MarketLine Blog

Siemens Alstom merger: Deal necessary to compete against China state-backed CRRC

The merger between Siemens and Alstom will create a company able to compete against the largest train companies in the world. Previous talks between Siemens and Canada based Bombardier failed but showed the mood in the market was towards consolidation. A merger between two leading European companies is necessary if Europe is to remain relevant. The Chinese CRRC is armed with massive resources and is pressing ahead with highly advanced technology. The importance of the ability of Europe to compete was underlined by the decision of the French government sold a stake in Alstom to make the merger happen, contrary to historical tendencies.

To remain a force on the global stage the merger had to happen. CRRC is involved in the creation of the first commercially viable maglev train network, putting the company ahead of the competition. Given the required investment in such projects, if Europe is to compete internationally there must be a company able to yield substantial resources. Keeping up will not be easy, but it will be exceptionally difficult without large revenues and hefty budgets for new projects. At present CRRC can finance whole projects and utilizes massive economies of scale, granting the company crucial competitive advantages.

Originally the merger was supposed to be between Bombardier and Siemens. Now that proposal has collapsed, Bombardier has been placed in a difficult situation, especially now the US has imposed tariffs on the C-series jet airliner. However, the way to joining the merger would appear to remain open. Not only are Bombardier and Alstom working together on multi-billion-euro contracts but the French Finance Minister publicly stated the entry of the Canadian company could happen, reshaping the market again.

Leave a comment

*Required fields. We will not publish your email address