In 2008, the global elevator market size was approximately EUR 34 billion. Of the annual EUR 34 billion global elevator market, 40 (approx.) percent consists of new equipment sales and installations and 60 (approx.) percent of maintenance and modernization of existing systems. At the end of 2008 there were approximately 9.1 (2007:8.7) million elevator units in operation worldwide, of which 478,000 (2007: 453,000) were installed in that year.
Elevators in operation (%)
Total 9,100,000 units
| Europe |
48% |
| Americas |
17% |
| Japan and Korea |
11% |
| China |
10% |
New elevator market (%)
Total 478,000 units
| Europe |
23% |
| Americas |
10% |
| Japan and Korea |
10% |
| China |
40% |
| India |
4% |
| Russia |
5% |
The maintenance and modernization business is more stable than the new equipment business. Manufacturers aim to attract customers to long-term service contracts. The maintenance and modernization segment benefits from stable recurring revenues and predictable cash flows as the majority of the costs consist of labour in local currency.
The European market size (in units) is significantly larger than that of North America given Europe’s relatively higher population density and the increased prevalence of apartment or condominium dwellers. As a result, about half of the annual elevator installations in Europe are for residential buildings and only one fifth for office buildings. Sales growth of new equipment in Europe was constant during the mid to late 1990s, but has been weak thereafter given the reduced construction activity.
In North America, the largest elevator market segments are office buildings, sports and leisure facilities, and residential buildings, each with approximately the same proportion of the total market.
The focal point of elevator markets has shifted even more clearly to Asia. The growth has been strongest in China, where resident construction is the engine for growth.
Growth Drivers - New Equipment Business
Demand for new elevators follows the general economy and developments in construction activity with about a one-year lag. There are several inter-related factors supporting growth, including demographic and socio-economic development, desire for efficient use of space, increasing movement of people and goods through airports and metros, and safety requirements.
The global construction and engineering industry –excluding homebuilding – is estimated to reach a market value of approximately USD 1.3 trillion in 2008. This represents a 25.2 percent increase since 2003, or a compound annual growth rate of approximately 4.6 percent. Growth is expected to be driven by the recovery of Western economies and the continued expansion of the developing markets in Asia Pacific and Eastern Europe.
The global homebuilding market is estimated to reach a value of approximately USD 840 billion by 2008, a 24.8 percent increase since 2003, equivalent to a compound annual growth rate of 4.5 percent. This market segment is defined as all residential construction including apartment blocks, housing estates and individual home developments as well as prefabricated houses and semi fixed manufactured homes. The leading producer of new homes in volume terms globally is the Asia Pacific region, which accounts for close to a third of the volume.
Population density is another key driver of elevator demand. According to the UN, in 2003 there were 26 cities with a population between 5 and 10 million and a further 20 “mega-cities” – cities with populations in excess of 10 million – housing a total of approximately 458 million people; by 2015 this is expected to increase to 39 and 22 cities respectively housing 627 million people. In the thirty years following 2000, the UN anticipates that global urban population will increase at an annual rate of 1.9 percent, nearly double the rate of population growth and resulting in a doubling in size in 38 years. This increase in population density is expected to result in increased demand for elevators.
Asia not only exhibits the highest population density worldwide but also the highest growth in density. Because of these factors, it is expected that Asia will be a key source of demand for new elevators in the coming years, particularly as standards of living increase. In China alone, estimates suggest that in 2004 there was one elevator or escalator for circa every 2,000 people compared to one elevator or escalator for every 700-750 people in the rest of the world.
In Western economies, an ageing population is expected to result in increasing demand for elevators in residential facilities. This new demand is being addressed particularly by products designed to be retrofitted into existing buildings presently without elevators. With products such as the counter-weightless elevator, KONE is well positioned to respond to this trend.
Growth Drivers - Service and Modernization
The underlying growth drivers for maintenance, modernization and service revenue are quite distinct to those for new equipment sales. The Western world has a large installed base of elevators. In 2005, more than two thirds of all existing units (including escalators) were estimated to be more than 20 years old. In the context of changing safety and performance requirements, demands on this old equipment are becoming more stringent. This need for modernization is not present to the same extent in the developing economies of Asia since the installed base is much younger and rapidly growing.
Other trends that drive modernization work in the Western world are hardly present in developing economies; neither does Asia suffer from a rapidly ageing population nor are regulations as stringent as they are in the West. Maintenance activity is regulated and enforced by law in most developed countries, with a certain number of maintenance visits required per year. This provides for relatively predictable future cash flows.
In the industrialized countries, sales of maintenance and upgrade services are expected to grow at higher rates than new equipment sales supported by an expanding installed base, safety requirements and the ageing of current installations.