Europe HVAC Market - Industry Outlook & Forecast 2025-2030

The Europe HVAC market size is expected to grow at a CAGR of 6.30% from 2024 to 2030.

IMPACT OF GLOBAL TARIFFS AND TRADE WARS

The recent escalation of trade tensions among the U.S., China, and the EU in 2024 and beyond into 2025 directly impacted HVAC manufacturers in as the issue has largely struck major components of HVAC units, such as compressors, heat exchangers, and electronic sensors, most of which are sourced from Asia.

Several companies have encountered higher procurement costs in Europe as a result of several new import tariffs and anti-dumping duties implemented by the European Commission on HVAC-related products imported from outside the EU, tightening margins and affecting project timelines. For example:

• The EU imposed temporary tariffs of up to 35% on Asian origin imported HVAC equipment components in early 2024 on account of unfair trade. This has forced certain European HVAC companies to seek alternative supply chains in Europe or pay higher prices, which results in increased equipment prices and slows down large-scale infrastructure HVAC upgrade projects.
• R&D Expenditure Issues in a Globalized World: Despite these doubts, R&D expenditure on HVAC technology continues to be dominated by a limited number of players, i.e., Daikin, Bosch, and LG. Small and medium-sized manufacturers are not able to compete due to the increase in operating expenses, reduced margins due to increased tariffs, and constantly changing regulatory regimes. Rather than focusing on new product development solely, all but a few firms in 2024-2025 are investing their efforts into the optimization of existing costs for equipment, improvement of intelligent controls and IoT compatibility, and retrofitting existing equipment for low-GWP refrigerants.
• Regulatory Pressure and Short Product Cycles: The demand for low-carbon heating and cooling equipment, and the constant tightening of EU energy consumption laws, require HVAC providers to update their products and solutions regularly. This reduces the product-to-market cycle and increases pressure on R&D and product management teams to produce compliant, cost-effective, and technically sound solutions in a very short span of time.

These political and trade uncertainties across the globe coupled with increased tariffs on imports and regional protectionism, are resulting in increased costs of production, delays in projects, and barriers to entering the European market for new HVAC technology. While giant companies with local manufacturing are more able to absorb these shocks, smaller import-based firms and vendors are most vulnerable. The expansion in the European HVAC market, while steady, is tempered by these outside threats, and reinforces the demand for localized supply chains, proactive R&D partnerships, and agile operating strategies in 2025.

EUROPE HVAC MARKET TRENDS & DRIVERS

Emergence of Smart Products and IoT Innovations Aid Replacements

Over the past 20 to 30 years, the energy demand in the construction sector has tripled, and there has been a very sharp rise over the past five years, driven by increased temperatures, rapid urbanization, and changing construction norms. In 2024, over 9% of the global use of electricity went towards space cooling alone, and this is expected to creep closer to 10% by 2025 as more and more residential premises, offices, and public establishments fit out HVAC systems to contend with violent weather conditions.

Space cooling demand has continued on its growth trajectory, with the total number of HVAC units in Europe and other developed economies scheduled to surpass 157 million by the end of 2024, indicating steady year-on-year growth. In 2025, this is expected to grow even further due to factors like rising heatwaves, building energy codes, and greater focus on indoor air quality (IAQ) post-pandemic. Furthermore, one of the primary issues for commercial building owners and household consumers alike is the rising price of electricity associated with traditional HVAC systems. Facility managers now generally estimate that HVAC systems represent the largest share of their total electricity bills, sometimes up to 40% in commercial buildings in peak summer months.

• The Europe HVAC market experienced a high uptake of IoT-enabled HVAC systems in 2024, particularly in commercial hubs, hospitals, schools, and luxury residential developments. This is expected to intensify in 2025 as governments and property developers emphasize smart building certifications and energy efficiency ratings like BREEAM, LEED, and WELL standards.
• LG Electronics launched their latest Therma V R290 air-to-water heat pump lineup in Europe in 2024, with advanced IoT features that allow homeowners to control heating and cooling using smartphone applications, optimize energy use based on occupancy, and schedule operations remotely.

In brief, the Europe HVAC market is undergoing a revolutionary change in 2024 and extending into 2025, fueled by rising energy demands, global warming, and shifting building regulations. The introduction of smart HVAC systems based on IoT technology is fast becoming the game-changer for both commercial and domestic consumers, delivering not just improved energy efficiency and lower operating expenses but also enhanced user comfort and system reliability.

Favorable Government Policies & Incentives

Encouraging government policies in areas promoting the utilization of RES and preventing the release of GHGs into the environment are driving the Europe HVAC market. Policymakers are also trying to influence policies that can assist in decarbonizing transport and regulating the power sectors. For mega and large projects, the utilization of appliances from renewable sources can become mandatory in the future to be certified as a green and sustainable building unit. This can strongly encourage the utilization of HVAC systems in residential and large commercial spaces. Throughout 2024 and into 2025, governments in Europe are rushing to strengthen regulations and incentive schemes to promote renewable energy solutions (RES) and reduce greenhouse gas (GHG) emissions, which have a direct impact on the demand for advanced, energy-efficient HVAC systems. Key developments include:

• The European Union's Fit for 55 Package and REPowerEU Plan are propelling stronger energy efficiency measures and higher uptake of renewable heating and cooling technology, such as next-generation heat pumps and smart HVAC systems.
• Germany, France, the UK, and the Netherlands have recommended financial subsidies, tax credits, and low-cost loans for installing green HVAC systems, particularly heat pumps and hybrid systems based on renewable energy sources like solar PV.
• Various governments in 2024 have introduced mandatory sustainability certification for new business and residential developments, and among the important conditions to be qualified as a green or low-carbon building is the installation of high-efficiency HVAC systems.
• EU Energy Performance of Buildings Directive (EPBD) revised in 2024, mandates all new constructions to be zero-emission by 2030 and existing buildings to receive regular energy upgrades, driving the replacement and retrofit market for HVAC equipment.
• The public funding programs for large infrastructure projects, airports, hospitals, and public buildings now require HVAC solutions with smart connectivity support, IoT monitoring, and energy optimization on demand to find their way to approval and funding lists.

These subsidies and regulatory updates are spurring future-proof heating and cooling technologies adoption at a quicker pace. Builders and manufacturers are looking to increase the number of next-generation HVAC solutions to meet standards while enjoying the financial benefits.

INDUSTRY RESTRAINS

Turbulent Global Political and Trade Relations

In 2025, the European HVAC market will still face robust constraints from ongoing global political and trade tensions, added to by economic uncertainty and mounting environmental regulations. While the post-Brexit UK-EU trade agreement continues to hold, regulatory fragmentation and complex customs procedures still confuse supply chains and cross-border HVAC trade, particularly hindering the movement of components and skilled labor. Geopolitical tensions, including the current Russia-Ukraine war and increasing tensions elsewhere in the world, have led to volatile energy prices and inflationary pressures on raw materials and manufacturing costs, squeezing profit margins for HVAC suppliers across Europe. Furthermore, the EU's increasingly stringent 2025 carbon and energy efficiency requirements are compelling quick adoption of green, next-generation HVAC technology, making it difficult for small and mid-range vendors to survive without substantial capital investment.

The highly competitive Europe HVAC market structure restricts heavy R&D investment, with major multinational companies commanding innovation pipelines and local companies focusing on incremental improvement and cost-saving in manufacturing. The fast convergence to smart, connected, and IoT-capable systems, and declining product lifecycles, add to the pressure on manufacturers to deliver technologically advanced, compliance-oriented products with competitive pricing. In addition, rising labor expenses, increasing demand for local production in the face of supply chain risks, and stricter refrigerant regulations under the EU's updated F-Gas Regulation 2025 also contribute to operating pressures. All of these combined hold the market's growth momentum as it approaches 2025, particularly on regional and domestic players who are struggling to keep pace with a highly regulated, price-sensitive, and politically divided landscape.

SEGMENTATION INSIGHTS

SEGMENTATION BY EQUIPMENT

HVAC commonly refers to heating, ventilation, cooling, and collective heating and cooling technologies put into use in residential buildings, industrial sectors, commercial places, and public utility buildings. The Europe HVAC market can be divided into the following three categories based on functionality: heating, ventilation, and air conditioning.

HEATING

The European HVAC market for heating equipment holds the largest segmental share and is projected to witness growth at a CAGR of over 6.28% during the forecast period. The segment is driven by more stringent carbon emission regulations, a large-scale shift from gas boilers to low-carbon alternatives like heat pumps, and heightened investment in district heating networks. Countries such as Germany, France, and the Netherlands have enacted stricter limits and regulations on heating systems powered by fossil fuels, driving the shift to heat pumps, which experienced record installations in 2024. Household buildings continue primarily to utilize central heating systems but increasingly are supplemented by hybrid systems, systems powered by renewable energy, and smart controls for enhanced energy management.

The industry remains highly decentralized, with behemoths like multinational companies Daikin, Bosch, and Viessmann coexisting with regional and local producers in smaller cities and rural areas. Simultaneously, IoT-empowered intelligent HVAC technologies that integrate building-level sensing are being embedded as the new standard in new commercial and residential development, offering real-time optimization of energy consumption and climate control. Both the air conditioning and ventilation markets are also witnessing healthy growth with escalating summer heat, heatwaves, and growing indoor air quality awareness propelling demand in Europe. From household units to schools, hospitals, and office spaces, consumers are now more willing to switch to energy-efficient, low-maintenance HVAC systems that are compatible with green building practices and government-subsidized sustainability incentives.

Furthermore, heat pumps are extremely popular in Europe. The heat pump industry dominated the market for heating equipment with a value of USD 27.52 billion in 2024 in European countries with freezing or colder climates such as Scandinavia, Norway, Denmark, and Northern Europe. Heat pumps are favored because they are energy efficient and eco-friendly, and their adoption is set to continue growing as carbon emission regulations tighten, with numerous European nations prohibiting the use of fossil fuel-based heating systems.

AIR CONDITIONING

The European air conditioner (AC) equipment market is highly competitive, featuring a mix of domestic and global vendors. It is seasonal and technology-driven, with the commercial (CAC) and residential (RAC) segments making up the bulk of demand. Europe’s diverse climate plays a key role in shaping demand. While Northern and Central regions experience milder summers, Southern countries like Spain, Italy, and Greece are facing increasingly hot and humid conditions. The summer of 2024 was one of the hottest on record, triggering a sharp rise in AC installations across homes, offices, hospitals, and schools.

Furthermore, in response to both climate change and energy concerns, the EU has strengthened energy efficiency regulations through initiatives like the Eco-design and Energy Labelling framework (EU 2017/1369). These rules mandate high-performance standards, including A+++ ratings, inverter technology, and the use of low-GWP refrigerants such as R-32. To further accelerate adoption, Southern European countries introduced tax incentives and subsidies in 2024 to support the transition to energy-efficient, eco-friendly AC systems. Heading into 2025, Europe’s AC market is being reshaped by a convergence of climate pressures, rising energy costs, regulatory reforms, and tech innovation.

VENTILATION

The ventilation equipment market is characterized by many small and medium-sized vendors at both local and regional levels. Ventilation equipment is essential for both residential and commercial buildings in Europe. Moreover, ventilation systems improve Indoor Air Quality (IAQ) by managing indoor thermal conditions with varying climatic conditions. Technological innovation is improving advanced heat ventilators, air filters, and programmable controls for efficient operations.

In Europe, the emphasis is on energy-efficient ventilation systems to restrict greenhouse gas (GHG) emissions and energy use. This includes the use of heat recovery ventilation (HRV) systems, high-efficiency fans, and demand-controlled ventilation (DCV) systems. These ventilation systems convey heat from incoming to outgoing air streams, reducing the energy required to cool or heat incoming air and improving overall energy efficiency. The emergence of high-tech ventilation systems for reducing ventilation energy costs and improving outdoor air quality is likely to improve the installation of new production facilities across the board. The above factors combine to boost the ventilation market over the forecast timespan.

SEGMENTATION BY END-USER

The European HVAC market is segmented by end-users into residential, commercial, and others, with the residential sector holding the largest market share. Several factors are expected to drive growth in this segment over the next five years, including rising disposable incomes, increased construction of high-rise buildings with features like swimming pools, and a growing focus on sustainability and eco-friendly technologies. There's also increasing awareness and adoption of HVAC systems powered by renewable resources such as geothermal energy.

The residential HVAC market has been growing steadily, fueled by strong demand for home renovations and consistent new housing construction. Low interest rates and a shift in consumer preference toward larger homes have further boosted demand for home improvements and new builds. Notably, many of Europe’s construction projects are significant contributors to HVAC market revenues. Furthermore, climate variation across Europe also drives demand for a diverse range of HVAC equipment in the residential sector. Demand surged alongside a boom in the construction industry, particularly in developed European countries. However, while demand for both new systems and replacements remains strong, consumers are becoming more cautious and may reduce non-essential spending, which could affect short-term sales.

On the commercial side, the market is facing more significant challenges. Economic uncertainty across Europe, including ongoing repercussions from Brexit and signs of a potential recession, has led to stagnating demand. As a result, many commercial customers are postponing HVAC investments or opting for more cost-effective solutions. Corporate spending on HVAC systems is expected to soften in the near term. Furthermore, the growth of the commercial segment is attributable to the development of affordable and flexible HVAC that matches the complex and dynamic infrastructure and helps reduce utility bills.

GEOGRAPHICAL ANALYSIS

Several key factors are driving the surge in HVAC equipment sales across Europe. These include rising construction spending, a growing number of retail building projects, increased government investment in sustainable building development, ongoing industrial expansion, rapid urbanization, shifting climate conditions, and higher disposable incomes throughout the region. Government regulations promoting eco-friendly refrigerants and energy-efficient, smart HVAC systems are also contributing to increased demand, especially in countries like Germany, the UK, France, and Italy, where construction activity is robust. Western Europe currently leads the market, holding over 56% of the regional share in 2024, and is projected to grow at a CAGR of 6.60% over the forecast period.

From a product demand standpoint, air conditioning systems dominate the market in Western Europe. Rising temperatures - driven by urbanization, pollution, and climate change - are making cooling solutions more essential, particularly in urban areas. Companies operating in the HVAC industry, specifically in air conditioning, are seeing steady sales growth thanks to strong demand in this region. This is largely due to the concentration of commercial facilities, industrial operations, and higher consumer purchasing power compared to other parts of Europe.

GROWTH STRATEGY OF KEY VENDORS

Growing demand for HVAC systems in European domestic markets is driven by various climatic changes, tighter energy efficiency requirements, and growing consumer awareness. Extended heatwaves in South Europe, i.e., Italy, Spain, and Greece, are placing a high value on cooling systems, while the colder regions of the Nordics and Eastern Europe are witnessing growing demand for heat solutions due to cold winters. These climatic oscillations are prompting inhabitants to invest in sophisticated HVAC systems for comfort throughout the year and to support the Europe HVAC market growth. Besides, tough EU legislation like the Eco-design and Energy Labelling Framework is also prompting people towards energy-efficient alternatives, as a result of which householders are incorporating systems that decrease energy consumption and carbon emissions as well as lower utility costs.

In addition, awareness of IAQ post-pandemic is also the major driver for the Europe HVAC market with advanced air purifying technology like HEPA filters, UV-C disinfection, and DCV. It is extremely widespread in highly congested urban areas where people seek healthier indoor air for health and wellness. HVAC system technology advancement, including IoT-based climate control and smart functionalities, is also driving growth in the Europe HVAC market. These technologies facilitate remote control and optimization of HVAC devices by homeowners, which improve energy efficiency and reduce long-term expenses.

But the competitive Europe HVAC market is more than just offering green solutions. To be competitive in this rapidly evolving market, companies must focus on incorporating cutting-edge technology that not only meets environmental requirements but also maximizes operational performance. This includes features like smart connectivity, real-time energy monitoring, and automation, which maximize system efficiency and reduce long-term operating expenses for end-users. Firms that can merge sustainability with advanced technological offerings will be poised to lead the Europe HVAC market, delivering solutions that not only comply with strict environmental regulations but also provide superior comfort, affordability, and energy efficiency.

Generally, the Europe HVAC market is driven by a combination of government incentives, advancements in technology, and heightened concern for sustainability. Those suppliers who can navigate this complex area, both adopting green solutions and advanced technologies, will be the future leaders in the competitive marketplace. With the industry continuing to revolutionize itself, the demand for energy-saving, technology-based HVAC systems will continue to escalate, and therefore, the demand to meet ecological requirements as well as government and social expectations in the future.

Key Company Profiles

• Aldes
• Atlantic
• Daikin
• Johnson Controls
• Mitsubishi Electric
• Vaillant Group
• Viessmann Group
• Ostberg
• Pentair
• Robert Bosch
• Rheem Manufacturing Company
• Samsung
• Siemens AG
• Systemair
• NIBE Group
• Zehnder

Other Prominent Vendors

• Alfa Laval
• Carrier
• Honeywell International Inc
• LG
• Panasonic
• Midea
• Regal
• Raytheon Technologies
• Flakt Group
• Swegon
• VTS Group
• Nuaire
• Nortek
• Hitachi
• LU-VE
• Vent-Axia
• Rosenberg
• S & P
• Wolf
• CIAT
• AL-KO GROUP
• Dynair
• Danfoss
• Lennox
• Backer Springfield
• Dunhambush
• TCL
• Trox GmbH
• Stiebel Eltron
• Uponor Corporation
• Glen Dimplex
• Ferroli
• Elco Burners
• BDR Thermea Group
• Biddle Air Systems
• Riello Group
• Ingersoll Rand
• Camfil

Segmentation by Equipment

• Heating
• Air Conditioning
• Ventilation

Segmentation by Heating

• Heat Pump
• Boiler Unit
• Furnace
• Others

Segmentation by Air Conditioning

• RAC
• CAC
• Chiller
• Heat Exchanger
• Others

Segmentation by Ventilation

• Air Handling Unit (AHU)
• Air filter
• Humidifier & Dehumidifier
• Fan Coil Unit
• Other Ventilation Equipment

Segmentation by End-user

• Residential
• Commercial
• Others

Segmentation by Geography

• Western Europe
• Germany
• France
• UK
• Italy
• Netherlands
• Spain
• Belgium
• Ireland
• Portugal
• Switzerland
• Nordic
• Norway
• Denmark
• Sweden
• Finland
• Central & Eastern Europe (CEE)
• Russia
• Poland & Austria
• Hungary
• Czech Republic
• Greece
• Slovakia

KEY QUESTIONS ANSWERED:

1. How big is the Europe HVAC market?
2. Which region dominates the Europe HVAC market share?
3. What are the significant trends in the Europe HVAC market?
4. What is the growth rate of the Europe HVAC market?
5. Who are the key players in the Europe HVAC market?