Cable Transit Industry



Public Transit: Politics, Procurement Policy and Taxpayer Dollars

Lots of folks nowadays love local. Suppose someone asks you, “Do you support local produce? Or in this case, locally manufactured trains?” Many would probably answer “Yes”. But what if I told you this means it will cost an extra 10-15%, would your answer change?

A recent article in the Globe and Mail discusses the relationship between mass transit and political agendas. It appears that throughout the world high-stakes rail projects worth millions or even billions of dollars are becoming entangled in a struggle that pits the bottom line against local interests.

In this age of globalization, companies around the world are constantly looking to cut costs while maintaining quality and driving innovation. That is, except companies in the public transit industry.

In Canada, the provincial government of Ontario requires 25% Canadian content on all provincially financed transit infrastructure. These regulations, aimed at protecting and stimulating local jobs and economies, elicit both support and criticism. Already Siemens has lobbied the province to relax this policy. It argues that this legislation unfairly gives Bombardier the upper hand since it’s the only company capable of manufacturing rail vehicles in Canada. In essence, Bombardier is the only show in town and politicians know it (how’s that for competition?).

The question is therefore: is it fair to enact these type of regulations? More importantly, do they inhibit cost-savings and are governments getting the best deal for the taxpayers who ultimately fund transit projects?

Rational arguments exist on both sides of the coin and a consensus isn’t likely to be reached anytime soon. More often than not, policy is is influenced by current political agendas of the ruling party and the economic state of the region.

But now let us flip the story around and look to see what all of this means for CPT.

Although the world’s two main cable manufacturers are both involved in global distribution, for the most part their manufacturing tends to be concentrated. As these companies continue to increasingly serve the urban market they should look to existing legislation and practices for public transit manufacturing. Perhaps it isn’t too soon for them to consider further global expansion of their manufacturing facilities.

Larger manufacturing capabilities in several targeted geographic locations may very well give them the presence, exposure and political support needed to convince governments and citizens alike that cable manufacturers are truly serious about the needs of the local urban market.

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Chinese Knock-Offs?

Ski hills are great and all, but the market’s limited. We’re not building any more mountains (except in Dubai) and the mountains we do have are being adversely effected by global warming – at least when it comes to ski conditions.

That’s not much of a growth market.

The urban market, however, is virtually limitless.

A couple of years ago, humanity transitioned from being a rural species to an urban one. For the first time in history, there are more people living in cities than not and all trend analyses suggest that will only intensify in the near and long future.

Most of that shift towards the urban, meanwhile, has come in the developing world – the very market urban gondolas have become so popular in. So there’s every reason to suspect that the market for urban gondolas will continue to expand – if not explode.

The question then is, can the industry as it’s currently structured handle that coming demand? More importantly, do they even want to handle that coming demand? Maybe the industry’s plenty happy just building ski lifts for the next 50 years.

One way or another, the demand for urban gondolas will be there. And if the industry doesn’t step up to the plate and capitalize on it, someone else will.

Should the industry mistakenly not prepare for this coming expansion of demand, we’re likely to witness new competitors entering the fray. It’s simple economics. If existing supply doesn’t exist to match demand, someone else will fill that gap.

In all likelihood, those new competitors will come from Asia. So much of a cable system’s cost comes from the hyper-specialized labour involved in creating systems so you can be certain that Asian manufacturers will try to find a way to deskill that labour and drive the cost of the technology down.

That means cheap knock-offs. Which in turn means decreased attention to detail and safety standards. Which in turn means accidents are likely to become common where before they were rare.

Which will damage the reputation of the industry as a whole.

I suspect we’re in for a wild ride.

Want more? Purchase Cable Car Confidential: The Essential Guide to Cable Cars, Urban Gondolas & Cable Propelled Transit and start learning about the world's fastest growing transportation technologies.