Hyundai Rotem is expanding its maintenance, repair and overhaul (MRO) business for rail vehicles. As more countries adopt Korean-made rail vehicles such as EMUs, the groundwork has been laid, and demand is growing as several countries seek MRO technology transfer. Hyundai Rotem plans to aggressively increase its global MRO market share while also boosting overseas exports of EMUs.
According to industry sources and foreign media on the 17th, Hyundai Rotem recently signed an additional partnership with the Moroccan National Railways Office (ONCF) covering rail vehicles and maintenance parts. This is a follow-up to the $2.2027 trillion won EMU supply contract on Feb. 2, and is said to address MRO business methods and parts supply. Hyundai Rotem has been establishing an EMU manufacturing and assembly plant in Morocco since Sept., and appears to be building infrastructure to enable everything from local assembly to MRO.
The MRO business is a revenue source amounting to two to three times the sales price of an EMU. According to a report released by the Federal Railroad Administration under the U.S. Department of Transportation, the purchase price of rolling stock accounts for only 20% to 40% of the total expense incurred until the vehicle is scrapped. The remaining 60% to 80% is the expense for regular maintenance and overhaul (complete disassembly, parts replacement and reconditioning), the FRA analyzed. An industry official said, "If you sell one train for about 100 billion won, MRO costs exceed 200 billion won."
Moreover, the MRO field is serving as a competitive edge for Korean corporations in the global market. In most countries that import rolling stock, capabilities are lacking not only in manufacturing technology but also in maintenance and repair. As a result, many demand the transfer of maintenance and repair know-how upon introduction, but technology holders such as the United States, Spain, Germany and France are said to refuse transfer out of concern over leakage.
In last year's contract with Uzbekistan, the first case of high-speed rail exports by Korea, MRO technology transfer played a decisive role. Uzbekistan is a country that adopted Spain's high-speed rail. When a failure occurred on this high-speed rail, Uzbekistan had to remove the equipment and send it to Spain for repair. The round trip alone took several months, and operations had to be suspended during that period. Thus, assessments say Uzbekistan chose Korea, which proposed MRO technology transfer during negotiations.
Hyundai Rotem plans to increase MRO orders by promoting technology transfer and localization. While MRO generally follows rail vehicle sales, the aim is to keep signing extensions. Earlier, after signing its first MRO contract in 2012 with URSC, the rolling stock operator under Ukrainian Railways, it signed two extensions in 2015 and 2017. This MRO contract runs through 2027. It also signed EMU supply contracts that included MRO with Egypt in 2019 and 2022.
Buoyed by earlier orders, last year's high-speed rail deal with Uzbekistan and EMU exports to Morocco, Hyundai Rotem's rail solutions institutional sector revenue rebounded this year. Hyundai Rotem's cumulative revenue through the third quarter this year totaled 1.4705 trillion won, up 37% from the same period last year (1.0762 trillion won). The rail solutions institutional sector had been on a downward trend, recording third-quarter cumulative revenue of 1.1424 trillion won in 2023 and 1.3849 trillion won in 2022.
According to market research firm PRM (Persistenc Market Research), the global rolling stock MRO market is expected to expand from $45.6 billion (about 67 trillion won) this year to $70 billion (about 103 trillion won) by 2032. In its report, PRM wrote, "As rolling stock operators continuously modernize their fleets, the adoption of upgrades will accelerate," adding, "Strategies such as integration and partnerships between manufacturers and third-party MRO providers are being observed."