Who (and why) gains from Germany’s €1.7 billion single wagonload fund?

With single wagonload transport being one of the most fragile and volatile services offered by the rail freight industry, the 1.7 billion euros that Germany will pour into it sounded like music to the ears of logisticians. Nevertheless, soon, joy was overtaken by doubt, considering reports claiming that DB Cargo would be the primary beneficiary of this financing scheme. Is this the case? And who is set to benefit, in the end, from this nearly 2 billion euro budget?

Just recently, the European Commission (EC) stepped in, approving a scheme to allocate 1.7 billion euros to support single wagonload and wagon group transport in Germany until 2029. In its statement, the EC clarified that The maximum annual budget would be 320 million euros. This measure is designed to safeguard the existence of these transport types and the companies operating them, ensuring they don’t succumb to economic pressures.

Also read: EU Commission approves German rail freight scheme for 1.7 billion euros

State aid for DB again?

Soon after the Commission’s approval, several reports appeared claiming, more or less, that the German state would use this scheme to favour once again its “favourite child,” e.g., state-owned and currently financially struggling DB Cargo. The discussion started focusing on “another state-aid scheme” targeting DB, despite the company currently being under EU investigation for ‘illegally’ receiving state funds in the past.

However, this is not how the situation works. According to information collected by several industry parties, the funding is company-neutral and relates to the type of freight transport, i.e. single-wagon transport. Consequently, it becomes clear that the scheme itself is not intended for DB Cargo.

Despite the funding budget being company-neutral, its allocation will be based on Germany’s single wagonload market share. This is where the real problem regarding the 1.7 billion euro financing occurs. Specifically, the scheme does not target encouraging new players to enter the market but instead supports existing services.

Considering then that single wagonload transport accounts for 14 per cent of German rail freight and that DB Cargo dominates around 85 to 90 per cent of this share, it is understandable that the largest share of the nearly 2 billion euro funding will be allocated to the state-owned operator.

What about new market entries?

The new funding scheme is essential for single wagonload transport in Germany; this is a fact that no one denies. It is also possible that now that public money is available, more new players might appear interested in joining the market.

According to industry feedback, however, the conditions created by the German approach are not ideal for incentivising companies to take the next step in single wagonload transport even though they might be willing to do so. That is because the funding seems to primarily promote connecting journeys over long distances, while it should possibly only promote service journeys to incentivise new players to launch services. As a result, if Germany wants to encourage single wagonload transport, it should create the right conditions for private companies, too.

More urgent issues

While single wagonload subsidisation is critical, the German rail freight sector faces more challenges. One of the most important concerns the increased track access charges that rail undertakings will have to deal with from December 2024 onwards. While TACs will increase, their subsidisation will phase out, creating another headache for rail professionals.

Peter Westenberger, managing director of industry body Die Güterbahnen, commented on that: “This new funding, strongly determined by the desolate situation at DB Cargo, cannot be a substitute for the recently massively reduced track access charge funding, which would benefit all providers in rail freight transport.”