A new Freedonia Group analysis forecasts global demand for residential HVAC equipment to increase 4.0% per year to $49.3 billion in 2025, marking an improvement relative to the 2015-2020 period as the economic effects of the COVID-19 pandemic continue to abate and residential building construction activity rises.
Below, we highlight some of the key trends from the study.
Pandemic-Related Concern About Indoor Air Quality to Boost Near-Term Sales
The COVID-19 pandemic significantly affected residential HVAC equipment markets worldwide. Though trends varied by country, in the aggregate, the impact was negative, as a reduction in residential building construction significantly lowered sales of HVAC equipment used in new buildings.
However, the pandemic also contributed to increased attention to indoor air quality and awareness of the health benefits of effective air circulation systems. While the short-term effects of this trend were muted due to the economic impact of the pandemic, there exists potential for heightened investment in renovation of HVAC systems as economic conditions improve and residential building construction rebounds through 2025.
Growth in Emerging Markets Incentivizing Innovation
The Asia/Pacific region will account for the largest share of global residential HVAC demand gains through 2025, with above average growth anticipated in China, India, and other emerging markets. Ongoing urbanization will fuel growth in new construction, while rising income levels will make HVAC systems more accessible to buyers.
A number of emerging markets – most notably India – hold especially strong growth prospects going forward, as rising standards of living will contribute to increasing penetration of HVAC equipment. In addition, many of the world’s most dynamic emerging markets are located near the equator, where rising temperatures are making cooling systems more of a necessity.
However, these nations typically have underdeveloped electrical infrastructure, and widespread use of HVAC equipment could overtax power grids. As a result, improvements in energy efficiency will represent a major advantage for gaining access to these markets. These nations also face additional challenges as they try to balance increasing industrialization with meeting climate targets, providing additional opportunities for producers who succeed in advancing climate-friendly technologies.
Air Conditioning Increasingly Penetrating Western Europe
Western Europe potentially represents a major growth market for air conditioning equipment, as the region includes many wealthy nations where this technology has historically been under-penetrated, especially in comparison to the US.
In recent years, unusually severe summer heat waves have driven spikes in sales of room air conditioners, and the threat of climate change presents the possibility that similar heat waves will be increasingly common going forward. As a result, sales are expected to remain elevated compared to historical norms, but cultural interest of air conditioning is expected to remain low in many areas. This represents both a challenge and an opportunity, as significantly stronger growth may be achievable if the industry can succeed in shifting attitudes toward residential air conditioning.
Heat Pumps Will Gain Market Share
Sales of heat pumps will increase at an above average rate, as the environmental and energy efficiency advantages of these products are allowing them to benefit from government incentive programs. For example:
- Heat pumps provide year-round comfort with both heating and cooling capabilities, without the incorporation of any additional equipment.
- These products can be installed in buildings that lack the necessary ductwork for unitary air conditioners.
- Heat pumps are among the most energy-efficient types of HVAC equipment available, a key purchasing criterion among some consumers.
Though demand remains primarily concentrated in Asia, heat pumps have made particularly strong market share gains in Europe in recent years, with sales advancing at a double-digit annual rate in Western Europe between 2015 and 2020:
- Growth in demand for these products has been promoted by EU efforts to improve energy efficiency and phase out products using carbon-intensive energy sources.
- Heat pumps still have significant potential for further market share gains in Europe, and rapid sales growth is expected through 2025 as well.
Want to Learn More?
Global Residential HVAC Equipment is now available from the Freedonia Group.
About the Author: Peter Kusnic is a Content Writer with The Freedonia Group, where he researches and writes studies focused on an array of industries.