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Business

Elevator builders go cheaper in China as competition escalates

An elevator under repair in China.

TOKYO -- Japanese elevator companies are stepping up Chinese operations with lower-cost residential offerings and better maintenance, seeking an edge as growth in the world's leading elevator market slows.

Hitachi has introduced new elevators for both commercial facilities and such residential settings as condominiums. These use more common parts than predecessors, as well as more components made locally, cutting production costs by an estimated 20-30%. Plants in China, Japan and Thailand have also banded together when buying parts, helping to hold down sales prices.

Mitsubishi Electric is now selling midrange home and office models priced around 10% below previous offerings. Demand for mainstay high-end elevators has sagged, in part because of an anti-graft drive under Chinese President Xi Jinping. So the Japanese company is shifting focus down the price scale and tailoring its machines to rental housing to lift sales.

China accounts for around 60% of the world's new elevator installations. Local manufacturers have a presence at the low end. But overseas players still dominate in midrange to high-end elevators, with Mitsubishi Electric, Hitachi and Finland's Kone the top three. Hundreds of thousands of elevators from Japanese companies are now operating in the Chinese market.

But price competition is intensifying as China's slowing economic growth takes a toll on demand. Hitachi's elevator and escalator orders in the country dropped off 10% in the year ended March and continued to fall on the year in the first half of fiscal 2016.

Toshiba Elevator and Building Systems, where new orders were flat for fiscal 2015, will debut its own midrange elevators this fiscal year. Around 70% of parts will come from outside suppliers, up from the current 50%, helping to lower costs by 10-20%. The machines are largely intended for residential use.

The Toshiba unit is also bolstering maintenance services for existing units, aiming to ensure solid earnings regardless of shifts in the broader economy. Around 100 new maintenance staffers will be brought on each year. Remote monitoring of elevators will be offered as well. The service will keep an eye out for malfunctions around the clock and automatically track performance.

(Nikkei)

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