News / DB Cargo's 'financial umbilical cord' set to be cut with EC ban on subsidies

Photo: DB Cargo

German state-owned Deutsche Bahn may be forced to end its financial support for its deteriorating freight operation, DB Cargo, as the European Commission is expected to prohibit such subsidies from 1 January.

Citing sources in the German railfreight sector, newspaper Süddeutsche Zeitung suggested the loss-making freight operation’s “financial umbilical cord is being cut off”.

The move follows years of allegations that its parent company’s support had “distorted the market”.

An EC spokesperson told Reuters an investigation was ongoing, adding “we are in close and constructive contact with German authorities”.

But while the commission has not yet formally announced a ban on subsidies, Süddeutsche Zeitung reports that company sources had told it that DB’s board had been made aware it was expected.

A spokesperson for Die Gueterbahnen, which represents German private railroads, told The Loadstar DB Cargo had survived operating at “below-cost prices” by being subsidised by state financing.

The association supports DB’s plans to sell the freight arm, which the spokesperson said would be “a major step forward for fair competition in rail freight transport”.

DB’s financial support of DB Cargo began in 2022 after years of cumulative losses totalled billions of euros. Last year alone, losses reportedly exceeded €500m and, six months into this year, the division recorded a loss of €261m – although Süddeutsche Zeitung reported increasing sales suggested it could be turning towards profitability.

Whether profit can be achieved remains difficult for the operator, particularly with an energised private sector eating into DB Cargo’s share of rail freight capacity, having secured some 59% of market share by 2022, despite DB’s “unfair support”.