Since beginning of war in Ukraine, many western companies have withdrawn from Russia Most of them totally shutting shop in Russia. We have all heard about the Western Fast Food Giants selling off their holdings to Local Russian companies. There are Many other Types of Businesses that are directly affected from such withdrawal, fast food giants making the news but they probably in my view do not have impact like those of IT Companies, Pharmaceutical or even heavy Industries which shut shop in Russia.
One of such Industries affecting Russian Infrastructure creation and maintenance are the elevator companies which Totally withdrew from Russia. Top Five Elevator Companies Globally which control more than Two Third of the Global Elevator Market are from the west, generally from North America or Europe. These companies have taken strong decision to pull out of Russia leaving many of their clients or Prospective clients with very few alternatives.
How is Russian Elevator Market suffering due to the Withdrawal?
The Marker is suffering mainly for two reasons, one is for the supply of New Elevators mostly for the high rise and Sky Scrapper Projects. These Projects require high speed specialized elevator which are reliable and the Top 5 Companies are only ones that are considered for such projects. Now Since the withdrawal, the Builders are considering other suppliers, mostly from China. High Rises and Sky Scrappers in China also use Elevators from the top companies based in western countries. These suppliers in china are not tried and tested and if anything these deals will be done for lack of options and due to non availability of the preferred vendors.
The Second reason is non availability of spares, this is definitely not a immediate issue as there will be enough spares available within the country but will be a problem as time passes and the spares from those companies will be required. This is specially true for the Buildings using Equipment from the Large Multinationals as they use Proprietary equipment and the replacement for such parts is difficult to find or the owner will have to go for a major modernization where the proprietary equipment, generally the control system and related equipment, is replaced with the other non proprietary or locally available system.
Who is completing the Pending Projects and what about the deliveries for the Orders already placed?
To the best of my knowledge many people who were previously working with the Elevator companies are still pursuing the Builders and owners ensuring that the deliveries will be done and some are also promising deliveries if new orders are placed. I do not know how the logistics, for Deliveries and Financial, for this is working but it seems at the least difficult. Some Companies are divesting their operations in Russia with terms for Delivering Spares until such divestment is complete.
How are the Employees and Customers coping to this sudden change?
The Existing employees for the multinational companies play a big role in this. They understand the market and they know the sources of the Parts and the alternatives to it. It is difficult for them to may be deliver for the new projects but can surely keep the maintenance contracts running. These contracts are generally sufficient and will play a major role in keeping the companies or the local entities afloat.
Customers are seeking Elevators from Companies Overseas either from China, Turkey or India. China and Turkey have advantage as the logistics are not as expensive as from India and also because these Countries, especially China because China is a large manufacturer for Elevator equipment globally and much of the Elevators Supplied anywhere in the world will have at least few Parts manufactured in China and this is true even for the Big Multinationals as all them have Large Factories in China.
I also have knowledge of many Infrastructure companies coming together and approaching vendors as a group and even the government through institutions like banks are facilitating the Infrastructure companies to find and approach new vendors for multitude of Products one of them being Elevators.
Opportunities and Challenges
These Situations bring a lot of Challenges in terms of Logistics of goods and also for moving Funds as the Russian Banks have Problems making the Fund Transfers in US Dollars due to Sanctions. However, The Russian Banks have created an alternative way around this by assuring transfer in local Currency to Sellers in Countries like India. Also, Some ports in Russia now have cargo ships arriving from various countries, even though the logistics cost may be higher but the logistics is possible.
This Brings opportunities to many elevator companies especially in China, Turkey and India to supply elevators to Russian Elevator Companies or Directly to the Infrastructure Companies in Russia. But these Opportunities can be grabbed only by companies who have the experience of delivering Quality Products to Foreign Countries, have experience and understand the global shipping and logistics, have connections in Russia and understand the local requirement for certifications in Russia.
Conclusion
Most of the Top Elevator Companies are divesting their Russian Companies. The Elevator Market will not suffer for a long time as the employees from these companies find a way to keep the local entity afloat using the maintenance contracts until they are under a new management and can source from elsewhere. The customers may have to wait, shell out more or select an alternative supplier. The Situation also brings opportunities to Elevator Companies. Some Elevator Suppliers may benefit from the exit of the large Players specially suppliers based in China, Turkey and India but transport and Financial Logistics is somewhat complex but can be dealt with.