Beijing accident won't hurt Otis in long term

BEIJING - The business of Otis Elevator Co in China will not contract much in the long term, after an escalator accident at a subway station in Beijing on Tuesday that killed a 13-year-old boy, experts said.

The accident won't threaten the business of foreign elevator producers, including Otis, because of the fast-increasing demand in China and purchasers' demand for foreign brands, said Peng Jinsheng, director of the expert committee of the Beijing Chamber of Elevator Commerce.

Foreign brands' clients wouldn't turn to domestic brands, Peng said.

The accident will have a negative impact on Otis in the short term. The Beijing government will suspend purchases of escalators produced by the company, a unit of US-based United Technologies Corp, the Beijing Municipal Transportation Administration Bureau said on Wednesday.

Statistics from the China Elevator Association show that domestic brands' aggregate market share was about 30 percent in the first quarter, compared with 20 percent in 2008.

Most purchasers still choose foreign brands. Three foreign producers - Mitsubishi Elevator Co Ltd, Hitachi Elevator Co Ltd and Otis - take up about 70 percent of the Chinese elevator market.

"Purchasers, including government buyers, prefer foreign brands over domestic ones and a single accident won't change their thinking much," Peng said.

The elevator market in China will continue expanding quickly, according to a report released by Industry Securities on Tuesday. It said that taking into account new housing starts in 2010 - 1.63 million square meters - and the first quarter of 2011 - 310 million sq m - demand for elevators will continue to increase in the next two years.

Just the affordable housing built under the 12th Five-Year Plan (2011-2015) - 36 million apartments - will require 300,000 elevators and could expand the business 20 percent year-on-year.

An analyst at Soochow Securities based in Suzhou, Jiangsu province, where most domestic elevator makers are headquartered, agreed with Peng.

There has been a shortage of elevators in recent years and that situation won't change for a long time, Huang Haifang said.

On Tuesday morning, an upward-bound escalator at an exit of the Beijing Zoo station on subway line 4 changed direction suddenly, killing one person and injuring 30 others.

Otis posted an announcement on its website to apologize for the accident. According to the local government, the cause of the accident is still under investigation. The Beijing transportation authority subsequently conducted safety checks of 1,331 elevators in the city's rail transit network .

China Daily

(China Daily 07/08/2011 page15)