For years now, China has been working to dominate our railroads. What are they planning, and what can be done to stop them?

From Railway Age. Almost 10 years ago, CRRC (China Railway Rolling Stock Company), the world’s largest rail rolling stock and railcar components company, a Chinese Communist Party SOE (State-Owned Enterprise), set forth a grand strategy to dominate the North American rail rolling stock industry. CRRC had already caused every Australian rail rolling stock company to go out of business by 2015, and the company was expanding wherever China’s “Belt and Road” initiative took them—plus North America. CRRC’s tactics were simple: Price to penetrate and drive everyone out of business.

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CRRC’s Growth in North America

CRRC’s efforts to dominate the North American passenger railcar market started with Massachusetts Bay Transportation Authority (MBTA) in 2014, where CRRC won a bid for 284 cars valued at $566 million. Its bid was $155 million below Hyundai-Rotem, the next lowest bidder; $339 million below third-place Kawasaki Railcar, and a whopping $442 million below fourth-place Bombardier (now Alstom). In 2016, MBTA ordered an additional 120 cars. …

CRRC built plants in Springfield, Mass. at a cost of $95 million and in Chicago at a cost of $100 million, and acquired a facility in Los Angeles to form a production beachhead. Its strategy has been to fabricate carshells in China using low-cost labor and steel, and doing final assembly in the U.S. This is in stark contrast to the many other builders who are far more vertically integrated and fabricate their carshells here, like Alstom and Siemens. Thus, CRRC employs far fewer Americans than its North American competition.

While CRRC and other Chinese investors were plunging headlong into the passenger railcar market, the company invested in a new freight railcar builder in 2014, Vertex Railcar, located in Wilmington, N.C. CRRC had high hopes of participating in the then-hot tank car market—and expanding into other designs rapidly. Vertex had visions of employing 1,300 people in short order. The threat to established carbuilders like Greenbrier, TrinityRail, National Steel Car, FreightCar America and Union Tank Car was real.

So, the North American rail supply base producing passenger and freight railcars and their many components was under attack. CRRC’s ambitions were painfully obvious: to dominate the North American rail supply market by seducing a lot of North American customers with incredibly low, too-good-to-be-true prices.

Congress Wakes Up to the Threat

U.S. passenger transit authorities, North American freight railroads and car owners welcomed the lower prices for rolling stock and components, not considering any long-term strategic impact their decisions may have. In response, the North American rail supply community, under the onslaught of CRRC’s aggression, turned to legislators for help to preserve not only jobs, but entire businesses and potentially an entire industry. …

2024: Bad News for CRRC

In 2018, Vertex Railcar went bankrupt due to a swift decline in demand for tank cars. Unable to respond to changing railcar demand, it was forced to cease operations. …

Also in March 2024, the European Union initiated its first in-depth investigation of CRRC based on foreign-subsidized unfair competition for its $660 million bid for Bulgarian rolling stock. On March 27, 2024, CRRC withdrew its bid.

Thus, the world is waking up to CRRC’s tactics and the potential impact they have on domestic supply.

On April 15, 2024, SEPTA announced the cancelation “for cause” of its $185 million CRRC contract, citing the railcars were plagued by problems, and the project was years behind schedule, without a single delivery.

While some of CRRC’s problems have been driven by outside forces such as tariffs on imported products and trade restrictions, most were self-inflicted. True, the company experienced similar post-COVID employment issues that all rail suppliers experienced, but numerous quality problems and delivery delays have caused CRRC’s customers to re-think their relationship and seek alternatives. …

Russia and China, the latter infamous for “acquiring” intellectual property, have taught us valuable lessons in geopolitical risk—something we were blind to until recently. The North American freight rail system remains the envy of the world, and North American rail suppliers were instrumental in getting us there. It’s time to finally recognize that geopolitical risks are real and more needs to be done to “Buy North American.” The future of railway supply depends on working together and not constantly trying to find potentially unfriendly cheap alternatives that drive North American companies out of business. Investing in a North American manufacturing base offers the safest, most stable source for supplying our industry in the many years to come.

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(Excerpt from Railway Age. Photo Credit: Acton Crawford on Unsplash)