Passenger trains manufactured in China by state-owned company CRRC Corporation Limited, world’s largest railway manufacturer, have started transporting passengers in the EU for the first time.
Their trains called Sirius, were ordered by Leo Express, a private Czech railway company. However, Leo Express cancelled their order three years later. It took CRRC too long to deliver, and crucially, their passenger trains didn’t have a certificate to operate in the European Market.
Obtaining this EU APOM – authorisation on placing on the market – certification, is the company’s long-cherished goal. It would enable CRRC to finally make inroads into the European Union’s market. No Chinese passenger train has yet obtained the certificate.
Although the order was cancelled, CRRC rented out three already built trains to Czech rail provider RegioJet, for free trials. After these trials, RegioJet leased the trains for five years – with a temporary permit to operate in Europe.
So despite its efforts over many years, CRRC has just three passenger trains operating in Europe so far.
Inroads in European market
Although this doesn’t look like a success story for the Chinese manufacturer, it’s just one of their efforts to make inroads into the European market.
They already have multiple types of freight trains that are running large scale in Germany, Austria, the Czech Republic, Hungary, Serbia, and Northern Macedonia.
And for passenger trains, CRRC is set to supply to more and more European countries.
In March, it struck a deal to export double-decker trains to Austria which will also run in Germany and Hungary. It also has outstanding orders in Serbia and North Macedonia.
More importantly, CRRC struck a deal with Hungarian equity fund Acemil in September, to set up a new railcar plant in Hungary. The deal followed after Chinese President Xi visited Hungary in May. The project’s main goal is to increase exports to Europe. It’s also likely that manufacturing these products in Europe could help avoid EU counter-measures .
But in February the European Commission dealt a blow to CRRC’s European ambition. The Commission opened an investigation into foreign subsidies, after the Chinese manufacturer participated in a Bulgarian tender for electric trains. The Commission found sufficient evidence that CRRC had obtained a foreign subsidy that gave it an unfair advantage.
CRRC was the first company to be struck by tougher EU rules against foreign subsidies, leading it to withdraw from the tender.
Despite this setback, CRRC will keep on pushing for the EU certificate. And once they have obtained it, the competition is set to be tough for European manufacturers.
A European Opportunity for China
Because three Chinese manufacturers distribute almost all of the Chinese infrastructure market, they have profited enormously from the growth of the Chinese railway market. This combined with state subsidies allowed CRRC to develop new technologies and high quality electric trains which they sell at a low price.
And their competition comes at a time of high demand for new railcars in Europe.
The average age of railway vehicles in Europe exceeds 40 years, so there’s need for large-scale modernisation as well as electrification. Experts estimate that more than 100,000 of the 500,000 railcars in operation across Europe will need to be replaced
But today, European factories can produce only 6,000 to 8,000 new railcars annually.
In short, we might see a lot more Chinese trains throughout Europe in the coming years – and that might pose a challenge for Europe’s industrial ambitions.