At a testing site in southwestern Germany, one of the world's largest elevator companies is stepping up trials of the first system to operate without cables. Thyssenkrupp AG's futuristic lift defies a basic design that has varied little over hundreds of years. Instead of being attached to ropes and pulleys, it soars up and across shafts with the help of magnets.
"Psychologically, there's no difference," said Andreas Schierenbeck, chief executive of the Thyssenkrupp Elevators division, dismissing any fear factor that comes with the technology. "Some people were afraid to step into elevators even with a cable."
With the first commercial deployment planned for 2020 in a building in Berlin, the maglev elevator called Multi will put the German engineering company a step ahead of rivals Otis, Kone Oyj and Schindler Holdings AG. Ranked fourth in the world by sales, Thyssenkrupp is betting the lift will provide an edge just as the market -- estimated at 60 billion euros ($71 billion) by Jefferies -- is poised for growth, driven by demand in dense urban centers for tall buildings.
"Thyssenkrupp's main advantage right now is being first in the field," said David Varga, an analyst at Bankhaus Metzler who recommends buying the stock. Developing a new technology will help the company to at least retain market share in an industry where gaining significantly on rivals is "very hard."
"It's interesting from a branding perspective," he said, adding that the company will have certain short-term benefits even though the new product won't add to the bottom line for at least a few more years.
Thyssenkrupp's elevator division started out as a sideline for the parent company, which is Germany's biggest steelmaker. In the past six years, amid a global steel glut that led a collapse in prices and a planned merger with rival Tata Steel Ltd., the unit has emerged as a cash cow, earning more than the company's other businesses.
To read about the steelmaker's reliance on elevators for profit, click here
Thyssenkrupp's Multi elevator will be in a category of its own, technologically. Kone is focusing on making cables lighter for ultra-tall buildings like Saudi Arabia's Jeddah Tower. The Finnish company, which has a testing site 350 meters underground in a limestone mine, also offers double-decker elevator cabins. Otis, owned by United Technologies Corp., has developed high-speed lifts.
"You get your freedom back - you don't have to use the elevator shaft as the main element" of design around which buildings are conceived, Schierenbeck said in an interview this month at the company's headquarters in Essen. The new elevators could run on the outside of buildings, or move sideways between parking lots and concierge desks, he said.
While the magnetic system is more expensive than traditional designs, developers can save money by using fewer and smaller shafts, freeing up precious floor space, according to Schierenbeck. Company estimates show the investment becomes worthwhile for buildings taller than 250 meters (820 feet) or about 80 stories. OVG's East Side Tower in Berlin, where the lift will make its debut, will stand at only about 140 meters, although the developers have widely promoted the innovation.
Thyssenkrupp Elevator's goal of making 1 billion euros ($1.2 billion) in adjusted earnings before interest and taxes is within reach, the executive said, adding that the target for 15 percent profit margin might take a little longer.
While the key Chinese market has slowed amid weaker property development and tougher competition, Schierenbeck sees rising demand in the coming decades as hundreds of millions of Chinese move to cities.
"The progress we are making is maybe good, but maybe not fast enough," he said. "We could do better. Maybe that's me being the typical German engineer, always looking at the things that are not working."
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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