The HVAC industry has a promising future and will continue to grow at a CAGR of 6.5% through 2025. The global HVAC market trades four main components: ventilation systems; climate control systems; heating, cooling and refrigeration equipment; and building automation systems.
Creating these systems requires a broad range of suppliers and expertise; therefore, the HVAC industry is prospering for many businesses.
HVAC Industry Growth Prospects For The Future
The HVAC industry provides a wide range of products and services to people and businesses worldwide, including industrial heating and ventilation systems (IHVs), commercial boilers, air conditioning equipment and other components.
The demand for HVAC products is increasing as more buildings are built yearly with better environmental controls, such as heating or cooling systems installed within them. In addition, there has been a significant rise in consumer spending on energy efficiency measures such as solar panels or energy-efficient windows, contributing to further growth for this market segment over the coming years.
The global HVAC market will probably thrive at a CAGR of 6.5% by 2025.
The global HVAC market has witnessed significant growth over the past few years, and this trend will likely continue. Essential factors driving this growth include rising demand for energy efficiency, government initiatives on climate change mitigation and renewable energy production, increasing penetration of innovative technology among consumers and growing adoption of advanced technologies such as IoT (Internet of Things). However, the growth rate could be more significant without restraining factors like price wars and cost- and energy increases.
The global HVAC market shows growth tendencies with a CAGR of 6.5% by 2025. Asia Pacific accounted for nearly 50% of global HVAC demand in 2017; this trend is likely to continue as the region continues to grow at an impressive rate.
In addition, climate change has transformed the HVAC industry, and new technologies are emerging to help face these challenges.
Ventilation & Air Conditioning Market Growth Rate
A primary function of HVAC systems is to regulate temperature and humidity levels in buildings. They most commonly appear in residential, commercial and industrial buildings. In addition, HVAC systems provide ventilation and air conditioning for indoor and outdoor spaces.
In the U.S., the industry grew at an annual rate of 3% between 2017-2022, according to PMMI’s Market Report (Ventilation & Air Conditioning Industry Global Growth Tendencies 2020-2023, PMMI Reports). This growth rate represents an increase from 2% during 2010-2016, primarily driven by demand for new construction projects due to increased building activity across all sectors, including commercial business parks, healthcare facilities & other healthcare settings, etcetera.
Increasing Construction Spending May Boost Demand For HVAC Systems
The HVAC industry sees a positive impact from the increase in construction spending. The construction industry, which includes residential and commercial projects, is one of the largest consumers of HVAC systems. This segment accounted for more than 50% of all HVAC units sold in 2017.
In addition to being an attractive market for new builds and renovations, there’s plenty of room for growth within existing buildings. According to research conducted by global management consulting firm McKinsey Global Institute (MGI), total spending on commercial building renovations could increase by more than $100 billion over the next five years.
In 2015, the Asia Pacific accounted for nearly 50% of global HVAC demand.
In 2015, the U.S. accounted for nearly 45% of global HVAC demand, whereas China, Japan, India and South Korea are the leading markets for HVAC systems in the APAC region.
In Europe, Italy had the most significant heat pump market in 2020.
Besides this, Germany and France are also role players in the industry.
Emerging Markets
The HVAC industry is now going global. As a result, emerging markets are becoming an increasingly important part of the market, especially in developing countries. For example, China will be the most extensive air conditioning and refrigeration equipment buyer by 2022.
As economies grow and populations expand, people want access to better living conditions—which means they will need more energy-efficient products like air conditioners and refrigerators. Therefore many manufacturers invest in developing new markets outside their traditional areas of operation (like Europe).
Climate change and regulations have transformed the HVAC industry, and new technologies are emerging to help face these challenges.
Climate change is causing many global concerns, which are influencing the HVAC industry directly and indirectly. For example, the need for cooling systems will probably increase due to global warming, whereas the demand for environmentally friendly solutions is emerging, too.
Increasing government regulatory policies and incentives to ensure energy saving and conservation of natural resources is also driving the industry. Governments of various countries are introducing stringent regulatory guidelines for the vendors while installing and retrofitting energy-prompt HVAC systems.
For instance, the Ozone Depleting Substances (ODS) regulation banned the R-22 refrigerant in the European Union in January 2015. Currently, the installed base of many HVAC systems relies on R-22; however, over time, R-22 will become more expensive, and there will be scarcity.
As a result, consumers would need to replace their existing HVAC systems, which is expected to drive the demand for modern, energy-efficient HVAC systems comprising programmable thermostats to help control temperatures throughout the day.
New technologies are emerging to help face these challenges, but many questions still need to be answered about how exactly they’ll serve manufacturing HVAC equipment.
Another factor is that plastic accounts for roughly 10%-30% of the cost of manufacturing HVAC equipment; alternatives to plastic are still in the making.
Raw materials used to manufacture HVAC equipment include copper, aluminium, steel and plastic, accounting for roughly 10%-30% of manufacturing costs.
Primary raw materials used in the manufacture of HVAC equipment include copper, aluminium, steel and plastic—the latter accounts for roughly 10%-30% of manufacturing costs.
The refrigeration cycle uses copper; the condenser and compressor contain aluminium; the evaporator has steel, whereas the insulation and gaskets on fan motors include plastic.
Technological advances have led to significant improvements in efficiency and cost-effectiveness over time, as well as increased automation capabilities (e.g., sensors).
The HVAC market is growing, and the demand for skilled industrial workers is rising.
The U.S. Bureau of Labor Statistics (BLS) reports a 28% increase in job openings between 2010 and 2020 within this industry.
The industrial heating and ventilation industry is one of the largest employers of skilled workers, employing over 5 million people across more than 200 countries worldwide, including manufacturing plants & workshops, building contractors; commercial refrigeration companies; food processing plants etc.
Factors Driving Global Growth of the HVAC Industry
Growth depends highly on the construction industry, energy efficiency and healthcare sectors.
According to the DIPP India report, “Construction” accounted for about 25% of the total installed capacity in 2016-17. Moreover, approximately 22% of all residential buildings were air-conditioned during 2019, which means there is tremendous potential for growth in this sector and other related industries like HVAC services etc.
Above this, healthcare facilities require large amounts of cooling and heating equipment due to their use by patients with compromised immune systems or who need to control their body temperature, so they don’t get sick from being too cold (or hot).
Factors Hindering Global Growth of the HVAC Industry
- Climate change: The HVAC industry is susceptible to climate change, which can reduce its growth.
- Economic slowdown: The economic recession has increased the cost of raw materials and output. It also affects the demand for energy-efficient products by households and commercial establishments by reducing their spending power, thereby impacting on sales growth of HVAC equipment manufacturers and suppliers across various geographies globally.
- Lack of skilled workers: A lack of skilled workers is one factor hindering the global expansion of this industry due to its complexity, high capital expenditure requirements, etc.
Conclusion
The HVAC industry is one of the most dynamic and innovative in the world. As a result of climate change, increased energy efficiency requirements, and changing lifestyles, there are many opportunities for growth in this sector.
