Investing in Moats: A Strategic Guide
Table of Contents Why Do We Invest in Stocks? Passive – the Incorrect Solution What Does the Solution Look Like? Moats: The Kind...
Read more11 August 2022
Rail and commercial vehicles (CVs) are used to safely transport passengers and freight from one destination to another and account for much of the commercial inland transportation activity. As safety is of utmost importance, braking and stability control systems are critical to the effective functioning of the transportation industry. The global market for such systems is an oligopoly. One company that dominates the markets for these critical safety systems, both for passenger and freight rail and CVs, is Knorr Bremse.
Brakes and braking components account for 60%+ of Knorr Bremse’s revenues. The business is associated with extremely high entry barriers. Development and regulatory approvals for new systems take five to ten years from ideation to commercialization. Importantly, its customers do not show a high willingness to switch as the impact of a poorly designed braking system can be extremely high.
Knorr Bremse’s vision is to create sustainable system solutions that make mobility and freight transportation safer, more reliable, and more efficient.
Source: Company data & MAEG | Wabco data is for FY 2019
Knorr’s Research and Development (R&D) efforts are a crucial driving factor for that vision. Nearly half of the company’s R&D efforts are dedicated to specific customer projects, with proprietary innovation projects accounting for the rest. It spends a significantly higher percentage of its revenues on R&D efforts. Over the last decade, the company accounted for 9 out of the 10 industry-leading innovations in Rails, and 8 out of 10 in CVs. This has resulted in technological leadership for Knorr Bremse in the brakes business, both within the CVs and the Rail markets.
Source : Factbook
A family-owned company, Knorr Bremse focuses its efforts on braking technology for rails and CVs as its core activity. The company is positioning itself for an evolving mobility/transportation industry, with electrification and autonomous developments gaining traction.
The key to Knorr Bremse’s success will lie in the continued innovation leadership, a factor that will depend on the continuation of Knorr’s innovative culture.
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