Forget competition – Deutsche Bahn, Germany’s state-owned rail company, is embracing the rising global demand for cars.
The firms’s freight subsidiary, DB Schenker Logistics, is to invest €20 million ($24.8 million) in a logistics hub close to Shenyang, China’s car-building capital. The complex in the industrial district of Tiexi will be used to supply well-known western and Chinese carmakers and their suppliers and could be operational within a year.
Schenker, DB’s largest subsidiary, will be partnered in the venture by Jinbei, the Shanghai-listed car manufacturer and parts supplier. The Chinese company, which will have a half share in the rail hub, is a subsidiary of Brilliance China Auto, a carmaker that produces in Shenyang.
Under the name Schenker Jinbei Logistics, the 45,000 m² (484,000 ft²) facility will serve the nearby production plants of car and parts giants such as Michelin, GM, Toyota, ZF Friedrichshafen and Mitsubishi. It will handle consignment sales, packaging and distribution services.
“The establishment of this joint venture is an important milestone on our way to becoming China’s leading logistics provider,” said Jochen Thewes, Schenker’s chief executive officer for the Asia Pacific Region. China, which is home to 5,000 of Schenker’s 64,400 staff, is already considered to be the company’s most important foreign market.
It has been active in China for some time. Brilliance China Auto is operating a joint-venture plant with BMW in Shenyang, which produces the premium German cars for the Chinese market. Schenker delivers parts to the plant five times a week in freight trains that travel from the German city of Leipzig via Russia and Kazakhstan.
“The establishment of this joint venture is an important milestone on our way to becoming China’s leading logistics provider.”
Schenker may be hoping that its expansion in China can offset problems in neighboring Russia. It opened a logistics hub in Kaluga, 200 kilometers south of Moscow, in 2008 but it is currently failing to meet expectations.
The hub’s main customer is a joint venture between Volkswagen and its subsidiary Skoda, with car parts being delivered by rail from Brunswick in Germany as well as plants in Slovakia and the Czech Republic. Until recently, two freight trains had been arriving each day at the joint venture’s plant.
But in September, as the economic crisis in Russia increasingly affected the demand for German cars, Volkswagen curbed production. Instead of the original target of 150,000 cars, now only 120,000 come off the assembly line in Kaluga.
Despite its problems in Russia, Schenker markedly increased its performance in the first six months of 2014, with €7.4 billion ($9.2 billion) in sales. Earnings before interest and tax stood at €148 million, giving it 8.8 percent more profit than in the same period last year. DB as whole managed only a 6.9 percent increase.
Providing Kaluga doesn’t put a spoke in its wheel, Schenker’s operating profit will increase into the double digit percent range over the whole of 2014, said chief executive Thomas Lieb.
The author is a Handelsblatt editor covering the consumer goods industries. To contact the author: Schlautmann@handelsblatt.com