CNR, CSR merger likely to rattle global competition
Beijing pushing for merger of nation's leading rolling stock makers to reduce competition, but move would also have global impact on pricing
Foreign rolling stock makers like Alstom and Siemens have good reason to feel nervous over the anticipated merger of China's two leading train makers, China CNR Corporation and CSR Corporation, analysts say.
CNR and CSR, both listed in Hong Kong and Shanghai, produce roughly 90 per cent of the trains that run on the mainland but their combined share of the overseas rolling stock market is less than 10 per cent.
Guotai Junan analyst Gary Wong said if they merged he would not be surprised to see that share grow to between 30 and 40 per cent in five years.
Their overseas market share has already been growing quickly. In the first half of this year, CSR's overseas revenue leapt 125 per cent to 4.57 billion yuan (HK$5.79 billion), while CNR's rose 65.6 per cent to 3.83 billion yuan.
Haitong International Securities forecasts that overseas deals will contribute 25 per cent of CSR's total revenue in 2016, up from 9 per cent in the first half of this year. The cumulative total of CNR's export contracts jumped 178.2 per cent to US$1.54 billion in the first half, according to its interim report.
Industry consultants Frost & Sullivan estimated the global rolling stock market (including China) was worth €51.5 billion (HK$507.3 billion) last year. Guotai Junan's Wong estimates that China accounts for half of that market.