NZ-Made: Berl Replies


The suggestion of NZ rail workers building Auckland’s electric trains continues to be fiercely debated - amid some criticism that transport minister Steven Joyce and KiwiRail were too hasty dismissing the idea.

This afternoon, Berl, which did the economic case for workshops in Wellington or Dunedin or both to do much of the work, replied to some of the criticsm so far.

The economic research firm said criticism of the idea centred on two issues - price and the issue of Kiwi workers have the skills and capacity.

Here’s what it has to say to the critics:

Many assume that building the trains in China or some other country with cheaper labour will cost a lot less than the $6.9 million to build the EMUs here.  This viewpoint is ill-informed, as we actually compete exceptionally well against both European and Asian producers.  Train manufacturing is relatively capital intensive, meaning labour costs play a smaller role in the total price of the project.  There is a mountain of evidence supporting this:

  • The EMUs being built for Wellington by a Korean company work out at the equivalent of $7 million each for a three-car unit (in $2007 dollars)
  • The only example of EMUs being built by China for other countries in recent years was a contract for Brazil, with a three-car equivalent cost of $6.94 million.
  • Prices to produce EMUs for countries in Europe, including Germany and Poland are the equivalent of between $6.6 million and $7.3 million for a three-car unit.

A fixation with the ticket price also ignores the differences in whole-of-life costs including scheduled repair costs; lags in getting unscheduled mechanical issues resolved; spare parts delivery; or lack of priority from supplier.

Skills and Capacity:

Some argue that New Zealand lacks the skills, experience, and work force to build the trains here.  This is a somewhat stronger case, but it also includes straw man arguments that must be highlighted.

One analogy used has been that New Zealand building the rolling stock would be like Air New Zealand deciding to build its own planes.  This is a poor analogy.  The report clearly takes into account that around 31% of the work will be done overseas, including the transformer; propulsion equipment; auxiliary power; and train control system.  But we can undertake the other 69%, including manufacturing the body shell; assembly; brake equipment; interior fittings and glazing; and doors.

We acknowledge that it may not be possible to build the rolling stock within the 45-month timeframe proposed.  For this reason, our report suggests two scenarios – 45 months, and 69 months.  Even under the 69-month scenario, the commercial and economic benefits of building in New Zealand are undeniable.  The key question is whether a shorter wait for the trains to be built justifies missing out on 770 six-year jobs; $232 million more in GDP; $65 million more in Crown revenue; poorer maintenance and development of skills; and loss of innovation and spin-offs to other industries.

We would argue strongly that it doesn’t.

In other developments and comments today:

  • Labour’s Dunedin South MP Clare Curran has invited Transport Minister Steven Joyce to Dunedin, so he can see first hand that the workers at the Hillside Rail workshop are capable of building the rolling stock needed for the Auckland electrification project.
    “Mr Joyce admitted in Parliament today that he has not visited either of the rail workshop yards at Woburn in Lower Hutt or Hillside in Dunedin,” Clare Curran said.
  • The union for rail workers is questioning whether Steven Joyce’s reference to KiwiRail as a “Cinderella” foreshadows an intention to cut back on investment in the SOE. In an interview on TVOne’s Close Up last night, the minister said that KiwiRail had been treated like a Cinderella in New Zealand for a long time.

“What does Steven Joyce mean by this,” Rail and Maritime Transport Union General Secretary Wayne Butson said.  “Is this the opening shot in a signal to downgrade investment in the company?”
Mr Butson said managing KiwiRail into extinction by systematic mothballing of lines, as was signalled in March, and not having the confidence to bid for construction work, amounts to a defeatist attitude to the New Zealand rail network.
“By introducing an air of decay about the future of the national rail network the government is opening the door wider to a further loss of skilled rail workers to Australia, and missing the opportunity to grow local economies like Dunedin and Lower Hutt.”

  • The Productive Economy Council said in a statement: “We are an ambitious nation and it would be nice if our political and economic decision making could catch up with that ambition. New Zealanders want to see our Kiwi SOE dollars spent here, building our own rail locomotives and rolling stock, creating jobs, new skills, tax revenue and export opportunities. Not protected industries but invested industries. This type of economic investment is very sticky and that is its appeal.”




  1. jarbury says:

    If building the trains in NZ means we have to wait another two years for them…. well, that’s going to be hard for me to support.

  2. Cierat says:

    I think a big picture view is the right approach here. In any event, if KiwiRail joint ventured with an offshore manufacturer to build in NZ there’s no reason why the more limited timeframe can’t be met…

  3. JC says:

    I really don’t see it, once they’ve been built - then what? It’s not as if we’re going to keep producing them. What happens to the jobs down the line as production winds up? It’s not as if we can bid for other contracts.

    If they’re worried about spare parts, then surely it’ll be the traction equipment, not the interior fittings and bodyshells that will need the parts - and those are the parts that will still be outsourced anyway.

  4. jarbury says:

    Well I reckon Auckland will need another set of trains around 2020 when the CBD rail tunnel opens. Wellington will probably need a pile more trains too…..

    … and I guess there’s some hope that overseas cities might buy them from NZ?

    We export a heck of a lot of buses… why not trains I guess?

  5. Scott says:

    I’m pretty sure the owners of the best train design IP will not let it out of there company. That leaves us with three options. 1. design the trains from scratch, 2. buy an out dated low quality design plans from a company who realizes there low value, or buy trains of a proven modern design.

    Btw, Im a huge supporter of buying NZ made, I just think we cannot match the engineering design talent of companied with decades of experience with similar mass produced designs.

  6. Steve says:

    GW is looking to replace the Ganz units by 2018 and as Jarbury has already mentioned, Auckland is likely to need more around the time the CBD tunnel is finished and by that time the Matangi fleet will probably be due for a spruce up and then other units from there.

    If the whole of life benefits are with NZ production of large parts of the EMU’s and they can be delivered on time then it is an option we should consider IMO. Remember that DMU’s actually cost less to build than EMU’s but the whole of life comparisons swung firmly in favour of the electrics

  7. Matt L says:

    Steve - I think that EMU’s are now cheaper than DMU’s due to the number of them being built worldwide. Most parts manufacturers are geared up for them so the parts cost less.

  8. rtc says:

    I’m sorry but if this means a possible delay to 2015 then I am totally opposed, furthermore, I don’t think Auckland’s network should be the testing ground for a made in NZ train set. We’ve had hand me downs for years and it’s time Auckland had a set of trains comparable to what’s being used in Europe.

  9. ingolfson says:

    Indeed - the delay is the clincher for me too. Too bad: If governments (and I am not excluding either this or the last one) hadn’t FUCKED AROUND forever, this might have been an option.

    Oh, and even when I agree with Joyce, he pisses me off.

  10. jarbury says:

    Oh, and even when I agree with Joyce, he pisses me off.


    Oh so true…

  11. Geoff says:

    I don’t see the delay as an issue, as the first will still be in 2013 as planned, and the delayed items will likely be the locomotives for the existing SA sets, so they will only be replacing something that is already there.

  12. Brent C says:

    Mining trucks is the only thing the government want to build in New Zealand at the moment. Its a shame really

  13. joust says:

    Labour is certainly not doing themselves any favours on the perception of their success or lack of it with Public Transport development here in Auckland. Think about the station openings, contract sign-offs etc. that have happened under National. I know the fact is a lot of that was developed under Labour, but do other voters? Taken together with this push for local construction that could result in delays, conflict of interest and poorer quality (thats perception as well not saying it’ll happen) they really come off as trying to undermine Auckland’s Public Transport development.

    If the reason for this is jobs and the economy, why is their transport spokesperson fronting it? Does he have anything to say about how the option of Kiwirail building the trains might impact transport?

    As for BERL an early speculative report takes no responsibility for the eventual delivery and product that might come out of all this.

  14. Rationale says:

    There’s no reason that a proportion of the work can’t be carried out in NZ, even if only the assembly of the units(and this could be negotiated with the manufacturer fairly easily I would think). I suspect Mr Joyce is reeling from the widespread reaction.

  15. Jeremy Harris says:

    A delay of two years is just a delay of packed out trains which we’d have by 2014 anyway and means a couple more years of crapped out trains that breakdown and delay all the time, like we’ve had for 3 decades… I think it is something we should look at but as Len Brown said at a CBT meeting, “Joyce doesn’t believe in trains, he believes in cars - and buses a little bit”…

    So Joyce won’t be supporting anything that can be seen as a development for rail, he views it as an economic hole, it would be like me supporting the RoNS and building a car manufacturing plant and oil refinery in Wellington… The difference is ideology and a belief (or lack of in Joyce’s case) in the price effect of carbon pricing and peak cheap oil…


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