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On the fast track to expansion

(China Daily)    08:34, December 05, 2016

With production units abroad gathering speed, CRRC eyes 35% of sales from overseas markets

 

China Railway Rolling Stock Corp Ltd, the country's railway vehicle and equipment exporter, will augment both overseas production and R&D to increase overseas sales revenue substantially.

In 2015, CRRC's overseas sales reached 26.57 billion yuan ($3.86 billion), up 67 percent year-on-year, and accounted for 7 percent of total sales. It is seeking to boost the figure to 35 percent by 2025 (that is, the end of the 14th Five-Year Plan).

The goal is to grab more market share from established global rivals. Its sales in 2015 reached 243.7 billion yuan, up over 8 percent year-on-year, earning a profit of 16.3 billion yuan, up over 17 percent.

Zheng Changhong, former CRRC's deputy chairman, said the group expects a total of $8 billion worth of orders from overseas customers by the end of this year.

"The opportunities come from surging demand in both developed and developing countries for high-speed railroads, improved railway infrastructure, upgradation of subway systems, passenger services and regional connectivity, as well as their desire to create jobs and new commercial areas," said Zheng, who retired last week.

CRRC's main competitors are France's Alstom SA, Germany's Siemens AG and Canada's Bombardier Inc. The other three have over 30 percent of international business in railway vehicles, related products, operations-related solutions and maintenance.

CRRC's biggest customer is still China Railway Corp, the country's railway operator.

Eager to enhance earnings from this fast-growing industry and prevent unhealthy competition among Chinese firms in overseas markets, the Chinese government decided to merge two former rivals, CSR Corp and CNR Corp, to form CRRC in 2015.

The State-owned enterprise now has 190,000 employees and 430 subsidiaries, including five listed companies, throughout the world.

Zheng said the merged entity has managed to cut overlapping investment worth 1 billion yuan, including building manufacturing facilities in a number of Chinese cities, and "will gear up to export bullet trains, subway cars, rail technologies and equipment".

Till date, CRRC has shipped and deployed its railway vehicles, parts, signalling systems, maintenance and other service businesses to markets in 102 countries and regions, accounting for 83 percent of countries that operate railway services in the world.

"The world's rail-transport market is not as hot as in the past years, just like the global economy. Infrastructure construction needs money. The general demand is falling," said Zhao Mingde, director of CRRC's strategy and planning department.

"Many foreign governments also ask us to build plants in their countries as part of the deal to continue the business."

With a total asset amount of 22.6 billion yuan, the Chinese company has set up 56 branches such as CRRC North America or CRRC South America in 21 countries with 4,625 employees.

In August, CRRC's first joint venture plant in India/South Asia started operations. India has one of the world's most extensive rail systems.

The joint venture, CRRC Pioneer (India) Electric Co Ltd, is based in Bavo Industrial District, Haryana state, near the national capital New Delhi. The manufacturing base saw an investment of $63.4 million. The Chinese side holds a 51 percent stake in the venture.

Even though CRRC has set goals to double its global sales to as much as $15 billion by 2020, Zhao said localization, quality after-sales services and reasonably-priced advanced products will be key to overcoming business uncertainty caused by declining global demand and trade protectionism in certain regions.

"Under such circumstances, we wouldn't mind building 'competitor-partner' relations with rivals to win bids in certain markets if it's necessary," said Chen Dayong, general manager of CRRC's international business department.

For instance, CRRC and Bombardier agreed in September to expand their relationship and join forces on international bids. They will cooperate to develop the market of New York's aging subway system.

The Chinese company will also deliver its first train built at its manufacturing plant in Springfield, Massachusetts, to the Boston transit system in 2018. The construction work was completed in August.

In March, CRRC also won a bid in Chicago to produce 846 metro rail cars, a record in the developed markets.

The group now operates plants that produce electric locomotives, electric multiple units and subway trains in South Africa, Malaysia, Turkey and Iran. The goal is to tap key countries and regional markets around each plant.

CRRC's subsidiaries, including CRRC Zhuzhou Electric Locomotive Co, Zhuzhou CRRC Times Electric Co and CRRC Sifang Co, have invested 3 billion yuan so far to acquire European technologies and manufacturing parts suppliers, including the United Kingdom-based Dynex and Germany's Boge Elastmetail GmbH.

CRRC Zhuzhou Electric Locomotive Co, one of CRRC's manufacturers mainly producing electric locomotives, is also in takeover talks with Czech Republic's Skoda Transportation. Any deal would mark the Chinese group's first takeover of a full-fledged rail transit equipment manufacturer.

Skoda Transportation mainly produces trams, electric locomotives, carriages, electric buses, traction motors and complete drives for traffic systems.

"Widening the international sales network and manufacturing bases in overseas markets can help not only the Chinese rail equipment manufacturer but infrastructure and service providers, who can enhance their localization abilities. Expanded global play could also help gain political and public support through local employment," said Cheng Hui, a researcher at the Institute of Transportation Research under the National Development and Reform Commission.

By 2015-end, China had built more than 19,210 km of high-speed railroads country-wide, building a solid foundation for an industry that can generate new market growth points during the nation's 13th Five-Year Plan period.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Ma Danning, Bianji)

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