Rail & Infrastructure

Metroactive

BYD says monorail contracts will boost profits

Wang-Chuanfu-w

On track: BYD’s boss Wang

Build your dreams is the company’s motto. And those dreams are expanding at BYD after it unveiled SkyRail, its newest product, last month.

China’s largest manufacturer of new energy vehicles (NEVs) is branching out into battery-powered monorail, seeing the new division as a natural fit with the technology and production processes in its existing electric bus business.

BYD‘s first monorail system has been installed at its headquarters in Shenzhen and Time Weekly was gushing in its praise of the company’s prototype SkyRail train, describing it as “marvellous, gorgeous, splendid and posh” all in one sentence.

But the magazine also advocated caution after the “recent scare” over another kind of vehicle: the Transit Elevated Bus, which test-launched in Hebei earlier this summer (see WiC336). Media like the Global Times and Xinhua were quick to dampen enthusiasm about the futuristic-looking bus, warning off potential investors. They pointed out that its inventor had only completed a primary school education and that his main financial backer was a P2P company, which had previously sold fake investment products.

This time most of the analysts returned from the BYD site visit in Shenzhen praising SkyRail, although they are finding it difficult to compute the likely impact on BYD’s earnings. Guo Hao Securities is pitching a potential boost of anything from 3% to 87% on 2020 operating profits, for instance.

BYD says that it has invested Rmb5 billion in R&D in SkyRail over the last five years, and that it is confident that the new division will become its third most important contributor behind NEVs and electronic parts. It is even forecasting revenues of Rmb10 billion for next year, or 10% of overall sales, making the division profitable in its first full year of operation.

BYD has unveiled several monorail designs. Type A is a transportation option for tier 2 and tier 3 cities, carrying 8,000 to 40,000 passengers per hour at a cost of Rmb150 million ($21.83 million) to Rmb250 million per kilometre to install. Type C is a smaller option and designed to run around apartment blocks and community spaces at a cost of less than Rmb100 million per kilometre.

Extolling SkyRail’s virtues, BYD chairman Wang Chuanfu told analysts that the monorail is an attractive option for smaller cities that can’t afford to build subway lines because of the higher construction costs. He says SkyRail costs one fifth of a subway system (Guo Hao Securities estimates that underground rail costs up to Rmb1 billion per kilometre in construction costs) and that a monorail network can be built much more quickly (in two years, instead of four or five for a subway).

The main drawback lies in lower passenger loads, which is why it isn’t so suitable for tier 1 cities where subways carry 25,000 to 70,000 passengers per hour.

BYD has already signed a Rmb25billion contract with nearby Shantou municipal government for a monorail and Wang said the first revenues will arrive in 2017 when the initial 40 kilometres of the 250-kilometre track is completed.

BYD says that it’s close to signing contracts with Shenzhen (Rmb10 billion) and Zhongshan (Rmb45 billion). All the cities mentioned so far are in Guangdong, BYD’s home province. But it claims to have received expressions of interest for contracts totalling Rmb100 billion from other parts of China, including Zunyi in Guizhou, Ganzhou in Jiangxi, Handan in Hebei, Jiangyin in Jiangsu, Liuzhou in Guangxi, Zibo in Shandong and Taizhou in Zhejiang.

Wang estimates that there is a potential market of Rmb5 trillion for monorail networks, based on 273 tier 3 cities and an average investment of Rmb20 billion in each project. But BYD has a formidable competitor in state-owned rolling stock manufacturer CRRC. That company built China’s first monorail in Chongqing five years ago (prompted by that city’s terrain, which makes subway tunnelling difficult). Earlier this year CRRC also unveiled a new monorail prototype after three years of R&D.

BYD seems unfazed by the rival offering. “CRRC is like a trunk and we are the branches,” a company engineer explained to Caixin Weekly, albeit somewhat cryptically.


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