Chinese train manufacturer CSR has sparked a dispute between fellow state-owned companies after winning two contracts in Argentina. The clash reflects the impact of the changing domestic environment on the industry, Guangzhou’s 21st Century Business Herald reports.
CSR made an announcement on May 27 regarding deals it recently signed, including a 2.26 billion yuan (US$368.5 million) contract to supply trains to Argentina, which was signed on May 23.
The deal was another victory for CSR, which was already criticized by other Chinese train manufacturers for using questionable practices to win a major contract in Argentina at the end of last year, the newspaper said.
Citing a report by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, the newspaper said that the recent dispute over contracts originated from a train accident and subsequent political scandals in the South American country.
Argentina decided to upgrade its railway network and inter-city train system after an accident killed 51 people in the capital of Buenos Aires on Feb. 22, 2012. The accident was considered the country’s worst during the last 82 years.
The Argentine government further announced a review on ongoing negotiations related to supply contracts for the upgrade, because several scandals involving graft allegations against transportation officials had surfaced.
One of the contracts affected, the newspaper said, was worth US$514 million and was later awarded to CSR, which approached the Argentine government through its Qingdao-based subsidiary at the end of last year. CSR’s price quote was much lower than those of the rivals, who entered the bid before the review.
CSR proposed an offer price of US$1.27 million per car, while prices offered by companies including France’s Alstom and China CNR stood at above US$2 million per car.
CSR’s low prices also led Argentina to halt negotiations with all other Chinese train manufacturers, as the country become suspicious about the pricing of other Chinese companies.
Such results, along with the fact that CSR did not notified its plan to bid to the chamber as required, led to a complaint filed to the industry body by competing firms. The chamber’s expert board ruled at the end of March that CSR should voluntarily withdraw from the Argentine market for a year.
CSR apparently does not intend to follow the decision, as it proposed a price that was even lower — US$1.05 million per car — to win the May 23 contract.
The newspaper also pointed out that CSR had broken the rules established by China’s now defunct Ministry of Railways, by moving into the fast-growing Argentine market, which was assigned to China’s CNR.
The intense competition in the overseas market, the newspaper said, is likely caused by declining domestic sales of Chinese state-owned train makers.
As China has stopped ordering new trains since 2009, an analyst said it was expected that CSR and China CNR would have no domestic orders after they completed the delivery of trains under existing contracts in March and June, respectively.
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