The explosive growth of new megacities, including their outer rings of slums, favelas, barrios and shantytowns, will power Siemens’ sales and earnings for the rest of this century. Mass migrations from rural to urban areas worldwide is creating unparalleled opportunity. Staggering numbers tell the tale: Already 51% of the world’s 6.9 billion people–3.5 billion souls–live in cities; by 2050 demographers think it will be 70%, or 6.2 billion people. Nearly all of that growth will be in emerging markets like Asia, Africa and Latin America. By 2100, the United Nations estimates, Europe’s share of the world’s population will be cut in half to 6%, while Africa’s will double to 25%.
The developed nations, with their massive industrial infrastructure and huge consumer markets, still account for 70% of Siemens’ sales. “But when you talk about incremental growth, more than 50% of it will happen in emerging markets,” Löscher says. “This is a huge, huge opportunity.”
A recent McKinsey & Co. report says 400 midsize cities that most executives “have never heard of”–Hangzhou, China; Chennai, India; and Florianópolis, Brazil among them–will produce 40% of global growth over the next 15 years. “When you talk about the emerging markets you have to think about the second tier,” Löscher says, citing Vietnam, Turkey, Colombia and Chile. “This is where I spend a lot of time, where we’re building infrastructure, where we have huge customer links, and they are very important to the growth story of Siemens.”
Water happens to need a lot of electricity: 3% of the U.S. load goes to water and sewer treatment. That produces demand for turbines and transmission lines.