Transport equipment sector risk report

Overall challenges influencing market dynamics: The transport equipment sector continues to experience contrasting dynamics in 2026, with strong long-term demand supported by defense spending, fleet renewal and infrastructure investment, but constrained by execution challenges and macroeconomic uncertainty. While many manufacturers benefit from historically high order backlogs, the conversion of these orders into revenues remains dependent on supply-chain reliability, production capacity and cost control. At the same time, higher trade barriers, industrial policy shifts and geopolitical tensions are reshaping global manufacturing strategies. Increased localization requirements and tariff uncertainty may delay investment decisions in some end markets, while rising labor, energy and raw material costs continue to pressure margins, particularly for manufacturers operating under fixed-price contracts.

Aviation outlook: The aviation sector remains supported by robust underlying demand, driving record-high backlogs, but continues to face significant production constraints. Aircraft manufacturers continue to face challenges in ramping up output due to shortages of critical components, limited supplier capacity and delays across the aerospace supply chain, particularly in engines, aerostructures and specialized materials. As a result, aircraft deliveries remain below manufacturers’ previous targets. The industry is also undergoing a major technological transition driven by decarbonization objectives. Investments in sustainable aviation fuels (SAF), lightweight materials, more efficient engines and longer-term solutions such as electric and hydrogen propulsion are accelerating, although large-scale adoption of disruptive technologies remains a long-term prospect. Going forward, the key challenge for aircraft manufacturers will be balancing record demand with operational execution: increasing production rates while maintaining strict safety standards, managing supplier constraints and avoiding further program delays.

Shipbuilders outlook: The shipbuilding industry is undergoing a significant strategic transformation driven by geopolitics, decarbonization and changing trade patterns. While China remains the dominant global shipbuilding hub due to its scale and cost competitiveness, growing geopolitical tensions and efforts to reduce supply-chain dependence are encouraging operators to diversify sourcing towards South Korea, Japan and other emerging shipbuilding markets. Environmental regulations are also reshaping demand, with shipowners investing in new vessels capable of meeting stricter emissions requirements. This is supporting demand for LNG-powered vessels, alternative fuel technologies and more energy-efficient designs. However, the transition requires substantial investment and increases technological complexity for shipbuilders. Despite healthy order activity in several segments, profitability remains sensitive to raw material costs, labor availability and competitive pressure. The industry is therefore entering a period of structural realignment, where geopolitical considerations are becoming increasingly important alongside traditional cost competitiveness.

Rolling stock manufacturers outlook: The global rail equipment market benefits from strong structural tailwinds, supported by urbanization, infrastructure investment, decarbonization efforts and the shift towards lower-emission transport. China is by far the largest rail market, driven by extensive high-speed rail expansion and urban metro development, while Europe and Japan remain global technology leaders in high-speed rail, signaling and advanced rolling stock. India, the Middle East and Southeast Asia represent the fastest-growing demand markets, supported by major infrastructure investment programs and urban mobility needs. As of today, the sector faces execution challenges, including production capacity constraints, supply chain pressures, labor shortages and lengthy certification processes, which can delay project delivery and weigh on margins. Profitability remains pressured by inflationary cost increases and competitive bidding environments, while rising competition from Chinese manufacturers in international tenders represents a growing challenge for established European and Japanese players. At the same time, digitalization, automation and higher-value aftermarket services provide opportunities to improve long-term profitability.

Commercial vehicles outlook: Commercial vehicle manufacturers face a more challenging environment due to weaker economic growth, softer freight demand and uncertainty surrounding the transition towards lower-emission technologies. After strong post-pandemic demand, several major markets, particularly Europe, have experienced declining truck and van registrations as high financing costs, weaker industrial activity and fleet replacement delays weigh on demand. At the same time, manufacturers are facing significant investment requirements to comply with stricter emissions regulations and accelerate the transition towards electric and alternative-fuel vehicles. The heavy-duty segment remains particularly challenging, given infrastructure limitations, high battery costs and uncertainty regarding the optimal long-term technology pathway. The sub-sector in Europe is also exposed to increasing competitive pressure, particularly from Chinese manufacturers that are expanding internationally with cost-competitive electric commercial vehicles. Going forward, the main challenge for OEMs will be balancing profitability with the need to invest heavily in electrification, digitalization and autonomous driving technologies.