Gunnebo AB of Sweden has established a factory in Kunshan, Jiangsu province, to build mechanisms for subway toll gates to meet an expected increase in demand from the mass-transit building boom in a number of mainland cities.
The company, listed on the Nasdaq OMX Nordic Exchange, is already a major supplier of flap-gates and turnstiles at subway stations in Shanghai, Beijing, Guangzhou, Tianjin and other major cities.
At the opening ceremony of the Kunshan facility, Per Borgvall, Gunnebo’s president and chief executive officer, said that although the Chinese market currently constitutes a relatively small percentage of the company’s global sales, “I expect it will expand rapidly to be among our top five lists.”
Gunnebo invested 50 million yuan ($7.6 million) in its Kunshan factory, which has a total floor space of 10,000 square meters. It is the company’s 14th production facility outside Sweden.
Output from the factory, which will commence operations in March, is expected to be large enough to accommodate all orders from the Chinese market.
The company’s sales of flap-fan gates on the mainland amounted to 80 million yuan in 2010. Projected sales in the Chinese market will top 32 million yuan in the first quarter of this year.
“The factory will serve as a platform for us to speak to local customers and be closer to our local distributors. We cannot do business on the mainland with offices in Hong Kong or Singapore,” said Borgvall. “It will help lower our freight costs and shorten delivery time significantly,” he said.
Kunshan will also serve as Gunnebo’s sourcing base for manufacturing parts and components in China.
The flap-gates sold in the Chinese market are specially designed for high passenger volume. They were initially designed for use in the mass-transit system in Hong Kong where the annual passenger volume reached 1.41 billion in 2010.
Borgvall estimated Gunnebo has taken about 80 percent of the market share in the sector in China. By the end of 2010, 33 cities in China had applied to build subways and 28 had received approval from the government, all of which will provide potential business opportunities for Gunnebo.
Borgvall estimated that his company’s sales in China would grow by at least 25 percent this year. “The market growth will be sustained for the next five to 10 years because investment in infrastructure is undergoing substantial growth in China. Government policies signal a bright outlook for mass-transit and high-speed railways,” said Borgvall.
Looking forward, Borgvall said the company might establish a research and development center in China during the next three years.
“You cannot run a factory without the engineering capability to meet customer requirements,” said Borgvall.
Gunnebo is also keen to engage in airport construction where a large volume of entry-control systems will be required.
As part of Gunnebo’s development strategy, the company also plans to manufacture security devices for banks to diversify its business portfolio.