Merger of China’s CNR, CSR Creates World’s Largest Train Maker
Vittorio Hernandez | | Dec 22, 2014 05:25 AM EST |
(Photo : Reuters) ChinaCRH380 (China Railway High-speed) Harmony bullet trains are seen at a high-speed train maintenance base in Wuhan, Hubei province, early December 25, 2012. China will open the world's longest high-speed rail line this week when a link between Beijing and the southern metropolis of Guangzhou is inaugurated, officials said on Saturday, underscoring its commitment to a trouble-plagued transport scheme. Rail investment slowed sharply in the wake of that accident and state media reported earlier this year that the government had cut planned railway investment by 500 billion yuan ($80.27 billion) to 2.3 trillion yuan under a five-year plan to 2015. REUTERS/Stringer (CHINA - Tags: TRANSPORT SOCIETY BUSINESS TPX IMAGES OF THE DAY)
Like two feuding families whose clan war ended with the marriage of their son and daughter, which leads to peace in a community, the forthcoming corporate marriage between CNR Corp and CSR Corp is seen as leading not only to an end of the price war.
It would also create the world's biggest train manufacturer by sales with the merger of the two Chinese giant railway firms.
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The "children" or by-product of their merger would be bullet trains, light rail vehicles and subway cars which the company could sell to the rest of the global market.
It would also mean they would be able to benefit from economies of scale by making optimal use of their respective technological strengths, human assets and production capacity to have edge over their competitors in the international market such as Europe, Canada, Japan and South Korea.
Like rivals for the same girls, the two firms often compete to get lucrative and juicy rail contracts overseas such as the high-speed rail line that would connect Ankara and Istanbul in Turkey and main line passenger trains in Argentina.
CSR won the heart of Turkey and got the contract, while CNR inked the Argentinean deal.
The Argentina contract is worth $274 million. Under the deal, CNR would build 800 locomotives and 2,000 freight rail cars.
In November, CNR also won a $12 billion rail contract in Nigeria which is China's biggest single overseas construction contract.
In many instances, while bidding for international contracts, the two Chinese rail giants find themselves rivals again for one contract as they are rarely beaten by their foreign competitors.
A World Bank report cited by China Daily noted that Chinese-built trains and rails cost between $17 million and $21 million per kilometer, while those manufactured in Europe would cost from $25 million to $39 million, which explains why many of the overseas rail contracts are won by either CNR or CSR.
The two need to acquire more foreign deals. Li Jun, deputy chief engineer of CNR's Changhun Railway Vehicle Co., explains, quoted by China Daily, because "The domestic market for high-speed trains is pretty saturated, so the merger will prevent unhealthy competition and help in the further development of China's rail industry and the sectors associated with it."
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