Heating and cooling in buildings accounts for an estimated 15% of global CO2 emissions. Consequently, as the global push for energy efficiency and decarbonization accelerates, heat pumps have emerged as a critical solution for heating. The rising cost of energy, stricter regulations, as well as the growing emphasis on more sustainable solutions are driving the adoption of heat pump technology. Moreover, recent advances in technology have considerably improved the performance of heat pumps, making it an energy-efficient and thus a more attractive heating solution for consumers and businesses.

KnowledgeAgent has analyzed the global heat pump market landscape and compiled an industry dossier. This report offers an overview of the key industry players, growth trends and projections, driving forces behind adoption, and the most recent developments – including production capacity expansion plans and M&A activity. The heat pump market industry dossier is available for download.

Market Volume

According to estimates, the global heat pump market is valued at USD 100 billion, growing at a mid-single-digit compound annual growth rate (CAGR). In 2021, heat pumps met approximatly 10% of global heating needs, a figure projected to reach 20% by 2030. Achieving this milestone and the target of Net Zero Emissions (NZE) by 2050 requires quadrupling the global heat pump manufacturing capacity by 2030.

Projections indicate a 6% annual growth rate in demand for heat pumps between 2023 and 2050, with annual sales rising from 40 million to 170 million units. In Europe, demand is expected to increase more than threefold to about 13 million units in 2030. In the United States, annual sales are forecast to grow at a CAGR of 13% by 2030.

Growth Drivers and Challenges

Heat pump market growth is supported by the following key factors:

• Government initiatives: Over 30 countries offer subsidies, tax credits, and regulatory support. Furthermore, mandatory labeling schemes and standards on the performance of heating systems are adopted in approximately 45 countries
• Energy independence and decarbonization: The global shift away from fossil fuels, particularly in light of recent geopolitical events, is accelerating the demand for alternative solutions. Heat pumps offer a viable path toward greater energy independence and reduced reliance on volatile fossil fuel markets
• Declining costs: Advances in manufacturing and their increasing integration with solar photovoltaic (PV) systems are making heat pumps more cost competitive

Several challenges remain:

• High upfront costs: The initial investment required for heat pump systems, including equipment and installation, can be significantly higher than conventional heating systems. A potential deterrence for consumers
• Workforce shortage: The relatively recent emergence of heat pump technology has created a shortage of skilled engineers, installers and technicians
• Limited economies of scale: The lack of standardized components results in lower automation levels during production, increasing reliance on manual labor and limiting cost efficiencies
• Immature supply chain: The supply chain for heat pump components remains underdeveloped, with further standardization and investment needed to ensure consistency and scalability
• Electricity taxation disadvantage: In many European countries, electricity continues to be taxed more heavily than gas and other fossil fuels, reducing the long-term cost competitiveness of heat pumps

Market Competition

A distinct characteristic of the heat pump market is its high fragmentation, with many regional and local players. Leading heat pump manufacturers include Daikin, Midea, Nibe, Trane Technologies, Carrier Global, Bosch, Mitsubishi, etc. For most of these global enterprises, heat pumps account for a rather small fraction of the business operations. Notably, some consolidation has been observed in the market as market growth has accelerated, with large deals announced in the past few years. The most notable of those were Bosch, acquiring Johnson Controls’ HVAC business, and Carrier Global completing the acquisition of Viessmann Climate Solutions in 2024.

Capacity Expansion

In addition to mergers and acquisitions, heat pump manufacturers have announced a number of new production sites or expansion of existing sites to meet the growing demand. Our industry dossier includes a list of these expansion plans, with a primary focus on developments in Europe. Apart from investments in production sites in Portugal, France, and Italy, most of announced capacity expansions are planned in Germany by Hoval, ait, and Stiebel Eltron, and in Poland by AIRA, Daikin, and Bosch.

Market Insights

An industry dossier is always a good starting point for identifying markets with growth potential. It provides a condensed overview of key players, market shares and segments, product portfolios, as well as technology developments.

In terms of internal stakeholders and their objectives, further market analysis will be required. Corporate strategy teams may require in-depth company profiles for mergers and acquisitions, while product management may want to monitor competitors for strategic competitive analysis.

For these and further insights into the heat pump market landscape, you can explore our full report, available for download. Check out additional research from our energy experts in the following blog posts:

• 03.02.2025: Better Decisions Through Comprehensive Company Profiles (in German)
• 08.02.2024: Benefits and Future Challenges of Solar-Energy-as-a-Service
• 07.11.2023: Investing in Energy System Flexibility for the Future

Do not hesitate to contact our Energy team for any kind of research projects in the energy field.

Sources:

1. Aira news release, 26/06/2024, Aira to invest €300 million and manufacture up to 500,000 heat pumps a year in Poland, https://company.airahome.com/newsroom/aira-to-invest-300m-euros-and-manufacture-up-to-500k-heat-pumps-a-year-in-poland

2. Ait Group news release, 03/08/2023, Heat pump specialist continues to expand: ait-group acquires production facility and doubles production capacity, https://www.aitgroup.com/en/news/press-releases/press-releases/press-release-ait-group-acquires-production-facility

3. Bosch news release, 23/07/2024, Bosch Acquires Residential and Light Commercial HVAC Business from Johnson Controls and Hitachi, https://www.bosch-presse.de/pressportal/us/en/press-release-24640.html

4. Bosch news release, 19/04/2023, Bosch to invest further in expanding its European heat-pump locations, https://www.bosch-homecomfortgroup.com/en/news-and-stories/news/bosch-investiert-weiter-in-den-ausbau-seiner-europaeischen-waermepumpen-standorte/

5. Bosch news release, 02/11/2023, Climate-neutral building stock: Bosch increases heat-pump production in Aveiro, Portugal, https://www.bosch-presse.de/pressportal/de/en/climate-neutral-building-stock-bosch-increases-heat-pump-production-in-aveiro-portugal-259585.html

6. HSBC Global Research, Brijesh Siya, John Fraser-Andrews, 03/2023, Green Building: Heat Pumps at Decarbonization Frontier

7. Carrier Global news release, 02/01/2024, Carrier Completes Acquisition of Viessmann Climate Solutions, https://www.carrier.com/commercial/en/us/news/news-article/carrier-completes-acquisition-of-viessmann-climate-solutions-na.html

8. C WorldWide Asset Management, 12/2023, The Market for Heat Pumps is Heating Up, https://cworldwide.com/insights-news/item/?id=19900&title=the-market-for-heat-pumps-is-heating-up

9. Cooling Post, 16/10/2022, Midea confirms €60m Clivet heat pump factory, https://www.coolingpost.com/world-news/midea-confirms-e60m-clivet-heat-pump-factory/

10. Daikin Europe news release, 04/04/2023, Daikin Europe kicks off construction of first Polish heat pump factory, creating 3,000 new jobs by 2030, https://www.daikin.eu/en_us/press-releases/daikin-europe-kicks-off-construction-of-first-polish-heatpump.html

11. Daikin Industries Ltd., Integrated Report 2023

12. European Commission website, Heat Pumps, https://energy.ec.europa.eu/topics/energy-efficiency/heat-pumps_en

13. European Heat Pump Association (EHPA), 06/2023, European Heat Pump Market and Statistics Report 2023, https://www.ehpa.org/news-and-resources/publications/european-heat-pump-market-and-statistics-report-2023/

14. Groupe Atlantic news release, 23/10/2023, Groupe Atlantic is investing 150 million euros in a new heat pump manufacturing site in Saône-et-Loire (71), France, https://www.groupe-atlantic.fr/en/News/GROUPE-ATLANTIC-is-investing-150-million-euros-in-a-new-heat-pump-manufacturing-site-in-Saone-et-Loire-71-France

15. International Energy Agency (IEA), 04/042023, Heat pump manufacturing capacity by country or region according to announced projects and in the Net Zero Scenario, https://www.iea.org/data-and-statistics/charts/heat-pump-manufacturing-capacity-by-country-or-region-according-to-announced-projects-and-in-the-net-zero-scenario

16. International Energy Agency (IEA), 15/03/2024, Heat Pump Manufacturing Capacity Per Region, 2022, https://www.iea.org/data-and-statistics/charts/heat-pump-manufacturing-capacity-per-region-2022

17. International Energy Agency (IEA), 07/2024, Heat Pumps, https://www.iea.org/energy-system/buildings/heat-pumps

18. Liechtenstein news release, 22/02/2024, Hoval invests 20 million euros in Germany, https://www.liechtenstein.li/en/liechtenstein_news/hoval-investiert-20-millionen-euro-deutschland

19. Macquarie Equity Research, 20/09/2023, Global Cooling

20. Publications Office of the European Union, 24/10/2023, Clean Energy Technology Observatory: Heat pumps in the European Union - 2023 Status Report on Technology Development, Trends, Value Chains and Markets, https://publications.jrc.ec.europa.eu/repository/handle/JRC134991

21. PV Magazine, 25/04/2023, German manufacturer to invest €450 million in heat pump expansion, https://www.pv-magazine.com/2023/04/25/german-manufacturer-to-invest-e450-million-for-heat-pump-capacity-expansion/

22. RBC Capital Market Research, 12/12/2023, Johnson Controls International

23. REN21. 2024. Renewables 2024 Global Status Report Collection, Global Overview, https://www.ren21.net/gsr-2024/

24. World Economic Forum, 21/02/2022, How to heat up - and cool down - climate innovation, https://www.weforum.org/stories/2022/02/heating-up-and-cooling-down-climate-innovation/