The global heat pump market faced challenges in early 2024, but data points to a possible recovery in certain regions by the end of the year.
In the United States, the second-largest heat pump market, sales in the first half of 2024 were down 1%. This was affected by reduced consumer spending and a preference for repairing existing systems. However, heat pumps continued to gain market share at the expense of declining sales of fossil fuel systems. By mid-year, heat pump sales were 25% higher than fossil fuel heating systems. By November, there was a strong recovery, with sales up almost 15% year-on-year.
In the European Union, heat pump sales fell by almost 50% in the first half of the year, continuing a downward trend since late 2023.
The main reasons:
- Rising natural gas prices,
- Slowing construction
- Political uncertainty.
Preliminary figures for the year in Germany, Europe's second-largest market, confirmed a decline of almost 50 percent. However, the German Heat Pump Association (BWP) expects sales to grow by more than 30 percent by 2025 thanks to government incentives.
In Japan, the heat pump market stagnated, growing by just 1 percent in the first half of the year compared to last year. One of the reasons was consumer reticence, reflected in a decline in the index of willingness to buy durable goods. However, by December, sales had risen by around 5 percent, partially recovering from the weak start to the year, but still below the 2022 level.
Supply chains and trade
Heat pump production is less geographically concentrated than other clean energy technologies such as solar panels and batteries. However, in 2023, China produced 40% of all heat pumps worldwide, more than the EU (15%) and the US (20%) combined. While production capacity grew modestly in most regions, China expanded by more than 10% to meet domestic demand.
China also leads in component production, producing 95% of the world’s compressors in 2023 and accounting for 50% of the world’s compressor trade.
In addition, China exported 50% of all heat pumps sold worldwide, three-quarters of which went to European countries.
Heat pump manufacturers that also make air conditioners have a competitive advantage due to similar manufacturing processes. More than 80% of the world’s air conditioner capacity is concentrated in China, and much of it is underutilized. This allows production to be quickly reconfigured to heat pumps when demand increases.
Market development forecast
Despite the expansion of global trade, local production remains key for large markets. Today, only about 25% of all heat pumps are manufactured for export. Under the current policy scenario, by 2035, domestic production will cover about 75% of demand in the EU and Japan, and up to 90% in the US.
Improved data collection and reporting will be an important tool for shaping industrial strategies and supporting policy. Representatives from manufacturers, industry associations and academia met at the IEA headquarters on 23 January 2025 to discuss measures to improve data quality and harmonise global definitions for heat pumps.
The IEA will continue to work with stakeholders to improve reporting and will publish regular updates on global heat pump sales and deployment trends.