The only way now is up

El­e­va­tor and es­ca­la­tor man­u­fac­tur­ers ride high on the back of China’s ur­ban­iza­tion

China Daily (Hong Kong) - - BUSINESS COMPANIES - By LYU CHANG WANG YING

Wang Xi­uli is a lift at­ten­dant. For the past five years, all she has had to do is to sit on a wooden chair and press but­tons in an el­e­va­tor of a 10-story of­fice block built in the 1990s. It’s grat­ing on her nerves and gives her headaches.

The good and bad news (for her) is the job that pays around 1,000 yuan ($163) a month won’t last long.

It is rare to see a lift at­ten­dant th­ese days in the United States and Europe. Mostly they are re­tained for nos­tal­gic cus­tomer ser­vice rea­sons in grand depart­ment stores and ho­tels.

In the third- and fourth-tier cities of China, there are still many like Wang to be seen but, as more ad­vanced au­to­mated el­e­va­tors re­place the old ones and fill the thou­sands of new build­ings spring­ing up, their days, like their but­tons, are num­bered.

The up­side is that many more lift per­son­nel jobs will be cre­ated as busi­ness steadily in­creases for el­e­va­tor and es­ca­la­tor man­u­fac­tur­ers cur­rently rid­ing high on the con­tin­u­ing con­struc­tion boom.

In the past decade, thanks to China’s eco­nomic de­vel­op­ment and in­creased de­mand for con­struc­tion projects, the el­e­va­tor mar­ket in the coun­try has grown rapidly.

Last year, com­pared with slug­gish sales in the US and Europe, the el­e­va­tor and es­ca­la­tor mar­ket in China clocked sales of about 529,000 units, an in­crease of 15.8 per­cent year- on- year. Al­though growth slowed slightly from 24 per­cent in 2011, China still ranked first in the world for the amount of new el­e­va­tors in­stalled, ac­cord­ing to data from the China El­e­va­tor As­so­ci­a­tion.

Li Shoulin, head of the as­so­ci­a­tion, says the coun­try’s on­go­ing ur­ban­iza­tion plan is the driv­ing force be­hind such growth.

“A large amount of in­fra­struc­ture con­struc­tion is needed dur­ing the ur­ban­iza­tion process,” Li says. “As a re­sult, more and more el­e­va­tors and es­ca­la­tors will be in­stalled in pub­lic places such as of­fice build­ings, com­mer­cial shop­ping cen­ters, air­ports, rail­way sta­tions and res­i­den­tial ar­eas.”

Shang­hai Mit­subishi El­e­va­tor Co Ltd, a sub­sidiary of the Ja­panese Mit­subishi Elec­tric El­e­va­tor, has main­tained dou­ble-digit growth over the past few years as China’s prop­erty boom en­sures ro­bust de­mand for el­e­va­tor in­stal­la­tions, says a com­pany rep­re­sen­ta­tive. Last year, it sold more than 60,000 el­e­va­tors. Or­ders have con­tin­ued to soar.

“The mar­ket is grow­ing much faster than we ex­pected,” he says. “Be­fore, no one thought we would pro­duce 60,000 units last year. Now we are try­ing to reach the next goal of 100,000 units.”

For­eign el­e­va­tor brands ac­count for 80 per­cent of the Chi­nese mar­ket, the world’s largest. ThyssenKrupp El­e­va­tor AG, from Ger­many, is set­ting up a new fac­tory in Zhong­shan in the south­ern prov­ince of Guang­dong with an in­vest­ment of 300 mil­lion yuan ($49.01 mil­lion). It is ex­pected to be com­pleted next year.

An­dreas Schieren­beck, CEO of ThyssenKrupp El­e­va­tor AG, says part of its strat­egy in China is to in­vest in ex­pen­sive tech­nol­ogy to im­prove re­search and de­vel­op­ment and op­er­a­tional ef­fi­ciency be­cause of ever-in­creas­ing la­bor and op­er­a­tional costs.

Be­cause of a short­age of qual­i­fied tech­ni­cians, new­com­ers to the mar­ket in China of­ten try to lure ex­pe­ri­enced and trained peo­ple from es­tab­lished com­pa­nies through of­fer­ing higher wages, but ThyssenKrupp says it will in­vest heav­ily in train­ing. The com­pany’s global train­ing cen­ter in Shang­hai, SEED Cam­pus, trains ad­min­is­tra­tive and man­age­ment staff as well as field tech­ni­cians.

The com­pany also plans to ex­pand its busi­ness lo­ca­tions in the coun­try from 184 to 250, cov­er­ing most re­gions, to meet the grow­ing de­mand for el­e­va­tors and es­ca­la­tors in the newly emerg­ing mega cities.

China’s ur­ban pop­u­la­tion is ex­pected to swell to 1 bil­lion by 2025, when the coun­try will have as many as 221 cities, 10 of them with a 10 mil­lion-plus pop­u­la­tion, the con­sul­tancy firm McKin­sey & Co said in its lat­est re­port.

As cities get big­ger, so do the build­ings, so there will be more growth po­ten­tial for el­e­va­tor com­pa­nies.

Alan Che­ung, pres­i­dent of Xizi Otis El­e­va­tor Co Ltd, the largest sub­sidiary of the US- based The Otis El­e­va­tor Co, says there is 51 per­cent ur­ban­iza­tion in China at present, with still a long way to go to achieve the 80 per­cent ur­ban­iza­tion level of Western Europe and the US.

“If China’s ur­ban pop­u­la­tion main­tains an in­crease of 1 per­cent­age point each year, about 15 mil­lion ru­ral res­i­dents will en­ter cities,” he says. “That pop­u­la­tion will in­crease de­mand for ur­ban in­fra­struc­ture and thus the de­mand for el­e­va­tors and es­ca­la­tors dur­ing the process of so­cial trans­for­ma­tion.”

Otis, one of the largest el­e­va­tor man­u­fac­tur­ers in terms of units ev­ery year, has built a fac­tory in Chongqing to ex­pand into cen­tral and western China.

“We chose Chongqing as our sec­ond pro­duc­tion base in line with the govern­ment’s long-term pol­icy to de­velop the in­te­rior and western ar­eas rather than just the coastal cities,” he says.

Che­ung says an­other growth point in China’s el­e­va­tor mar­ket arises from de­mand for re­pair and main­te­nance ser­vices. There are about 2 mil­lion units in­stalled in China re­quir­ing main­te­nance.

“We want to be a ser­vice-ori­ented com­pany in­stead of just a man­u­fac­turer or an equip­ment in­stal­la­tion com­pany,” says Che­ung, adding that the com­pany’s strat­egy for the fu­ture was built around cus­tomers’ re­quire­ments.

The US com­pany will con­tinue to in­vest in the af­ter-sales sec­tor, ex­pand­ing its re­pair and main­te­nance ser­vice staff by 30 per­cent to about 1,500 over the next few years.

“We ex­pect prof­its to be main­tained in the com­ing years, but we have to be more com­pe­tent,” he says.

The Fin­nish com­pany Kone Oyj hopes to strengthen its po­si­tion in the Chi­nese mar­ket by in­creas­ing its share in Gi­ant Kone El­e­va­tors from 40 per­cent to 80 per­cent in 2011.

In April, Kone el­e­va­tor in­dus­trial park was es­tab­lished in Kun­shan, near Shang­hai. At 240,000 square me­ters, the new Kone Park in­cludes three el­e­va­tor fac­to­ries and one es­ca­la­tor fac­tory.

Matti Alahuhta, CEO of Kone, was quoted by the Fi­nan­cial Times as say­ing that Gi­ant Kone was es­pe­cially strong in third- and fourthtier cities.

“As growth slows in the coastal cities, ur­ban­iza­tion is mov­ing to the cen­tral and western parts of the coun­try, so those mar­kets are still grow­ing very fast,” he says.

Alahuhta cites forecasts that the world’s 600 big­gest cities will ac­count for 62 per­cent of global eco­nomic growth be­tween 2007 and 2025. An in­creas­ing pro­por­tion of those cities are in China. Con­tact the writ­ers at lvchang@ chi­nadaily.com.cn and wangy­ing@ chi­nadaily.com.cn

PRO­VIDED TO CHINA DAILY

An em­ployee of Xizi Otis El­e­va­tor Co Ltd as­sem­bles an es­ca­la­tor. El­e­va­tor and es­ca­la­tor sales have risen rapidly in China along­side ur­ban­iza­tion.

PRO­VIDED TO CHINA DAILY

Xizi Otis’s Chongqing fac­tory.

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