Beijing-based China CNR Corp. 601299.SH -0.26 percent said it had secured a small but important components order from Germany’s Siemens AG SIE.XE -0.15 percent that represents a rare Chinese foothold in the Western market for high-speed trains, a year after a deadly accident cast doubt on industry integrity.
The 91 million yuan ($14 million) order includes lengths of aluminum alloy to be fashioned as the roofing, floors and walls of high-speed passenger rail cars. “It’s the first time China CNR will export key components for high-speed trains to Europe,” said a CNR executive.
Siemens cited a shortage of production capacity in Germany and said the order was confined to a single project. Siemens said it had purchased “raw components” from China for years and noted final assembly work would be done in Germany and that “no further agreements have been signed with CNR so far.”
A Siemens spokeswoman said she didn’t have information about where the railway equipment will be deployed.
A year ago, Chinese state-controlled makers of high-speed trains faced doubts about product quality and equipment recalls after a string of railway problems that included a deadly collision. Though limited in scope, the CNR-Siemens deal suggests the potential for the Chinese industry to vault from a big domestic market for high-speed railway equipment into the more strictly regulated Western markets.
The export of high-speed rail equipment represents just one high-technology pursuit of Chinese industry, along with airliners and power plants.
“I think this is the future trend,” said Paul Gong, a Citigroup analyst in Hong Kong who tracks the railway equipment sector.
While punching out train walls and floors is less technologically challenging than building the electronic circuitry of a full railway carriage, Gong said the skin of high-speed trains requires advanced workmanship and its production is “one step closer to the finished product.”
China’s domestic market is the fastest-growing and largest in the world for high-speed rail systems. Locomotive and carriage makers like CNR and rival China CSR Ltd began with imported technology a decade ago, though today they say their systems are proprietary and among the most widely used due to the huge expansion of China’s high-speed railway system. Each has chalked up sales in developing countries for rail cars and subway equipment.
But a year ago, the image of the Chinese railway industry was in tatters over corruption allegations against top Ministry of Railway officials and repeated malfunction of its most vaunted high-speed railways. Then, last July, a collision of two high-speed trains near the city of Wenzhou killed 40 people, jolting a government that had repeatedly trumpeted Chinese technological prowess in rails.
For instance, asked last year at the site of the Wenzhou crash about the industry’s export potential, Premier Wen Jiabao said, “Without safety, high-speed trains will lose their credibility.”
No CNR carriage was involved in the crash, but the manufacturer was among those ordered by Beijing regulators to re-certify high-speed railway equipment. CNR said it made unspecified modifications to 54 of its CRH380BL bullet trains during the recall period in the latter half of 2011.
Siemens has long ties to China’s railway system, having supplied much of the equipment for the country’s first high-speed line, between Beijing and Tianjin, ahead of the 2008 Summer Olympic Games. It is also credited with a short system near Shanghai’s airport that runs on magnetic levitation. The CNR CRH380BL bullet train has roots in a Siemens model.
During the build-out of China’s high-speed network, local regulations virtually closed the market to foreign suppliers unless they worked in partnership with Chinese equipment suppliers, which analysts say helped strengthen suppliers like CNR.
Last month, China’s State Council said it will triple the length of its high-speed rail network to 40,000 kilometers by 2015 from 13,000 kilometers now. The plan, as described by Xinhua News Agency, calls for the system to connect virtually every city with more than a half million residents. -By James T. areddy