Technavio analysts forecast the railcar leasing market in Europe to reach $3.93 billion through 2021, according to its latest report.

The research study covers the present scenario and growth prospects of the Railcar Leasing Market in Europe for 2017-2021. The report further segments the market based on application, including freight cars, tank wagons and intermodal.

The railcar leasing market in Europe is showing steady growth, as it is a sustainable and reliable mode of transportation. Tax benefits and considerations extended to the lessee, by the lessor, is a cost-effective method of financing equipment. Rail operators enter lease agreements since they reduce capital expenditure and other credits that can be allocated for other purposes. Also, it eliminates the risk of equipment degeneration that could lead to reduced resale value.

Technavio analysts highlight the following three factors that are contributing to the growth of the railcar leasing market in Europe:

Growth in oil, gas and mining industry

The railcar market in Europe will be primarily driven by the oil and gas industry, which accounted for 36.18% freight volume share in 2016. The production of primary energy, such as oil, natural gas and nuclear fuel (uranium) accounted for over 800 million tonnes in 2016.

According to Sharan Raj, a lead logistics research analyst from Technavio, “The growth in consumption and production of primary and secondary energy in Europe will drive the market for the oil and gas industry. Development in the oil and gas industry will drive the growth of the railcar leasing market in Europe.”

Increased funding by the European Commission

Since the year 1990, there has been a significant increase in the government funding in the European railway industry. For example, in Switzerland, two-third of the revenue from the heavy vehicle fee is designated for rail investments. For encouraging the movement of freight by rail, governments provide freight grants to the railway industry.

“European Commission launched a public-private partnership called Shift2Rail in the year 2013, where the commission planned to invest more than USD 480 million during the forecast period, toward research, innovation, and advancing the rail infrastructure. This will include intelligent traffic management and control systems, and innovative IT and inter-modal freight solutions,” added Sharan.

Liberalization of rail industry in Europe

Monopoly control and the difference in policy regulations from region to region has been the main reason behind the strict freight transport regulation. The regulations mainly included fixing tariffs that are laid down by public authorities and haulage committees; setting up licenses for new entrants in the market (setting quality and quantity restrictions); working conditions, which include driving time and labor wage and maintaining proper operating standards for vehicles, which include industry measures, access to tracks and speed.