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Global elevator companies are rushing to take advantage of Chinese government subsidies to replace hundreds of thousands of aging elevators, in a reprieve for a sector hit hard by the country’s real estate slowdown.
Finland’s Kone, the US’s Otis and Switzerland’s Schindler all say their “modernization” activities in China are growing as more elevators pass the 15-year mark – the usual trigger for upgrade or replacement.
According to official data, China has about 12 million elevators, escalators and moving walks. The state-run People’s Daily reported in December that about 1.1 million elevators are more than 15 years old and now pose “safety risks.”
Joe Bao, Kone’s head of Greater China, said the number of elevators in China needing modernization represented the industry’s “next growth super cycle”.
The company expected to replace or upgrade 40,000 to 60,000 elevators a year in China by 2028, up from about 20,000 now, while U.S. rival Otis said the number of modernizations would double year over year by 2025.
China’s real estate slowdown has hit the world’s second-largest economy for most of this decade, reducing the number of new elevator installations.
China is an important market for elevator manufacturers given its size, and several manufacturers have large factories north of Shanghai, complete with towers used to demonstrate their products.
Otis said in its latest results that global sales fell 7 percent last year, dragged down by a fall of more than a fifth in China, while Schindler also said orders were hit by a “continued sharp decline in demand” in the country. Kone’s orders in Greater China are “significantly down” compared to 2024.
All three companies aim for growth through a subsidy scheme financed by special long-term government bonds.
Companies said government grants of about Rmb100,000 (about $14,650) to Rmb200,000 are available to replace aging elevators and have been expanded this year to support installations in older buildings.
Otis’ head of China Sally Loh said the initiative reflects both aging urban infrastructure and the increasing number of Chinese living longer.
The race for market share has prompted Kone to offer elevator replacements within a week, with the company displaying its products, including a gold elevator button, at its headquarters in China last month.
Elevator maintenance and replacement is seen as a business opportunity given the highly fragmented nature of the Chinese market, which Bao said was dominated by thousands of local players.
However, Otis has warned that its customers’ “credit conditions” have affected the company’s ability to match its previous sales pace in China.
Kone’s Bao said its operating balance has risen from 85 percent new installations and 15 percent modernization to about flat, and expected overall sales to eventually recover. “As the pinnacle of our industry [was] In 2021, we will return to 2021 at some point,” he said.
The construction industry has always had peaks and valleys, Bao said – and while the Chinese market has experienced a “pretty dramatic slowdown… there are some sectors that are growing”.
Additional contributions from Cheng Leng in Beijing
