IFE Elevator lifts expansion outlook

Manufacturing company's business strategy presses the button for overseas venture

IFE Elevator Co, one of China's largest elevator manufacturers, is considering starting a plant in South America, with its main focus being Brazil.

Brazil's large population and positive economic outlook as part of the group of emerging economies known as BRICS - Brazil, Russia, India, China and South Africa - means a robust demand for elevators, said Xin Quanzhong, chief operating officer of IFE, which is based in Dongguan, Guangdong province, in South China.

A Brazilian plant would cut the transportation costs, he said, adding that the company began sales to Brazil last year.

"The Brazilian government is encouraging foreign investors to set up plants," Xin said, though citing such challenges as differences in language, culture and the legal system.

"But going global is a trend, and a company making such a move should fortify its foundation in technology, and its compliance with foreign standards and services," he said.

China exported 65,968 elevators valued at $1.812 billion last year, up 19.12 percent and 19.46 percent, respectively, according to a report of Saier Media.

Last year, the top three export markets for China's elevator and escalator brands were Russia, South Korea and Brazil. At the same time, Asia also had a large demand for Chinese elevators, with South Korea, Malaysia and Indonesia being the leading export destinations.

Li Shoulin, president of the China Elevator Association in Beijing, said that the strong potential for export growth is a testament to the improvement of the overall capacity and competitiveness of Chinese brands.

"That growth in exports also goes along with a strong domestic market, which has very good brands," he said.

Foreign brands once took the lion's share of China's elevator and escalator market, but as more domestic companies have upgraded both their brand image and technology, the landscape has changed.

"China's elevator and escalator brands have a good reputation in the global market because they are strong in pricing, stability and quick installation," Li said.

IFE Elevator is such an example of the rise of domestic brands.

It started expanding into overseas markets in 2007, generating more than 250 million yuan ($40 million) in revenue from exporting to countries including Singapore, Malaysia, Bangladesh, Australia, the United Arab Emirates and Egypt last year. Its total revenue stood at more than 800 million yuan last year.

Southeast Asian markets have grown faster than other markets and account for about 70 percent of the company's exports, which is partly attributable to the proximity between Guangdong and those countries.

In its second step for overseas expansion, IFE Elevator set up branches in 2010, investing $500,000 for a wholly owned branch in Dubai for serving the Middle East and one in Jakarta.

The branches include staff for after-sale services and support, helping the company boost sales.

The company is planning to open a branch in Sri Lanka, where the economy picked up after the end of its civil war in 2009 and where demand has been increasing in recent years, Xin said. It also is assessing the possibility of running a plant there.

Meanwhile, on the domestic front, IFE Elevator has acquired land for building a plant in Hebi, in Central China's Henan province, which is scheduled to go into operation at the end of 2016 to serve mainly the northern part of the country.

Domestic manufacturers have enlarged their share of the competitive domestic market to more than 30 percent, Xin said.

IFE Elevator recently completed the process of becoming a shareholding company, which Xin said would help regulate corporate governance, enhance its brand and step up spending on research and development.

Domestic manufacturers now have more say in international matters, according to a report by Forward Intelligence. More than 624,000 units of elevators were produced in China last year, up 18 percent year-on-year, with 15 percent increase in growth forecast for this year.

The domestic elevator market is expected to account for about half of the global market, and Chinese exports are forecast to make up about one-third of global share within five years.

Amid the strengthening recovery of the world economy, the possible appreciation of the Chinese currency should have cast a minor impact on exports, analysts say.