Deutsche Bahn in Trouble: EU Scrutinizes Billion-Euro Subsidies for Freight Transport

Despite generous subsidy programs approved by the European Commission, Germany faces allegations of illegal support for Deutsche Bahn. Since the beginning of 2022, an investigation has been underway to determine whether the state-owned giant has been covering massive losses of its subsidiary, DB Cargo, at the expense of other market players who do not enjoy such privileges and are therefore struggling to compete.

Even with the subsidy programs approved by the European Commission for rail freight transport, proceedings regarding unauthorized state aid continue in Germany, as reported by RAILTARGET. Since January 2022, there has been an investigation against Germany concerning Deutsche Bahn (DB) for absorbing the operational losses of its subsidiary, DB Cargo. From a market perspective, there is suspicion that this constitutes illegal support, as other companies operating in the rail freight sector do not have similar privileges and are thereby disadvantaged.

On August 21, the leading German newspaper Süddeutsche Zeitung reported, citing sources within DB, that the European Commission had preliminarily informed DB’s supervisory board that the parent company's absorption of DB Cargo's losses constitutes illegal state aid. This gives DB Cargo an unfair advantage over its competitors, significantly narrowing DB's operational scope. While the company is completing the sale of its transport and logistics subsidiary, DB Schenker, it has also, since the start of the year, separated the operation of its rail network, including stations, into a new subsidiary, Infrago. According to its charter, Infrago is to be the non-profit arm of the group. Freight transport within DB Cargo has been economically unprofitable for a long time, with a loss of 261 million euros in the first half of 2024, and its market share in freight transport fell below 50% for the first time in history.

Due to the liberalization of the European passenger transport market, regional and long-distance transport is also under competitive pressure. The European Commission is expected to make an official decision in October. DB has declined to comment on the matter to the German press. A spokesperson for the Ministry of Transport stated that the years-long crisis at DB Cargo must end. "This is why a comprehensive transformation program has been created, which must now be implemented rigorously, also considering the state aid proceedings, to ensure a legally secure future for DB Cargo AG," the spokesperson for the German Ministry of Transport said.

The case of DB Cargo is energizing German politics. Climate protection, as a fundamental political goal, means that the German strategy aims for a 25 percent share of the freight transport market by rail by 2030. Currently, it stands at 18%, with only slight increases in recent years.

Source: Süddeutsche Zeitung