HANDELSBLATT EXCLUSIVE Herrenknecht's Future Tunnel Vision

The world leader in tunnel-boring technology, Herrenknecht, faces growing competition from China and Silicon Valley. The family-owned company is racing to maintain its technological edge.
Never boring.

Herrenknecht is a family-owned enterprise that has literally conquered mountains. The drilling company helped bore the longest train tunnel in the world, the 57-kilometer Gotthard Tunnel, through the Swiss Alps.

Herrenknecht, however, cannot afford to rest on its laurels as the world leader in tunneling technology. Competition is stirring in the cradle of high-tech innovation, Silicon Valley.

Martin-Devid Herrenknecht, the 30-year-old son of Herrenknecht’s founder, said the company is keeping a close eye on Elon Musk, the owner of SpaceX and Tesla, who made waves in December when he announced on Twitter that he planned to build a boring machine.

Mr. Musk has long expressed interest in a future mass transportation concept called a Hyperloop, which would carry passengers in a pod through a high-speed vacuum tunnel.

Almost all of our competitors are Chinese and are supported by the state. There’s a lot of pressure on prices. Martin-Devid Herrenknecht

“There are rumors that he could move forward with certain technologies that we have also kept an eye on for a long time, but haven’t had a breakthrough,” Mr. Herrenknecht, who serves as vice president of the family foundation that owns the company, told Handelsblatt.

For now, Herrenknecht has mostly expressed interest in Mr. Musk’s plans as opposed to concern. It’s conceivable that the company could even work with Mr. Musk to build Hyperloop tunnels one day.

“A Hyperloop would have to pass through mountains somewhere and that would be interesting for us in terms of potential contracts,” Mr. Herrenknecht said. “We would really like to invite him [Elon Musk] to come by,” he said.

The real threat to Herrenknecht doesn’t come from Silicon Valley startups – not yet anyway. Cheap competition from China is the real source of concern for the company. Beijing has made major investments in tunneling technology in recent years.

“Almost all of our competitors are Chinese and are supported by the state,” Mr. Herrenknecht said. “There’s a lot of pressure on prices.”

Herrenknecht is also concerned about its intellectual property being poached as it competes with Chinese companies on their home turf.

“We have to make sure that our know-how isn’t taken,” Mr. Herrenknecht said. “In the end it’s about trusting the right Chinese partners.”

But the competition in China still has some catching up to do. In 2015, Herrenknecht generated €1.24 billion in revenue and exported 90 percent of its machines, which have built metro tunnels in cities across the globe from South America to East Asia.

The company plans to keep its Chinese rivals at bay by emphasizing its competitive edge in technology and its reputation as a world-renowned company. Mr. Herrenknecht, who oversees projects all over the world, is confident that the family company will prevail.

“Let’s put it this way – there’s continued interest in our machines,” he said.

 

Catrin Bialek is a Handelsblatt correspondent based in Dusseldorf. Christof Kerkmann is an editor for Handelsblatt Online and writes about the technology sector. To contact the authors: [email protected] and [email protected]