Finding a fast route to European nations(2)

KTZ Express President Sanzhar Yelubayev describes this as a "very exciting development". Currently, Asia has to rely on ocean freight to Europe and then truck or rail to Central Asia.

Toyota has been one of the first Asian companies to tap into the overland Silk Road. The Japanese automaker used to ship cars and auto parts to Europe by sea through the Suez Canal, a process that takes 70 days, says Takuya Ichihashi, Toyota's chief representative in Kazakhstan and Central Asia.

Besides Toyota, dozens of electronic firms and carmakers from East Asia and Europe including BMW and Mercedes-Benz have switched to the overland route to accelerate the logistics flow for high-value, time-sensitive products, including high-tech and luxury goods.

Chinese high-tech companies such as Xiaomi Corp and Huawei Technologies Co Ltd are also using this route, says Norio Yamamoto, a United Nations Silk Road adviser and president of the nonprofit Global Infrastructure Fund Research Foundation, based in Japan.

A pioneer of using the overland route is Hewlett-Packard. The technology giant has set up factories in Chongqing to manufacture notebook computers. Since 2011, it has transported some 2,500 containers and 5 million products to Europe using the route.

Part of it has to do with investors' "go west" strategy. In recent years, a number of transnational companies operating in China have shifted their production base further inland from the eastern coast in search of low-cost labor. For instance, Foxconn from Taiwan, which makes products for Apple and Acer, also has factories in Chongqing.

However, the prospects for business on the overland Silk Road are not all that rosy.

Maritime transport still dominates over 95 percent of intercontinental trade. Of the 100 million tons of goods transported from China to Europe every year, the overland route accounts for less than 1 percent of the total, says KTZ's Alpysbayev.

One consideration is the higher cost of using rail, which makes it a less popular option for bulk shipping.

To ship a standard 20-foot full container from China to a major European port by sea costs $2,500 on average, according to a United Nations Economic Commission for Europe report published in 2012. Shipping it by rail would increase the cost to $8,900.

"It's all about economics and trade-offs," says the UN's Yamamoto, adding that it is unlikely that global companies will abandon the maritime route anytime soon.

"It all depends on whether this small part you try to ship is valuable enough to justify the higher transport cost. It is like using a courier service. "

In short, the overland Silk Road is more of an alternative than a substitute for the maritime route.

Adding to the cost is the relatively small traffic volume of goods. It is not uncommon for the Chongqing-Xinjiang-Europe trains to leave for Europe hauling 50 full containers and return to China empty. The train line is still in search of a profitable business model.

"The return trips can target luxury products such as wine and food, which has a growing demand in China," says Henry Christensen, chairman of the China Logistics Club, a network of small and medium-sized logistics companies and freight forwarders.

Developing a niche service may be a way out. Apart from auto and IT goods, the industry is looking at a service to transport temperature-sensitive products, including medicines.

Logistics giant DHL began to offer temperature-controlled containers on the rail service between Chengdu and Poland in January, according to media reports.

Looking ahead, railway operators hope to increase the market share of the overland route to at least 7 percent by 2020, from the current 1 percent of the cargo flow between China and Europe.

"It appears to be a small number, but that's a huge market for us," says Alpysbayev.

A mission impossible? "Well, it is very hard but achievable. There are people who aren't aware an alternative route like this exists," he says.