Leevi-Eemeli Lotjonen, a finance and mathematics student from Helsinki, delivered a stock pitch on a European company at the 2025 Value Investing Seminar. His talk, aptly titled an "elevator pitch" in a literal sense, delved into the intricacies of the elevator industry, shedding light on its competitive landscape, prevailing trends, and why one European company is poised to become a dominant player through strategic acquisitions.
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Leevi, a Finnish alumnus of United World College Atlantic in Wales, brings prior experience in private equity. He is currently an intern at UWC Endowment Management, and prior to that worked as an analyst at Access Capital Partners, a large Europan investment firm.
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2025 Value Investing Seminar - Leevi-Eemeli Lotjonen
Lotjonen opened with a historical anecdote featuring Mr. Elisha Graves Otis, whose demonstration forever changed the elevator industry. Historically, pulley systems were used exclusively for tools, not people. Otis challenged this notion by publicly demonstrating his safety elevator in New York, lifting himself 10 meters high. A man in white then dramatically cut the rope, causing the elevator to drop only a few centimeters before the safety bar ejected, proving to the shocked audience that elevators could be safely used for humans.
This pivotal moment paved the way for the modern elevator industry, now dominated by four major global players: Otis Worldwide Corp (NYSE:OTIS), Schindler Holding AG (SWX:SCHN), Kone Oyj (HEL:KNEBV), and ThyssenKrupp AG (ETR:TKA) (now TK Elevators).
The "Razor and Blade" Business Model
The elevator business operates under a classic razor and blade business model, a strategy where initial product sales lead to recurring revenue from complementary products or services. Companies sell new elevator installations for a low or even no margin. The true profitability comes from subsequent service and modernization contracts. Once an elevator is installed, it requires ongoing maintenance, parts, and occasional upgrades. Since these components are often proprietary or best serviced by the original manufacturer, the customer is effectively locked into long-term, high-margin service agreements. This model ensures a consistent and predictable revenue stream far beyond the initial sale.
Key Trends Driving Demand
The elevator industry benefits from several powerful global trends that ensure its continued growth and stability:
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