Text/Wang Xinxi
Recently, CRRC was recently obstructed by the European Union in the bidding for the Bulgarian high-speed rail project and kicked out, which caused heated discussions in the industry. The reason is that CRRC's offer is too low, 46.7% lower than the estimated cost in Bulgaria!
To put it simply, Bulgaria's order is for 20 push-pull electric EMUs and 15 years of maintenance, with an intended price of 610 million euros (4.78 billion yuan). Talgo reported 620 million, and CRRC Sifang directly cut it in half, reporting 310 million (an average of 120 million yuan per column). The low price caused the EU's subsidy suspicion, and then forced the CRRC out of the game.
It is the first time that many people have heard of China's high-speed rail bid for Bulgaria being disqualified because the bid was too low. This made the Chinese people realize that the original low price was also wrong.
Of course, this matter can be regarded as the EU's trade protection, but from the perspective of the EU's position and concerns, it is also worth considering. Because high-speed rail is not as good as trucks, it is a set of engineering systems, and the difference in cost will not be too great.
From the perspective of the European Union, a railway into it, although the communication signal power is a Chinese standard, but also in strict accordance with the European standard production, the back maintenance team also in Europe, it is difficult to reduce the cost to a level of 46.7% lower than the cost, because even if you go to purchase the cheapest ancient model of the domestic CRH2A single train is more than 100 million, not to mention the cost of customization, transportation, and maintenance, Bulgaria's high-speed rail bidding for only 120 million?
Therefore, only half of the bidding price is inevitably suspicious, which makes them think whether there is a subsidy behind it, whether there is a quality problem, or the competitive means of using the supply chain capacity to superimpose low-price dumping, or whether it is squeezing the profits of employees and suppliers. In fact, not only the EU thinks so, but many domestic netizens also think so.
As early as July 2023, the EU's "Foreign Subsidies Regulation" came into effect, which aims to prevent enterprises from obtaining some unreasonable foreign subsidies to gain market competitive advantages.
From the perspective of normal logic, China's high-speed rail technology is one of the business cards on behalf of China's manufacturing, and many of our core components on high-speed rail are in their own hands, from EMU research and development, railway engineering construction, train control technology, power supply technology, railway dispatching technology, high-speed rail network operation and management technology, maglev technology, traction system, bogie and brake and other core technologies are all independently controlled.
By the end of 2023, the mainland has opened more than 45,000 kilometers of high-speed rail, and has established the world's longest operating high-speed rail system.
China's new subways and high-speed trains all use self-developed trains, Japan uses its own Shinkansen, and the European Union does the same.
However, the thinking logic of many countries around the world is that advanced manufacturing technology should have a premium. China's high-speed rail itself has mastered advanced technology, but bidding at such a low price seems a bit incomprehensible to them. From the point of view of foreign countries, the core goal of an enterprise is to make money, if you do business and don't want money, then what are you trying to do? Since you can't understand it, then it is better to refuse it directly.
Why do we think Bulgaria has other plans? In fact, apart from Europe and Japan, there are very few high-speed trains themselves that can be profitable. Even if the United States builds high-speed rail, due to the vast and sparsely populated United States and the developed shipping, it will lose money 100%.
In fact, many times, other countries are unwilling to do loss-making business, we are willing to do it, because our domestic is too volatile, our desire to go to sea to expand the market is too strong, and in the domestic market, to lose money to grab the market, first expand the market and then consider the profit of the practice has almost become a habitual competitive idea in many industries and many enterprises.
But in China, consumers are eating this set, after all, the most direct beneficiary of the price war between enterprises is the consumer.
Therefore, in our opinion, CRRC's ultra-low price bidding is to give them benefits, which is equivalent to the nature of semi-aid, but from the position of the other party's long-term consideration, this is to make their high-speed rail industry chain upstream and downstream have no way to live. The EU, like China, controls the core technology of high-speed rail, and their concern is that if CRRC bids at such a low price and gets the order, if it is cheap and easy to use, then the entire European market, the future construction of high-speed rail, there is nothing to do with the EU.
Therefore, their suppression of this ultra-low price is essentially an overall consideration for the future survival and development of the upstream and downstream of the entire EU high-speed rail industry chain and related industries, although in our view this is a kind of trade protection.
Therefore, it is worth reflecting on our advanced high-speed rail technology, why should we bid so much lower than the estimated cost of other countries?
Why do you ignore the high labor and material costs of the bidder and reveal a price that is much lower than the cost of the bidder? Why don't you make the money you should make? Why should you give up the profits that others are willing to give you? This inevitably makes the other party worry that you are bidding for a lot of mountains and rivers, what are you trying to do? Is this a win-win cooperation, or do you want to smash other people's jobs.
It is a wake-up call for our enterprises to go to sea
As early as March 14, Russia's first high-speed railway worth $20 billion, the Moscow-St. Petersburg high-speed railway project, started construction. The contractor chose a European company, not a Chinese company. What are the reasons behind this, and it is also worth thinking about.
This reminds us that the enterprises going out should not bring the domestic business model to the extreme, which is the profits and technological progress of domestic enterprises, and the loss of employee welfare, working hours and health, which is not conducive to the establishment of a good reputation by domestic enterprises in overseas markets, but is easy to attract resistance from some markets, so that Chinese enterprises go overseas to encounter more prejudice and blows.
The killer feature of Chinese products has always been cheap, whether it is leading technology or not, in itself, from the perspective of corporate interests, from the perspective of employee salary, with core technology, there must be a brand premium.
If on the basis of having high technology, it is 46.7% lower than the estimated cost price of Bulgaria, this way of exchanging losses for the market and leaving no way for others to survive is actually not conducive to domestic enterprises going overseas.
Our enterprises need to think about changing the way of blindly fighting a price war to go to sea, but to learn to follow the customs, the price of goods and services can make others feel that it is a symbol of quality and identity, and can make people put down their concerns.
In order for China to become a real manufacturing power and a strong country, it also needs to keep profits for itself and improve the welfare of workers, which is the goal of industrial upgrading itself.
If you go to sea and blindly compete in the mode of price war, local enterprises in other countries will have no way to live, and they will definitely not be willing to let you in if they stand in the interests of the other party. Therefore, we need to change the stereotyped impression that Chinese companies are always engaged in price wars. We must learn to price according to the standards of overseas markets, leave profits for ourselves and others, and prefer to occupy a little less market share in the early stage, form a win-win pattern, and truly integrate into the local market.
We engage in industrial upgrading and have independent manufacturing technology in order to benefit ourselves and improve the welfare and wages of our workers, which must be based on a certain profit. The logic behind the idea of seizing the market at a low price and then recovering costs through follow-up maintenance, other value-added projects, and long-term operation may become increasingly difficult in the current international trade environment that favors local protection, and the logic behind Chinese workers' efforts to make sacrifices to provide cheap products to the world without being bought may be worth thinking about from a different perspective, which also means that this competitive model may also need to change.
Author: Wang Xinxi, Senior Reviewer of TMT This article is not reproduced without permission