According to a market study released by Technavio, the global railcar leasing market is expected to grow at a CAGR of close to 7% by 2021.

According to Sharan Raj, a lead analyst at Technavio for logistics research, “The growth in the use of rail freight has triggered the growth of railcar leasing in developing countries. Higher equipment replacement and maintenance cost of railcars are the key factors motivating shippers and railroad players to lease railcars instead of owning them.”

The market research analysis categorizes the global railcar leasing market into three major segments based on type.

Freight Cars

Environmental sustainability of rail transportation is the major reason for the rapid growth of rail freight transportation. In comparison with other modes of transportation, rail freight transportation causes a lower negative impact on the environment. It is also 55% more fuel-efficient than other modes of transportation.

“North America is the major market focusing on environmental sustainability,” Sharan said. “This market is constantly improving in terms of the fuel efficiency by adopting rail freight cars for transporting a major percentage of raw materials and manufactured goods. Apart from North America, APAC countries are also expected to show around 45% growth in rail freight logistics between 2016 and 2025. The rise in rail freight logistics across the world is expected to boost the requirement for rail freight car leasing.”

Tank Cars

The global railcar leasing market by tank cars is expected to show a steady upward growth during the forecast period. Rising crude oil production is the major driver that is triggering the growth of this segment. North America is a favorable market for tank cars as half of the shippers transporting flammable liquids and gases prefer rail freight as the safest transit over other modes of transportation.

In 2016, there were around 42,000 tank cars in the overall rail freight market, of which, lessors owned around 70%. As tank cars carry highly flammable and toxic substances, lessors should adhere to the stringent rules and regulations listed by the government, such as enhanced tank car standards, risk-based retrofitting for old tank cars and proper braking standards for the safety of the complete transit of toxic substances.

Locomotives

The global railcar leasing market by locomotives is expected to show considerable growth during the forecast period. The larger lifespan of locomotives is the major driver that will impact market growth. The larger lifespan will increase the repurchase span of locomotives by lessors. For instance, the U.S. railroad considers 26-31 years as the useful life period for locomotives.