on an adventure into the enthralling realm of Hitachi and Kawasaki's rolling stock divisions.
Financial Performance
Hitachi Ltd (TSE: 6501)
Rolling Stock Division Revenue (2022): ¥1,200 billion
Operating Profit Margin on its rolling stock division (2022): 7.0% (approximate number)
Kawasaki Heavy Industries (TSE: 7012)
Rolling Stock Division Revenue (2022): ¥360 billion
Operating Profit Margin on its rolling stock division (2022): 5.5%
When it comes to the bottom line, Hitachi leaves Kawasaki in the dust. With an eye-popping ¥840 billion revenue gap and a more impressive operating profit margin, Hitachi is undoubtedly the Usain Bolt of the rolling stock race.
The sheer scale of Hitachi's rolling stock operations reflects its global presence and the numerous contracts it has secured over the years. Hitachi is the main provider of the Shinkansen, and supplies rolling stock across Europe, including high-speed Frecciarossa trains in Italy and AT300 trains in the UK. In the United States, its subsidiary Hitachi Rail STS USA delivers transit and freight services. Hitachi also won a contract to supply new trains for the UK’s Intercity Express Programme and the British high-speed rail service, HS2. The company's influence extends to other countries such as India, where it is involved in numerous rail infrastructure projects.
In contrast, Kawasaki's smaller revenue footprint suggests a more focused approach, with a higher concentration in certain markets. However the company still has significant contracts like the R211 subway cars for NYC. In Asia, it's visible in Taiwan's High-Speed Rail, Singapore's MRT system, and China's CRH2 high-speed trains. The company also made inroads in the UK with Class 800 and 802 trains, and collaborates in India for electric locomotives.
Growth Opportunities: Full Steam Ahead
Hitachi's Ambitions:
Leaving competitors green with envy, Hitachi clinched a jaw-dropping €2.7 billion contract to supply 234 new intercity trains for the UK's Intercity Express Programme, further solidifying its presence in the European market.
Showcasing its commitment to global expansion, Hitachi won a staggering $7 billion contract to build and maintain high-speed trains for India's first bullet train project, a testament to the company's expertise in high-speed rail technology.
With a keen eye on the future, Hitachi pours resources into R&D for cutting-edge eco-friendly and energy-efficient train technologies, ensuring that they stay on the right track. This includes investments in battery and hydrogen fuel cell technologies, which could revolutionize the industry.
Kawasaki's Quest:
Kawasaki keeps its wheels turning by capturing the surging demand for urban and intercity rail systems in Asia, securing a $400 million contract for 112 commuter trains in Singapore. This success demonstrates Kawasaki's ability to cater to the rapidly growing urban transportation needs in the region.
Always in pursuit of innovation, Kawasaki engages in strategic collaborations to develop groundbreaking rail technologies, including a joint venture with CRRC (China Railway Rolling Stock Corporation), the world's largest rolling stock manufacturer. By combining forces, Kawasaki can leverage shared expertise and resources to tackle complex technological challenges.
Not one to be left behind, Kawasaki ventures into niche markets like light rail and monorail systems, expanding its portfolio to cater to evolving transportation needs. This diversification allows Kawasaki to tap into specialized markets, broadening its reach and customer base.
Competitive Advantages
Hitachi's Winning Formula:
Hitachi's sterling brand reputation for quality and reliability, cultivated over a century of innovation, is undoubtedly its golden ticket. This reputation has allowed Hitachi to build strong relationships with customers and governments around the world.
A diversified product portfolio, spanning commuter trains, high-speed trains, and light rail vehicles, ensures that Hitachi stays on track to cater to diverse global needs. By offering a wide range of solutions, Hitachi can adapt to the varying requirements of different countries and regions, making it a one-stop-shop for rolling stock.
Exceptional R&D capabilities empower Hitachi to spearhead the development of trailblazing technologies like battery-powered trains and hydrogen fuel cells, solidifying its position as the ultimate train wizard. By staying ahead of the curve, Hitachi can shape the future of the industry and maintain its competitive edge.
Kawasaki's Battle Strategy:
With over a century of experience and expertise in rolling stock manufacturing, Kawasaki's unwavering commitment to excellence is nothing short of remarkable. This rich history has led to a deep understanding of the industry and a wealth of knowledge, enabling Kawasaki to navigate the ever-changing landscape of rolling stock.
An impressive array of rail vehicles, including high-speed trains, commuter trains, and freight trains, ensures that Kawasaki is always ready to tackle any challenge head-on. This comprehensive portfolio allows Kawasaki to serve a diverse customer base and respond to various market demands.
A firm emphasis on partnerships and collaborations enables Kawasaki to unify forces and develop cutting-edge technologies that shape the future of rail transport. By working with industry leaders and experts, Kawasaki can tap into a wealth of knowledge and resources, accelerating innovation and securing a competitive edge.
Conclusion: The Champion Emerges
In the final analysis, Hitachi and Kawasaki are titans in the rolling stock world, each with its unique strengths. Yet, Hitachi, with it over twice as large rolling stock division, stands taller. Its ground-breaking projects, like the UK’s HS2 and AI-based digital solutions, redefine public transportation on a global scale, making it a compelling investment powerhouse.
However, Kawasaki isn’t far behind. Its bold venture into hydrogen-powered trains signals an eco-friendly future, and strategic collaborations worldwide show an underdog ready to strike. While Hitachi may currently be king of the hill, Kawasaki's innovative spirit and tenacity hint at a thrilling competition ahead. It's clear this battle of the behemoths is far from over - it's a dramatic contest shaping the future of global transit.