Chinese trains giant CRRC to buy problem-hit Škoda Transportation?

Škoda Transportation, photo: archive of Czech Government

There is speculation that the Plzeň-based engineering company Škoda Transportation will be sold to the Chinese company CRRC, reported on Thursday. However, a series of problems may have adversely affected the value of the train and tram producer, the news site said.

Škoda Transportation,  photo: archive of Czech Government
Škoda Transportation grew out of the original Škoda Works, founded in 1859, and was incorporated in 1995. After some years of success its fortunes have taken a marked downturn in recent years, with both revenues and profits falling.

According to a number of its contracts have run into difficulties while the political support the company (which is owned by nine individuals) could count on in the past has cooled.

The world’s largest train maker, China’s CRRC, is interested in purchasing Škoda Transportation, the news site said. Škoda Transportation has in the past worked with CRRC on tram production in the world’s most populous state.

Škoda Transportation is refusing to comment on whether negotiations on a sale – valued at tens of billions of crowns – are taking place, with representatives insisting there is no more to the story than media speculation.

However, CRRC’s interest in Škoda Transportation was referred to in a Prague Castle list of deals smoothed by last year’s visit to Prague by Chinese President Xi Jingping. says talks have also been confirmed by people close to the transaction.

However, a series of problems may have adversely affected the value of the train and tram producer – and could even scupper the deal, the news site said.

One issue surrounding Škoda Transportation’s value is the fact it has long-term problems with the key German market, said

Its 109E train locomotive is perfectly suited to tracks throughout Central Europe but is forced to reduce speed in Germany. This has impacted business.

In 2013 the company won a contract with Deutsche Bahn to deliver six locomotive and wagon sets at a value of CZK 3 billion going by today’s exchange rate.

However, there have been delays at the production end and a spokesperson for Škoda Transportation said it wasn’t possible to say when the machines would be delivered.

Another prospective major deal, under which Škoda Transportation was to make trains for the UK’s National Express for Bavaria’s rail network, fell through.

The company also has problems in Ukraine, where provisionally agreed major projects were halted by the conflict with Russia. On top of that, international sanctions have impacted the Russian market.

Meanwhile, the Czech market has weakened, making exports even more important for the Plzeň-based company.

At the same time, Škoda Transportation saw its previous political support decline sharply when it won an arbitration case in which it was seeking over CZK 1 billion in unpaid invoices from Czech Railways.

Politicians regarded the move as a betrayal and the minister of transport, Dan Ťok, is among those to have criticised the company, reported.