More Questions Than Answers

Russian elevator sector is experiencing tough times.

The Russian elevator sector is experiencing tough times as sanctions and the country’s ever-growing isolation in the international arena puts serious pressure on the industry. Prior to February 24, 2022, the Russian elevator market was one of the world’s fastest growing (thanks to huge volumes of domestic housing construction), with annual growth rates of up to 13%-14%. However, the beginning of the Russo-Ukrainian war ended hopes for further development of an elevator industry with the same dynamics.

This is also due to the exodus of most global players, the majority of which had previously considered the Russian elevator market a top priority in terms of volume and potential for further growth. As of press time, most global producers had  completed their exit of Russia. The last company on the list became Finnish OEM KONE, which, at the end of October 2023, completed the sale of its Russian operations to Russia-based S8 Capital (ELEVATOR WORLD, December 2023).

The end of imports and suspension of operations of global players’ local factories have already posed the threat of a shortage of quality elevators in the Russian market and — more importantly — raised the issue of safe use of existing elevator stock. Local manufacturers are unable to replace global producers’ products, whether in terms of output, quality or safety. In terms of safety, several incidents involving broken elevators have recently occurred in Russia, with the most publicized taking place in fall 2023 in St. Petersburg when 13 passengers nearly suffocated in an elevator in one of the city’s shopping malls. Prior to that, at least three incidents of elevators falling with passengers inside — two involving injuries — were reported.[1]

According to earlier statements by Gulshat Zagidullina, general director of Russian elevator producer Tatlift LLC, this year in Russia approximately 140,000 elevators need to be replaced. That is a huge number, especially considering the Russian elevator fleet is becoming obsolete. However, it is currently unclear whether local producers will be able to deliver any significant portion of the required figure. In the meantime, the Russian government holds on to some unfounded optimism.

An official spokesman of the Russian Ministry of Industry and Trade — a federal government agency responsible for development of the elevator industry — said in an interview with local business newspaper Izvestia that there are more than 20 enterprises in Russia that produce elevators, with a total production capacity of more than 60,000 units per year. “This allows us to fully meet the existing need for elevators with speeds up to 2.5 m/s,” the Ministry asserted.

Local manufacturers are unable to replace global producers’ products, whether in terms of output, quality or safety.

The Ministry, however, acknowledged a more challenging and complex situation in terms of high-speed elevators (with speeds of more than 2.5 m/s). Recently, some Russian media have also reported on the shortage of elevators for high-rise buildings.

As part of state plans, this problem could be solved by starting more active imports of foreign elevators via parallel imports — branded goods imported into a market and sold there without the trademark owner’s consent in that market[2] — to allow delivery of some models of high-speed elevators, as well as their individual electronic components, from TK Elevator, Schindler, Otis and KONE. However, realizing these plans could be hindered by the products’ high cost, which could be several times higher than their original market value due to logistics, transport and other factors. In addition, the volume of supplies is usually small. In this regard, the government hopes that the departure of foreign companies will stimulate Russian manufacturers to more actively invest in the production of elevators, including high-speed models.

From its side, the government already provided investments in the amount of RUB400 million (US$4.4 million) for the development and production of domestic elevator equipment including gearless lift machines, control systems, frequency inverters, etc., although most local analysts believe that this volume is insignificant.

In terms of components, according to Petr Kharlamov, vice president of the National Elevators Unit, the Russian elevator sector has been able to avoid a full-scale crisis with the supply of spare parts for service, as was the case for other segments of Russian industrial production such as the automotive sector. That sector has been supported by the regular supply of spare parts from China. Kharlamov states:

“There is no global problem here. There may be rare delays in the delivery of spare parts. However, the current situation is not catastrophic. The quality of spare parts also does not suffer. The same Finnish KONE elevators are manufactured in China.”

The Ministry of Industry and Trade also reported that the total share of Russian components in elevators is approximately 80% and continues to grow.

Still, most independent analysts — versus those provided by the government — believe the current situation is much more complex, while the physical condition of existing Russian elevator stock rapidly deteriorates.

This is also confirmed by official statistics that show that today, more than 500,000 elevators operate in Russian apartment buildings. Of those, approximately 100,000 have completed their intended service life of 25 years. Each year, up to 10,000 elevators complete their service life. In accordance with the technical regulations of the Customs Union of Russia, Kazakhstan and Belarus Safety of Elevators 011/2011, all elevators that have expired must be replaced by February 15, 2025. However, this requirement will most likely not be met.

The situation is also complicated by an acute shortage of personnel in the industry due to the ongoing war in Ukraine and Russian military mobilization, with a significant number of skilled domestic elevator specialists being in the Russian army. Moreover, Russia also has a shortage of educational institutions for training elevator industry personnel. A significant number of these institutions were closed after the collapse of the USSR in 1991.

References

[1] “In the Shopping Center of St. Petersburg, People Almost Suffocated in the Elevator,” NEWS.ru, October 1, 2023.
[2] inta.org/topics/parallel-imports