EUR 850.00 For Business Accounts Only

Morningstar | Kone Well-Positioned in China, the Largest Elevator Market, but Shares Offer Scant Margin of Safety

As the market dynamics in China and Europe shift, we think established relationships with developers and end users will protect Kone’s position as a top global elevator player. Kone’s success in winning contracts for new elevator and escalator, or E&E, installations stems from a track record of delivering tailor-made solutions that can save costs by shortening a building’s construction time, lowering energy use, or improving people traffic flow. In China, now the world’s largest elevator market, Kone has the number-one market share position on new installations, and in Europe it is the second-largest competitor for new equipment.Winning new installations puts the company at a competitive advantage in securing maintenance contracts, which are more lucrative and important to long-term returns than new installations. In China, where it has now been present for 20-plus years, Kone shares the number-one position for maintenance contracts, and in Europe, Middle East, and Africa, or EMEA, it is number three. As the original equipment manufacturer, or OEM, the company is in a good position to win the associated maintenance contract on a new installation because it can offer lower downtime through the quickest access to spare parts, knowledge of its own equipment, and its long track record of reliability. This last point is especially important in developing markets, where Kone’s European brand, associated with quality and safety, carries weight. Over time, elevators have become more software-driven, enabling better usage management to lower energy costs or control access for security purposes. Like cars, increasing the sophistication of tools and skills needed to maintain software-enabled elevators has limited some third-party repair providers to servicing older models. Kone is increasing investments to connect most of its installed base to the cloud over the next few years, helping customers dynamically manage E&E flow, as well as provide ongoing online diagnostics to minimise downtime. Once a customer signs on to cloud management, we think it will be even more unlikely to switch to a new maintenance provider.