The sale of Vossloh Locomotives to Chinese state actors: risk or mutual opportunity?

At Datenna, our China experts continuously track and conduct detailed investigations into the acquisitions of European and US firms by Chinese entities. Through a series of articles in our resource library, we highlight striking acquisition case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the acquisition of Vossloh Locomotives by state-owned CRRC ZELC.

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The Sale of Vossloh Locomotives

In August 2019, German firm Vossloh announced plans to sell its subsidiary Vossloh Locomotives to Chinese firm CRRC Zhuzhou Electric Locomotive Co., Ltd. (CRRC ZELC), a subsidiary of China Railway Rolling Stock Corporation Ltd. (CRRC). The majority of CRRC shares are held by the State Council of the People's Republic of China through a complex system of corporate governance involving several layers of state-owned enterprises. CRRC is also a key company in China's Made in China 2025 and Belt and Road national initiatives.

Vossloh Locomotives is based in Kiel, Germany, and has established itself as a key producer of diesel-electric locomotives in the European market since its establishment in the late 1800s. With this acquisition, it passed to the largest rail-vehicle manufacturer in China — a company primarily active in the Chinese domestic market.

A Road to New Opportunities

The CEO of Vossloh, Oliver Schuster, referred to the acquisition as an "extremely important milestone" that would lead to new opportunities in product development and innovation. Vossloh Locomotives was in need of fresh innovative input to keep pace with rapidly advancing competition.

This was not the first Vossloh transportation unit to be sold — two other units, Rail Vehicles and Electrical Systems, were sold to non-Chinese owners in 2015 and 2017 respectively. The Locomotives acquisition marks the sale of the last remaining branch of Vossloh. The deal brings opportunities to both partners: Vossloh Locomotives gains access to development resources and innovation, while CRRC ZELC secures direct access to the European market — a strategic goal it had been struggling to achieve for years.

Access to the European Railway Market

Despite being a core player in Chinese rail-vehicle manufacturing, CRRC ZELC has faced significant difficulty engaging with the European market. Previous limited engagements included shunting locomotives supplied to German Rail (DB) and Rail Cargo Hungaria, and Sirius EMUs supplied to Leo Express in the Czech Republic. Beyond these, the firm had not successfully penetrated the market.

The European market for railway operators has been fully liberalised, allowing European providers to expand freely within and between EU nations. This does not apply to non-EU firms, which have increasingly faced more stringent regulations. The European Commission's guidance on third-country participation in EU procurement effectively allows Chinese operators to be blocked from tenders, as China does not hold the bilateral agreements necessary for such access and does not assure mutual opening of its own procurement market.

Given that barriers for inter-EU operations have decreased while those for Chinese firms have increased, the acquisition of Vossloh Locomotives represents a significant strategic move — gaining unrestricted access to the EU market through the purchase of an established European firm with full freedom to expand across the EU.

A Potential Block by the German Government

Before the acquisition was finalised, the German Federal Cartel Office expressed concerns and launched an investigation. The government considered blocking the deal under foreign trade and investment regulations, with concerns rooted primarily in the acquirer's majority state ownership and the risks associated with that — including the threat to fair competition from CRRC ZELC's continuous access to government funding, technological resources, and potential price-dumping strategies.

The Final Approval

Ultimately, the Office conducted an elaborate risk assessment and concluded that there was no basis for blocking the acquisition. While the merger might cause some imbalance in competition given CRRC's state backing, this was weighed against the fact that Vossloh Locomotives had itself been losing competitiveness for years. The suspected risks of government involvement were assessed as not necessarily likely to materialise. On April 27, 2020, the German Federal Cartel Office approved the acquisition; the sale became fully effective on May 31, 2020.

Through this acquisition, Vossloh Locomotives aims to regain competitiveness through innovation under new ownership, while CRRC ZELC has secured a meaningful foothold in the European railway market — and a platform for further expansion abroad.