How The New Space Elevator Works

If you’re faint of heart, beware.

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.

Big Four
Thyssenkrupp lags behind the other three big elevator manufacturers in revenue.

Bloomberg
“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.

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