VIEWPOINT FEATURE |
New players and growing markets While all eyes are on Alstom and Bombardier, TMH is becoming a force to reckon with in the rail industry
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ast month, Alstom completed the acquisition of its Canadian rival Bombardier Transportation. The announcement came with a tranche of dizzying numbers: a deal worth between €5.8 billion to €6.2 billion, creating the second largest train maker in the world, in what was one of the biggest deals approved by the European Commission last year. Not only will the takeover translate into considerable growth for Alstom, many will also view it as an attempt to mount a credible challenge to the dominance of the world’s largest train manufacture, China’s CRRC. But whilst the acquisition has been couched in terms of the existing competition between industry heavyweights, this is not the only driving factor. TMH, one of the rail sector’s emerging companies, are playing a key role in shaking up the industry, deploying innovative strategies in emerging markets, and leading the charge against the established order. TMH International, a subsidiary of the privately-owned Russian rail manufacturing group Transmashholding (TMH), has enjoyed a meteoric rise in the past two years. With a differentiated strategy that seeks to develop a local presence in specific target markets, TMH now operates in six countries across three continents. TMH has partnered with local companies on the ground, enabling them to better understand the market, its customers, and the local nuances, while keeping a very light management structure at its international Swiss headquarters. It has already successfully implemented this strategy in Argentina, Cuba, Egypt, Hungary, Kazakhstan, and South Africa. Despite being Russia’s sixth largest company, few have taken TMH’s growth seriously. This is an important misstep, perhaps borne out of an out-of-date perception that Russian industry is predominately state-run. TMH’s rise demonstrates how global barriers have been broken in the past 20
years, enabling new players to compete with established rivals. As a result, the rail rolling stock manufacturing sector is at an interesting crossroads. Established companies in the industry will have to make moves if they wish to survive; Alstom’s acquisition of Bombardier Transportation could be viewed as an attempt to reassert its control on a changing sector. Likely to accelerate Alstom’s growth and establish the company as a standard-bearer for the rail sector, the acquisition will enable the expansion of reach and influence, thanks to Bombardier Transportation’s geographical presence in key growing markets. Of course, Alstom’s acquisition will also be viewed in the context of China, as it attempts strengthen its position against its largest rival, CRRC. Unlike 2019’s abortive attempts to create a European rail champion with Siemens, which was blocked by regulators, Alstom’s CEO Henri Poupart-Lafarge is clear eyed about his companies intentions: it is all about making Alstom stronger. However, this is a stiff challenge; CRRC’s annual revenue last year was greater than that of Alstom, Bombardier, and Siemens combined. The Chinese giant is increasingly perceived by experts in the sector as a threat that needs to be blocked. Many point to CRRC’s unchecked rise over the past decade, during which time they have penetrated the international market through Africa as well as in Europe. It has won tenders with technology that is strong and prices that are hard to match. While the European Commission has been sceptical about China’s ambitions, arguing as recently as 2018 that there was no prospect of Chinese entry into the European market, European companies have nevertheless begun to understand that they must adopt a more aggressive strategy in order to truly compete with the Chinese giant. However, whilst Alstom’s acquisition of Bombardier has been viewed within the existing context of major industry players, it is clear that other players have also
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News in brief Multiple new lines open across China New lines are continuing to open up across China, with the long-awaited sections of Line 1, Line 6 and Line 7 in Hangzhou opening on 4 March. The Hangzhou Metro is now 306 kilometres long. Meanwhile in Xi’an, the city’s 3 lines, Line 5, Line 6 and Line 9, were officially launched together on 3 March. The trains on all 3 lines use CRRC’s B2 type car, with six cars for a train. In Shanghai, Metro Line officially opened on 2 March. It is the city’s fourth rail transit line that is fully automated and driverless. The trains are produced by CRRC Changchun, with an A-type aluminum alloy body. It has six cars per train and can go up to a maximum speed of 80kph. On 25 February Taiyuan Metro Line 2 officially brought Shanxi Province and Taiyuan city into an era of subways. The trains have smart functions that allow them to automatically ‘wake up’ and ‘sleep’. The trains also can make predictive maintenance suggestions. Guangzhou’s Huangpu Tram Line 1 opened on 23 February. The vehicles have supercapacitators, which allow charging to be completed within 30 seconds as passengers get on and off the vehicle, restoring more than 80 per cent of the energy storage.
pushed it to play its hand. The significant strides made by newcomers to the sector, driven by innovative strategies that challenge traditional modes of operating, have broken down traditional operating barriers that existed 20 years ago. For the old guard, this is forcing major changes to the market paradigm. Patrick Landau is the founder and chairman of Maydex AG. He specialises in defence, security, infrastructure and transport. Since 1986, has advised leading multinational companies and governments in International Development and M&A.
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