23 August 2019

CNR to overtake CSR in alpine challenge

China CNR Corp. (601299.CN) and CSR Corp. (01766.HK, 601766.CN), the country’s two largest makers of rolling stock, turned bullish on the news that China Railway Corporation will hold a second tender this year for bulk purchases of high-speed trains.

The upbeat sentiment is justified since the counters have a national duopoly on manufacturing of electric multiple units (EMUs). Better still, the latest tender is worth about 57 billion yuan (US$9.36 billion), the China Securities Journal estimated, almost triple the amount for the August round in which CSR turned out to be the big winner.

But CSR is unlikely to repeat the success this time as the state’s railway operator intends to buy more EMUs to run at high altitudes and in the cold. That demand favors CNR since the company is the country’s sole supplier of alpine-adapted high-speed trains.

Just as their Chinese names suggest, CNR covers northern China while CSR takes care of the south. This geographical difference is reflected in their vehicles even though the rolling stock looks much the same. CSR puts more focus on making its products heat resistant and rustproof to cope with the damp southern climate. CNR, meanwhile, builds vehicles that perform better in the cold and high altitudes of the country’s plateaus.

The company has an unbeatable edge in the latest bid for high-speed rail stock needed for lines between Tianjin and Qinhuangdao and Lanzhou and Urumqi.

According to China Business News, the profit margin for alpine-adapted EMUs is the widest of the various high-speed trains. One ordinary EMU costs about 100 million yuan but the price tag on an alpine model is up to twice that.

– Contact the writer at [email protected]


    EJI Weekly Newsletter

    Please click here to unsubscribe