The digitization challenge for Europe’s rail sector

How rail operators, infrastructure companies, governments and regulators can manage the essential modernization


The pressure on European railways is growing. Governments are seeking to shift more passengers and cargo on to the railways in order to reduce road traffic and meet their emissions reduction targets. However, many countries are already behind their own schedule for implementing a new pan-European digital signaling system. Digitizing rail operations means building a fully connected technology stack that is digitally controllable at every point, from the signals and switches on the line to digital couplings (DAC) on wagons transporting freight. The European Train Control System (ETCS) is a core enabler of this in Europe. It is supposed to replace countries’ legacy control and signaling systems and establish a common European standard. ETCS and automatic train operation (ATO) are the essential pillars of the digitization of the rail sector, and are the main subjects of this analysis.

Our analysis shows that in 2020, only 14 percent of the EU rail network was equipped with ETCS infrastructure, and at the current pace of growth, the proportion will be 25 percent by 2030 and 35 percent by 2040. This implies the urge to finally accept the digitization challenge. This study takes a closer look at three solutions, ranging from the short term to the long term, that can drive forward the necessary transformation of rail technology across Europe.

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Three solutions for a successful transition

The reckoning

A realistic assessment of the starting situation – plus the benefits and the challenges of digitization and technology investments – forms the basis of a sound roadmap. The benefits of ETCS range from the necessary modernization of the signaling network to greater interoperability across Europe and improved safety, although the challenges are considerable and require serious thought by governments, regulators, rail operators and infrastructure operators. When it comes to ATO, there are benefits and challenges in increasing the grade of automation. In addition to infrastructure and rolling stock ETCS upgrades and ATO, there are other technology upgrades that need to be made now in order to facilitate the digitization of the rail sector and ensure the greatest degree of benefits are created in future by the investment.

A realistic target state and joint roadmap

After the reckoning the next step to digitizing Europe’s railways is for each country to establish a realistic target state and define a joint roadmap for the rail sector in their country. When it comes to the essential ETCS strand of digitizing the rail network, different stakeholders have conflicting interests and different priorities. Rail operators, OEMs and suppliers stressed the need for stable planning from transport ministries and infrastructure bodies. All companies in the sector want to avoid double investments and competitive or financial disadvantages as early adopters, they would like to be informed about countries’ rail digitization goals to align their strategies and plans with the requirements. Undoubtedly, modernizing rail operations is a momentous task that can only be shouldered successfully and at scale if all different stakeholders join forces. To address the challenges identified in the reckoning phase we defined the key factors for a successful roadmap balancing the stakeholders’ interests and capabilities and provide recommendations to aligning manage the transition.

No ETCS without the E

Cross-European alignment is the third solution in this paper, and a task for the longer term. The long-term priority for the digitization of rail networks – work on which should start now – has to be alignment on the technology roadmap and rollout at a European level, starting with the international corridors. European alignment will also create a stable, predictable release schedule for technology across the region, avoiding delays, and one of the original intentions of ETCS is that it will create economies of scale when 28-plus countries order the same types of hardware. Broader standardization such as common specifications for rolling stock is an opportunity to drive efficiencies across the continent, and knowledge transfer on a European scale. It will lead in creating a truly standardized rail system – keeping the ‘E’ in ETCS as some have described it.

How the rail sector remains competitive to foster the switch from road and air, and play its role in decarbonizing transport

To decarbonize the transport and logistics sector in Europe by moving more people and goods out of cars, trucks and planes and onto trains, modernizing the rail network is imperative. However, this is a momentous task and the required investments are very high. Success will require the smart combination of different levers: state of the art digital signaling through ECTS and ATO where warranted, which has been our focus in this analysis; but also other necessary investments including greater electrification of rail infrastructure for hydrogen and battery powered trains, the targeted upgrade of areas where bottlenecks occur, and new rail infrastructure to increase capacity. Decisions should not be entirely financial. Instead, they require a careful assessment of cost compared with the benefit for society, including decarbonization, and must take the perspectives and constraints of all relevant stakeholders into account. Our study points out that it is essential to focus on the development of the overall network and of connectivity, particularly of cross-border traffic, and to stay away from isolated prestige projects.

Philipp-Marcel Strobl and Lothar Weichert also contributed to this report.

Contact us

Bernd Jung

Bernd Jung

Partner, Strategy& Germany

Dr. Daniel Haag

Dr. Daniel Haag

Director, Strategy& Germany