Bombardier Inc. is trying a new approach to tapping into China's rail market – not just building trains, but selling the blueprints.
The Montreal manufacturer struck a 10-year agreement to licence a variant of the technology for its Flexity 2 line of trams to a subsidiary of China South Locomotive & Rolling Stock Corp. Ltd., the biggest player in the railway manufacturing sector.
It's the first deal like it for Bombardier in the world's most populous country, which has been building transportation infrastructure at a fierce rate. The company is making a push to become a major provider of rail equipment to China, where it is fighting for a piece of the market with long-time rivals such as Siemens AG of Germany and Alstom SA of France.
Bombardier will supply documentation, training and other assistance in manufacturing and selling the streetcars to South China unit CSR Puzhen. The company would not disclose how it gets paid but says the partnership will help it grow strong "local roots" in key Chinese markets.
This type of licensing-only agreement and other partnerships, however, raise concerns in some quarters that Bombardier is simply helping China develop its rail expertise so as to eventually become a major global rival in manufacturing trains and subway cars.
"I don't think Bombardier is going to get much of a bump on this. Bombardier will regret it in 10 years when China starts mass producing their own versions," said Malcolm Johnston, a transit advocate based in British Columbia.
Bombardier Transportation spokesman Marc Laforge said the key to these types of partnerships or joint ventures is to stay ahead of the innovation curve.
"Bombardier is a leader in technology and we intend to keep it that way. There's no way we feel insecure," he said.
Martyn Briggs, of London-based consultants Frost & Sullivan Inc., sais China – as well as India – offer huge opportunities for rail product manufacturers that take the time to establish a strong presence in markets where there is growing demand for such products as trams.
"It's certainly a big opportunity for Bombardier," he said.
Bombardier has been doing a good job of differentiating itself from rivals like Siemens with next-generation light rail vehicles that cater to the needs of rapidly growing urban centres in developing economies like China, Mr. Briggs said.
Bombardier has spent years deepening its presence in China. Among higher-profile projects are joint ventures to build super-high-speed trains to the Ministry of Railways as well as deals to provide subway cars to Shanghai and other cities.
"After many years of intense development of metros, Chinese cities are embracing low-floor trams to complement their urban transit systems. Bombardier is now bringing its state-of-the-art technology to this new and growing market," Jianwei Zhang, president of Bombardier China, said in a news release.