Investors and consumers have likely heard of electric cars, electric trucks and electric semis by now. One vehicle that hasn’t gotten as much attention in the U.S. is electric trains, something that Caterpillar Inc (NYSE:CAT) could soon change.
What Happened: Caterpillar is the owner of Progress Rail, a company it bought for $1 billion in 2006. Progress Rail made headlines recently for a deal for 10 electric locomotives from Union Pacific Corp (NYSE:UNP).
The deal by Union Pacific follows up a deal the company made with Wabtec (NYSE:WAB) for 10 electric locomotives.
Together, the two purchases total more than $100 million committed to electric trains, a record for the sector. This is the largest investment in battery-electric technology by a railroad company, according to Electrek.
Progress Rail has around 200 facilities in 16 countries and serves the rail industry with freight and passenger trains. The company’s EMD brand is one of the leading train brands for the last 100 years.
The EMD Joule from Progress Rail is an electric train that has 3,000 horsepower and can run 24 hours on a single charge. The train’s battery recovers energy reserves through a process called dynamic braking.
The Progress Rail trains are expected to be delivered to Union Pacific in early 2024.
Related Link: Caterpillar, BHP Partner On Zero Emission Mining Trucks: What Investors Should Know
Why It’s Important: Union Pacific is one of the largest railroad companies in North America, with more than 8,000 trains in operation.
A plan put in place by Union Pacific plans to reduce emissions by 26% by 2030 and hit net-zero emissions by 2050. The company plans to have the largest battery-electric train fleet in the world after taking deliveries of the ordered trains.
“We’re committed to actions that reduce Union Pacific’s environmental footprint as we work toward our ultimate goal of reaching net zero emissions by 2050,” Union Pacific said in its plan.
“These investments will contribute to further developing this important technology and providing industrywide benefits.”
The 20 trains ordered by Union Pacific from the two companies are expected to be tested in cold and warm weather and to be tested for wide usage. Strong testing could lead to increased deployment across the Union Pacific train portfolio.
Caterpillar has made efforts to transition portions of its business lines to battery power, including mining trucks.
The Last Word: In the future, industries outside of traditional automobiles could push into electrification and net-zero emissions. Given the ownership of Progress Rail, Caterpillar could have itself an undervalued piece of the future of the train industry.
With electric vehicle companies that have delivered vehicles and are still in the early stages getting strong valuations by the private and public markets, it's important to think of how much an electric train company that could lead the industry could be worth.
