Elevator Industry Sees Up and Down

The Chinese domestic elevator enterprises saw great development in these years and have broken the monopolization of foreign companies.

In 1980, China saw the establishment of its first elevator join venture. The company’s name was China Xunda Elevator Co., Ltd. 30 years later, China’s elevator industry, as one of the first industries open to the public, have seen most of its shares be taken by the foreign companies, Mitsubishi, Hitachi, Otis and Abhibba take nearly 80% of China’s elevator market. The domestic companies, however, kept living in the shadow of these foreign enterprises.

In recent years, the domestic elevator companies, represented by Canny-Elevator, Shenyang-BLT and Shenglong-Elevator, rose and began to infringe on the market share taken by the foreigners. On March 12, 2010, Canny-Elevator went public in the Shenzhen Stock Exchange. The domestic companies have changed their previous market positioning and brand images and have got the strength to challenge the foreign companies.

Foreign Companies Taking the First Hand

At the beginning of reform and opening up, China’s elevator industry was haunted by the shortage in capital and technology. The central government decided to introduce the foreign investors. In that way the elevator industry became the first industry having foreign investment. From 1980, the elevator factories in Tianjin, Shanghai and Shenyang all welcomed their foreign partners who got into China step by step.

Ren Tianxiao, president of the China Elevator Association, said that the foreign companies capitalized on their advantages in technology and capital as well as the favorable conditions and took the Chinese market very quickly. At the beginning, the foreign companies’ expansion indeed restrained the development of Chinese domestic companies. Anyway, thanks to the expansion allowing the Chinese companies to learn from their foreign partners to boost their development! For example, the technologies and management experiences of the foreign companies made the Chinese companies know the essence of operating a company. In addition, the foreign companies’ attaching importance to the supporting facilities and components of elevators was also a great lesson for the Chinese.

The experts think that it is hard to get engaged in the elevator industry because of the technological threshold. An elevator manufacturing company needs to know technologies of many industries, especially in the product design and manufacturing, mechanic integrated system, after-sale service and maintenance. In addition, high-quality talents are needed for a company to meet the demand of product design, development, maintenance and corporate management. It needs a long time to accumulate the experiences. The demand for the technology and talents keep many enterprises outside of the elevator industry.

What’s more important is that the customers usually attach importance to the brand of elevator which is an important part of a building. Previously, many customers thought that the foreign elevators, with fame and quality, were more reliable. The brand awareness plays an important role in the customers’ selections. Therefore, brand image is very, very important for the elevator companies. However, it also needs a long time for an elevator company to build its brand in the market.

Last year, Canny-Elevator provided eight sets of luxurious elevators which can run at 4m/s for a five-star hotel in Guiyang, Guizhou. These elevators were based on Canny-Elevator’s own innovation. Previously, only the foreign elevators were installed in the five-star hotels and some of them were imported directly from their places of origin. This proved the equal quality and performance of the domestic-made elevators with the foreign ones. The customers should have better knowledge of these elevators.

Domestic Elevators’

Developments

From the 1990s, many private companies got into the elevator industry to provide the supporting components for the big joint ventures. Some private companies with strength directly cooperated with foreign companies to have joint ventures to produce the elevators. During the process they learnt and assimilated the foreign technologies and got used to the international technological standard, installation and maintenance system and management pattern. These private companies, some of which didn’t know how to produce the elevators before, made use of the cooperation with foreign companies, seized the opportunities brought by the market expansion in the 1990s and saw fast development.

Wang Youlin, board chairman of Canny-Elevator, was a good example. Wang Youlin started his business in the 1990s from producing components. Then his company went through fast development based on its unique pattern of “integrated elevator plus related components”. When the executives of other elevator companies were thinking of how to reach cooperation with the foreign companies, Wang Youlin still rejected the proposal of cooperation from many foreign companies and developed the company by his own power.

Presently, one Chinese domestic elevator company can not fight against the foreign competitors alone. But their influence and power are not ignorable. The Canny-Elevator, Shenglong-Elevator and some other well-established elevator companies are located in the Yangtze River Delta. Looking at the whole industry, most of the elevator companies in China are located in the Yangtze River Delta and the Pearl River Delta. According to the experts, the industrial concentrating effect provides solid development base for these private elevator enterprises. The Yangtze River Delta, where 60% of the elevator companies are located, will be the “gathering place” for the Chinese elevator companies in the future.

Wu Jianchun from the government of Wujiang, Jiangsu, said that Wujiang was an important area in China for elevator production. There are 30 elevator companies in this city and 150 enterprises producing components. Such an industrial cluster is growing bigger and bigger, which has become the pillar for the economic development of Wujiang and is becoming a new economic growing point for Jiangsu.

Wang Youlin attributed the development of domestic elevator to the government support which created a big space for their development. In 2008, the government issued the “Ways of Managing the Government Purchasing of Products Based on Self-innovation”, stating that the government will prefer purchasing the innovative products from the Chinese companies. In 2009, the government worked out the Program of Reviving Manufacturing Industry, stressing that “the regional advantages should be made to form industrial cluster effect and to build some cities into the places assembling a group of famous manufacturing enterprises”. These policies all helped the development of the domestic elevator industry.

Elevator as the “White Goods”

In 2008 the output of elevators in China exceeded 210 thousand units and the annual growth was 20%. More than a half of the elevators were made in China, which has been largest elevator producer and consumer in the world.

The urbanization and fast development of property industry in China are increasing the demand for the elevators. Right now the foreign companies take 70% or so of the Chinese elevator market. However, the 25% market share doesn’t mean a desperate place for the Chinese elevator companies. Though the Chinese companies are in the adverse place with the foreign competitors in capital and brand awareness, they are blessed by the low price and good cost performance. They are very competitive in the second- and third-tier cities of China and the overseas market. Many experts believe that one or two world famous elevator manufacturers will stand in China in the future, like Geely in the auto industry.

Canny-Elevator adopted the strategy of differentiated marketing last year and saw positive results in obtaining big orders and large projects. Their elevators were installed in many newly-built constructions in China. In 2009 the total value of the company’s contract was 1.7 billion yuan (USD 250.8 million), increasing by 20% from last year.

Ren Tianxiao, president of the China Elevator Association, believed that the brand awareness of domestic enterprises will be further spread among the customers. The elevators will be like the field of “white goods” (washing machine, electric cooker and so on), whose control rights have been gradually shifted from the foreign companies to the domestic ones. It is forecasted that the domestic-made elevators will increase their market share to 50% in the next ten years.