The European air conditioning (AC) market has faced a downturn in 2023, and the road to recovery seems distant, with expectations for 2024 remaining subdued. With decrease in Western Europe in 2023 by -2,9% in quantity sales and far more -13% in Central and Eastern Europe countries, the market shrank, according to results of Interconnection Consulting.

The Cooling Off of the AC Market

In 2023, AC sales plummeted across Central and Eastern Europe (CEE – Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Czechia, Greece, Hungary, North Macedonia, Poland, Romania, Serbia, Slovakia, Slovenia), with some companies in countries like Hungary and parts of the Balkans witnessing a huge drop in new sales by over 70%. Even regions that fared relatively better, like Albania, saw only a slight decline of 3.8% in units installed, reflecting the widespread impact of the market slowdown. Overall, the AC market in CEE recorded a total quantity of 1,32 million units and value of EUR 1.145,2 million, with expectations of stagnation in 2024 at 0,6% in value sales. Nevertheless, the market in CEE is projected to reach EUR 1.327,5 million in 2027, according to Interconnection Consulting.

The Western Europe countries (WEU – Germany, Italy, Spain, Benelux, France, UK and Austria) faced in 2023 only modest decrease by -2,9% in quantity sales. Persistent governmental subsidies kept the influence of downturned construction lower on AC market, overall. From WEU countries Austria fell the deepest by -15,4% while on the other side United Kingdom quantity sales changed only by -1,1%. The total quantity sales resulted of 3,5 million units sold and value of EUR 4.945,4 million with expectations of positive change 1,6% of value sales in 2024. Overall, the WEU market is expected to reach EUR 5.727,2 million at the end of forecasted period, in 2027.

Replacement Growing and Global Context

On the other hand, AC market is highly supported by replacement segment, which is increasing its share, due to drop in new constructions. Even replacements in some countries boosted by subsidies help the market overcome the challenging times. The new installation and replacement ratio is 63:37 with further tendency for replacements, in some European markets, already accounting for more than 50%, like in Italy. From the global point of view, the AC market penetration in Europe remains lower than in the U.S. or Japan, suggesting that there is still enough space for growth as suggested by Mr. Lukac, author of the study.

Changing Preferences and Technological Shifts

The AC market’s troubles are not solely due to economic conditions. The industry is also facing increased competition from alternative cooling solutions, such as cooling ceilings, cooling provided by heat pumps, and more centralized HVAC systems, especially in non-residential buildings. These alternatives, though more expensive initially, offer greater efficiency and are increasingly favored by architects and builders.

Albania Leads in Growth

Among the countries analyzed, Italy continues to be the largest market by value sales, followed closely by France and Germany. In the CEE region, Poland and Greece are the top performers in terms of sales volume. Albania leads in growth expected for 2024 (4,2%) among all European countries. The office building sector dominates, accounting for 30,3% of the market last year, followed by industrial buildings at 16,6% and the HoReCa sector (hotels, restaurants, cafés) at 16,2%.

 Chinese Manufacturers Gaining Ground

The air conditioning market is highly concentrated, traditionally led by Japanese manufacturers like Daikin, Mitsubishi, Toshiba, and Fujitsu, which accounts for more than 49% of total European market in value sales. However, this dominance is being challenged by the rise of Chinese companies such as GREE and Midea. These Chinese suppliers despite the market downturn in 2023, made their way to rise the market share and kept growing by almost 2% in contrary of other companies’ sales problems. They are making significant inroads, particularly in the conventional split air conditioner segment, which is popular in residential markets.

Link to the report

03/09/2024

Copyright: Interconnection, Publication free of charge for coverage regarding the study and InterConnection Consulting.