Difficulties associated with the construction field

Vietnam has officially added elevator products to the list of domestically produced products since November 2014. Therefore, elevator is a relatively young field in the processing and manufacturing industry. The growth rate of the elevator industry is also associated with the development of the construction industry. Statistics show that the proportion of elevator value accounts for 10% of the entire construction industry.

If in 2019 the construction market slowed down mainly due to legal factors, in 2020, difficulties mainly come from disruptions and instability caused by the epidemic. Fluctuations in the price of raw materials for production, weather factors significantly affect the operation of 58.3% of construction enterprises. In addition, the periods of social distancing due to the epidemic also greatly affect the workforce and workers’ mentality, making the situation even more difficult.

In 2020, the construction industry will grow by 6.7%, significantly lower than the growth rate in the period 2015-2019. In the first half of 2021, the growth of the construction industry is still just under 6%.

This fact has led to a slowdown in the growth rate of the elevator industry.

Cloudy mornings give way to clear evening

The economic scenario forecasted in 2022 by policymakers shows that the economy will have a slow and uneven growth rate. There will be 5 key industry groups, “leading the way” for the Vietnamese economy. One of them, which is both the focus and the “prime capital” to stimulate the private economy to develop is the construction of infrastructure. This group of industries is receiving special attention from the Government. Along with that, the introduction of Resolution 128 of the Government on safe, flexible adaptation and effective control of Covid-19 has been creating an opportunity for the construction industry to make a breakthrough in 2022, which is considered very feasible.

According to information from the Ministry of Industry and Trade, in 2022, industrial restructuring will continue to be carried out and consider this a key task. Accordingly, continuing to promote industrial restructuring in the direction of increasing the proportion of processing and manufacturing industries and reducing the proportion of processing and assembling for industrial products manufactured in Vietnam. Step by step remove difficulties for enterprises to increase competitiveness, build technical barriers for imported products to support domestic products, increase localization rate.

Once the policy is untied, we can see optimistic and bright signals about the elevator manufacturing industry in 2022.

The elevator market is still inadequate

According to the origin, elevator products available on the Vietnamese market are basically divided into two types: imported elevators and joint-venture elevators.

Imported elevators are products imported in complete units, supplied by famous brands such as Otis, Schindler, Gamalift, etc., meeting strict standards of quality and safety in the world.

Elevator joint venture has always been understood as a domestically produced product, made up of some imported components and the rest made in Vietnam. This product is required to comply with domestic technical regulations and standards before being put into distribution and use.

In fact, currently Vietnam is not capable of producing all components of elevators. Therefore, joint venture elevators and domestic elevators are being exchanged for concepts, leading to confusing information for consumers.

Vietnam has many agents to distribute authentic products of famous brands in the world. This creates equality in the balance of trade between economies, helping consumers have access to suitable quality products. But even the enterprises that distribute authentic imported elevators have to admit the fact that: the domestic market is suffering a rather expensive price, capital profits flow back to foreign countries, while technology transfer is almost nil. Besides, referring to the experience from developed countries like Korea, imported elevator products also need to be put through testing laboratories, if they meet the requirements, they will be licensed for import. This is something that Vietnam has not yet and in the coming time, the Vietnam Elevator Association, the Institute of Elevator Technology Applications will consult with state management agencies to develop policies related to this field. That not only further improves the standards of imported products, but also contributes to creating favorable conditions for domestic elevator manufacturers to have a better chance of competing in their own home.

Meanwhile, investing the joint venture elevator products that are available on the market, we can find many inadequacies.

Company X, an enterprise in Hanoi, advertises itself as having all kinds of elevator products suitable for customers’ requirements in terms of size and price. When we asked if we wanted to install a home elevator with standard size of 1,600mm x 1,500mm, capacity of 350kg, 5 stops, the company representative quoted a price of 290 million VND. Continuing to bargain to get the best possible discount, an employee named S advised to use stainless steel to make the cabin with a thickness of only 0.8mm (reduced by 5 million VND). Or use a used Mitsubishi motor with a gearbox, which will reduce an additional 10 million dong, although this type has many disadvantages such as slow transmission speed, shock, power consumption, and more complexity in the maintenance and repair process.

Y Elevator Company, headquartered in Ho Chi Minh City, after hearing our request for advice, fixed the price for a joint-venture elevator product that they are providing at 300 million dong. The domestically processed parts (frame, cabin wall, elevator door wall…) will be ordered by the company to complete processing, while the motor part will be used from China such as Torin. When asked more carefully about the elevator control cabinet, the owner of this business told the truth that at that price, he could only use “Engineered Cabinet”, a cabinet that uses components of unknown origin and does not have CO/CQ.

When we were concerned about the lack of synchronous assembly that would affect the quality and experience during use, the business owner reassured him with a firm voice: Rest assured, elevator will still pass the test and run fine!

Continuing to dig deeper to see the situation of small, fragmented production of many domestic “joint-venture elevator” manufacturing enterprises. But in this article, we will not discuss that issue deeply, but just want to suggest which institutional orientation will promote the development of the domestic elevator manufacturing industry in the coming years.

Raising standards and increasing the localization rate in Vietnamese elevators

Statistics show that, from the beginning of the 21st century until now, the demand for elevators has increased by an average of 5.9%/year. In 2020, the total value of elevator products newly manufactured and put into use worldwide will reach 128 billion USD (about 3 million billion VND).

Experts predict that from now to 2027, the world elevator market will continue to expand with more than 1 million new products per year, bringing the number of elevators used worldwide to 24 million units and bringing huge revenue to companies operating in the field of manufacturing, installation and maintenance services.

With the advantage of being in the region with a dynamically developing economy in ASEAN, Vietnam’s elevator manufacturing industry has a growth rate of 10-20% per year and we can completely catch up with the future train of the world elevator industry.

However, incomplete statistics show that out of the total of 35,000 elevators installed each year in Vietnam, the number of domestically manufactured elevators accounts for only about 20%. The question is whether domestic consumers are still skeptical about the quality of domestically produced products or are there other reasons (?!)

According to Mr. Nguyen Huy Tien, General Secretary of the Vietnam Elevator Association, there are basic problems that need to be resolved soon.

Firstly, it is necessary to improve technical standards in the domestic elevator production process, thereby improving product quality. The regulations and standards of domestic elevator products, once approaching the standards in strict markets such as the US and Europe, Vietnamese products will dominate the Vietnamese market. Besides, the “green” factor of sustainable development also needs attention and gradually becomes one of the mandatory criteria. Domestic products must ensure “win at home” before aiming to reach the competitive edge in the flat world.

Second, promoting the development of supporting industries will play an extremely important role. This is considered a direct driving force to create added value for the domestic elevator manufacturing industry. The development of supporting industry will create a variety of components from within the country, reduce import turnover, increase the localization rate of intelligence content in products.

Third, at present, there has not been any organization that sets forth a common standard for human resource training for the elevator industry. Enterprises still operate according to the criteria of “Everyman for himself”, leading to fragmented, small production, lack of synchronization and mutual support. Therefore, the unification of a vocational training standard, which is both professional and technical training, career orientation, and output test is an urgent and long-term strategic task, not only for the elevator manufacturing industry but also important for the processing and manufacturing industry.

In my hand was a small book titled: Play Bigger. Right on the cover of the book, it reads: “Creating a new product is already very difficult but protecting the rights and rightful position from that product is even more difficult. Maybe it’s time to start Play Big.”

I think, so is the domestic elevator manufacturing industry: Play bigger./

Thai Son