The development of China's railway system has a rich history that continues to evolve and expandOne of the most notable milestones was in 1958, when the country's first electrified railway, the Baocheng Railway, was completedInitially, the capacities of domestic locomotives were insufficient to handle the steep gradients, lengthy inclines, and numerous curves of the trackIn response, the Ministry of Railways of China made a strategic decision to import the 6Y2 electric locomotives from France's AlstomThis marked the beginning of a longstanding partnership between Alstom and the Chinese railway sector.

Fast forward twenty years to 1978, a pivotal year when China embarked on its reform and opening-up policiesTo enhance the transport capacity for Shanxi coal, the Railway Ministry once again turned to Alstom, this time procuring a new model called the 8K locomotive through international bidding processesThe introduction of the 8K model not only ramped up the capacity for transporting coal along dedicated lines but also had a profound impact on subsequent locomotive designs, project management techniques, and supporting technologies within China.

Today, China stands as the world's largest market for rail transportation, and Alstom has solidified its presence as a key player in the local landscape for over 60 yearsAs the second-largest manufacturer of rail transport equipment globally, Alstom has not only increased its investments within China but has also utilized its expertise to become a deeply integrated participant in the local rail market.

Recently, I had the opportunity to interview MrGeng Ming, the President of Alstom China, regarding the future growth of China's rail transport market and the competitive dynamics between Alstom and domestic Chinese enterprises.

Alstom is optimistic about the future of the rail transport market within ChinaThe year 1958 marked the beginning of this journey, when Alstom provided the first batch of 12 electric locomotives for the Baocheng Railway

Advertisements

Following the reforms, Alstom recognized the potential of the Chinese market and proceeded to establish representative offices and joint ventures throughout the country, collaborating on advanced technology transfer and local manufacturing.

In the early 2000s, particularly after the year 2004, China’s railway transport industry experienced rapid growth, with high-speed rail and urban metro networks seeing widespread developmentThis sector has transitioned from solely importing technologies to innovating independently, indicating a historic shift from following international standards to leading in innovation.

At the industry level, China is moving beyond mere production toward a comprehensive service model that encompasses vehicle manufacturing, intelligent operations, and the integration of green technologyThe focus of the rail transport sector is no longer just meeting basic transport needs but is evolving to accommodate the demands of urbanization and high-quality growthThese transformation processes align closely with Alstom’s global strategic goals of developing innovative and sustainable transport solutions, which reinforces our confidence in future developments within China.

The product range that Alstom offers in China is extensive, including high-speed trains, metro cars, low-to-medium capacity vehicles, crucial components like traction motors, shock absorbers, and bogies, alongside signaling and servicing technologiesHowever, we are acutely aware that for the sector to grow sustainably, it requires a significant period of localization.

Alstom's journey in the Chinese market has transitioned through several phases: from technology and product introduction to localized production and now to independent innovationBy aligning our products and core technologies to meet Chinese market demands, we have registered a total of 2,865 technical patents through our joint ventures in China, with over 60% being inventions.

This commitment to localization positions us to compete effectively with domestic rivals

Advertisements

Alstom maintains a positive outlook on the Chinese market and is eager to increase our investmentsIn just 2024, we plan to launch two new local corporations in Hefei and Jinan.

Our aim is to develop new productive capabilities that foster high-quality local products and core technologiesSimultaneously, we aspire to provide innovative solutions for the burgeoning industry by introducing new technologies and products that align with green initiatives.

We are unfazed by competition and the push for domestic equipment production, as these challenges are simply realities we must addressOur focus remains on producing locally and delivering products tailored to the needs of the Chinese market.

Digitalization and green technologies are emerging as critical areas for future growthWhen discussing incremental growth, we can differentiate between absolute growth, which refers to newly constructed systems, and growth within existing frameworksGiven the maturity level of high-speed rail and urban rail systems, absolute growth will not match the rapid expansion seen over the past two decades; however, significant opportunities exist within existing infrastructures.

Alstom retains its confidence in the global rail equipment market's growth outlookDespite recent disruptions to the supply chain, escalating energy costs, and geopolitical uncertainties, demand for rail transportation infrastructure is anticipated to increase in the long runChanges in broader trends tend to be relatively minor.

According to SCI Verkehr, a leading German analytical agency, the global railway equipment market size surpassed 200 billion euros in 2023 for the first time and is expected to grow at an average rate of 4% annually over the next five yearsThis growth will stem from the digital transformation of rail transport systems and the adoption of green technologies, in addition to high demand from emerging market countries that currently lack substantial rail infrastructure.

In well-established markets such as Europe and North America, the need to modernize outdated transport systems presents crucial market opportunities for rail transport equipment companies.

Moreover, Alstom holds a particularly optimistic view of China's future development

Advertisements

SCI Verkehr forecasts indicate that "China remains the largest market for national railways, with a market size close to 40 billion euros, and future growth will be concentrated primarily in the after-sales service sector."

Globally, the push for digitization and decarbonization in rail transport has garnered significant attention, and China is expected to lead these advancementsWhether stemming from the government’s proposals for new infrastructure or its dual carbon strategy, efforts are underway to foster developments related to both digitalization and low-carbon responsivenessWe are keenly anticipating that elements like suburban rail development and urban agglomeration construction, represented by projects such as CR450, will find incorporation into the forthcoming national 14th Five-Year Plan, facilitating improved growth in these sectors.

In the urban rail transport domain, recent years have seen tighter government policies aimed at managing debt risks and ensuring steady economic recoveryThis has resulted in stringent project approvals for urban rail transport, leading to a gradual slowdown in construction paceWe fully support and acknowledge these government regulations while maintaining the recognition that demand for rail transport remains strong across various cities.

For cities with well-established subway networks, early projects are now undergoing the necessity for substantial equipment upgrades and renovations, which represent another growth avenue within the existing framework.

On a global scale, a significant portion of project components is sourced from Chinese manufacturersAs a multinational entity, Alstom has always possessed a global mindsetSince the acquisition of Bombardier Transportation in early 2021, we have expanded our reach to become the most geographically diversified rail transport company in the world.

In the international market landscape, the relationship between Alstom and Chinese firms is characterized by a blend of cooperation and competition, which are not mutually exclusive

Advertisements

Advertisements