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Elevator Market in Indonesia Rides High on Urbanization, Finds Frost & Sullivan

- Investment on construction remains the prime focus of Indonesia

JAKARTA, Indonesia, Nov. 28, 2012 /PRNewswire/ -- The Indonesian market for elevators is one of the fastest growing markets in Southeast Asia, after Vietnam. Increasing population numbers and shift from rural to urban areas have led to an increase in construction activities in the metropolitan areas of the country, such as Jakarta and Surabaya.

This has created a vast market for elevators and is expected to drive market growth over the next five years. The construction and modernization of airports in Jakarta have further boosted the demand for elevators.

New analysis from Frost & Sullivan (http://www.buildingtechnologies.frost.com), entitled Elevators Market in Indonesia, finds that the market earned revenues of US$164.0 million in 2011 and estimates this to reach US$282.4 million in market revenues by 2016.

"As end users become increasingly comfortable with technology, they will look to adopt more modern mobility systems," said Frost & Sullivan Research Analyst Vidhi Yaduvanshi. "Hence, most of the upcoming buildings are equipped with elevators and escalators to ensure free and unrestricted mobility. The renewed focus on efficient use of space within a building means that an effective use of elevators is encouraged which will also drive the market."

Although the market has significant potential, Indonesia is an extremely price sensitive market and market participants can tap it optimally only by strategizing while taking into account end users' price sensitivity and cyclical demand from the construction market.

The price sensitivity is caused by the low level of awareness about value-driven products in Indonesia as most of the end user segments, primarily the developers, are focused on the functional aspect of the products.

The price sensitivity in Indonesia has also restricted the entry of certain participants that offer premium products and value-added services. Frost & Sullivan predicts that the restraints will affect the market for the next five years.

Over the past few years, the pressure on prices has increased due to the entry of new participants in the market, the subsequent price war and also the market stagnation during the global financial crisis and its after effects. However, Indonesia's elevator market participants managed to absorbed the higher costs of raw materials due to the intense competition in the market.

Yaduvanshi noted that in order to increase their market share, most branded participants – which dominate the market compete on price and offer additional services.

However, participants will feel optimistic that the Indonesia Building Code will strengthen the regulations pertaining to building accessibility and maintenance, which will lead to higher quality of equipment in older as well as the newly constructed buildings.

"Participants are more likely to gain steady revenues from the maintenance market than the new equipment market," noted Yaduvanshi. "This is because unlike the new equipment market, which is dependent on the construction market and is hence, cyclical in nature, the maintenance market is dependent on the existing base of elevators, which increases year on year."

Eugene van de Weerd, Country Director for Frost & Sullivan Indonesia noted that the island of Java witnesses the highest economic development in the country, and this spurs infrastructure and building construction projects in this region. Thus, investment on construction, especially that of residential buildings, remains the prime focus of Indonesia.

"The market growth can be attributed to the consistent growth in the residential, commercial, hotels, and retail verticals. The major portion of the revenue for the elevators market will come from these verticals," van de Weerd concluded.

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