The market for Residential Ventilation in Europe rose last year (2019) by +2.4% in terms of value, after 2.1% in 2018 and after growing strongly in 2017 (+7.1%) due to favorable construction activity. A decline in building completions and increasing market saturation, especially for central systems with heat recovery, are responsible for the weak growth rates of the past two years. For 2020, Covid-19 is expected to post a strong minus growth of -8.1% by value, with the countries examined being affected differently by the effects of the pandemic and recovery is not in sight for most countries until 2022 or 2023, according to the new study by Interconnection Consulting.

Current indicators suggest that the market for residential ventilation in the analyzed markets (Germany, Austria, Switzerland, France, UK, Italy, Poland, Benelux, Nordics ) will rise by 0.6% annually until 2023 in terms of units sold. However positive growth is expected in some countries not to return until 2023 again.

Of the investigated countries, Austria showed the strongest growth with +6.4% in terms of quantity sold recorded (with simultaneous decline in value of -3.0%), while Poland with 5.0% growth in terms of quantity (+6.5 % by value) most solidly developed overall. The Swiss market shrank by -0.8% in units, but even lost by -3.9% in value. Germany showed overall growth of 3.6% compared to 2018, whereby also here a double digit growth decentral (local) systems with heat recovery had to compensate for the decline of the central systems with heat recovery.

Measured by sales value, considering all the countries examined, Decentral Ventilation units with HR currently account for 10.2% while Central Systems with Heat recovery account for 42.4% and the rest (47.5%) goes for Exhaust Systems without heat recovery. Comparing these numbers in terms of quantity (units sold), exhaust air systems without heat recovery, as well as decentralized systems (with heat recovery) are much more represented due to the lower average price.

Central systems with market saturation

In a whole number of the countries examined, the growth in central units (with heat recovery) was negative, although a differentiation must also be made in some countries. In part, the decline mainly affected systems with lower output (capacity in m³), while more powerful systems (but the quantities of which are sold in significantly (!) lower quantities and can also be used in areas such as schools, kindergartens, meeting rooms, in addition to residential construction), could even record increases. According to industry insiders, manufacturers also like to focus on this area because in some cases even higher margins can be achieved. The manufacturing costs for larger systems are only marginally higher in relation to the significantly higher prices that can be achieved with more powerful units.

Another influence on the systems used, is the increasing proportion of apartments (multi-storey residential buildings), while the proportion of one and two-family houses is declining year after year in almost all countries. In Austria, for example, the industry complains that it is becoming increasingly difficult to argue the investment costs (which goes along with the installation of a central unit with heat recovery systems). Here more and more cheaper alternatives such as decentralized systems or exhaust air systems without heat recovery are used. There is also a lack of necessary funding that could compensate for this trend. In subsidized, social housing, the argument of creating the cheapest possible living space is often in the foreground.

A small ray of hope in the comparison of countries remains Poland, where central systems also saw significant growth in 2019.

Italy is still a special case. Although prices there have been under pressure for years (with high single-digit price declines and ruinous average prices for many manufacturers, especially in the southern region of Italy), the market for central systems fell again in 2019 by -7.8% with a small volume 1.8% increase. Great Britain is another market that is avoided by some manufacturers due to the low product prices and high market concentration in some areas.

Price differences also result from the prevailing country-specific distribution. While Austria and Switzerland mainly rely on two-step direct sales through installation companies, in most other regions indirect three-step sales are more common. Therefore, the average prices (measured as sell-in prices at manufacturer level) in the two countries mentioned are also higher than in other markets, although the significantly higher prices in Switzerland do not fully explain this.

Decentralized systems are booming in “established” countries

Decentralized systems with heat recovery were able to achieve significant growth in almost all countries, provided there is a market in the respective country. Such systems are hard to find in Switzerland or France e.g. but the market for these products is also relatively small in Northern Europe and the Benelux. In Italy, decentralized HRV in 2019 increased by + 25.8%, in Germany still by + 13.2%, bringing Germany to around 225 thousand decentralized units. Decentralized units, which in turn were divided into transverse systems and single room fans, were able to record cumulative growth in all countries examined. In Germany, however, it is primarily transverse systems that contribute the majority of the growth of decentralized systems with HR. However, there is also a strong price war in this area, with the average price only going down in 2019, for example, in Germany, since some manufacturers with very low average prices in this segment were able to show particularly high growth. Since many manufacturers obtain their products from a few OEMs, it is all the more difficult to differentiate them from the competition.

The lion’s share of the decentralized systems is for wall and ceiling mounting, only a very small part is for window ventilation. Window ventilation is only occupied by a few companies, but is considered a market with high growth potential. Even if the competition is manageable in terms of the number of companies, the difficulty lies in the production of large quantities with simultaneous, individually tailored production, which is why some players have already withdrawn from this field. Schüco, which recently launched a new product in cooperation with Renson, is currently making a new start.

Exhaust systems are growing constantly

In all countries examined, the growth of exhaust systems was around 2.65% by volume, with over 75% of the systems being distributed by decentral systems(bathroom / toilet fans) . However, there are very large country-specific differences, for example central exhaust air systems without heat recovery systems are almost not widespread in some countries. A particularly large proportion of the exhaust air systems are in Great Britain, where the market leader already covers a very large part of them.

Corona and its aftermath

Already before Corona, there were already some signs of a slowing economy, such as a decline of economic growth and building permits showed. Due to the pandemic, the situation has worsened again drastically. Some effects of Corona crisis, such as closed construction sites and projects in which the completion was postponed, directly had an impact in 2020; other effects will become noticeable in the coming 1-3 years for the industry, when the number of building completions drops dramatically. Shortly before the lock-down, there was even a brief increase in demand as a kind of pull-forward effect, since manufacturers were still trying to adequately stock up on components, but this effect has long fizzled out.

While DACH or the Netherlands have come relatively well by the pandemic, the lock-down was considerably more problematic in countries such as Italy, Spain, Great Britain and Belgium. Limited Distribution through wholesalers, delays due to closed borders, lack of supplier products and logistics services, or non-existent labor from Eastern European countries, brought many companies already in the last 3 months into trouble. A shutdown at construction sites or requirements, preventing appropriate coordination of trades locally along with concomitant quality problems – will also lead to further difficulties.

As for the manufacturer of ventilation systems, mainly producers of customized ventilation solutions had considerable problems when products already manufactured and ready to ship, were no longer accepted (due to postponed or closed construction projects/sites) by customers as they could not be disposed otherwise.

The emerging demand for new construction projects and thus declining building permits is particularly problematic because the financing of many projects is “on hold”. Although non-residential construction is hit even harder than residential construction, there is also a negative downward spiral here. In Germany there are also further delays in the approval procedures, since in times of shutdown, many procedures of the already overloaded authorities remained unprocessed and the old procedures first have to be worked through. Billions are currently being pumped into the economy and states are outbidding themselves with economic stimulus, support and tax deferral programs, but the state will not be able to sustainably promote such programs in the long term, and these loan-financed financial injections will also have to be repaid one day.

The long-term development of residential ventilation will also be largely determined by the extent to which it can be established as a fixed component of newly created living space in the future. This in turn depends heavily on raising awareness within the population, on the need for energy efficiency and high air quality through constant fresh air supply.

Overall market concentration increased

Overall, the market concentration has slightly increased compared to last year. The 126 companies analyzed in the report have a combined market share of over 91% regarding the total market. However, the top 30 already have a market share of approx. 72%, although in smaller countries the market concentration is often significantly higher. Despite some very international companies, there are still local heroes in most countries, that play a significant role. The leading companies in Europe include: Aldes , Atlantic, France Air, Helios, Itho , Maico , Soler & Palau, Swegon , System Air , Volution Group , Zehnder, etc. to name just a few. In recent years, many companies have also tried to increase their reach through acquisitions and mergers. These include, for example, Helios ( Vallox ), Zehnder (Paul, Enervent , Greenwood , etc.), Soler & Palau ( Pluggit, Envirovent, Unelevent…), Volution Group (Inventer, Pamon, Ventilair…) and many more;

As part of a competitive analysis, the complete study shows the market shares of the top manufacturers at country and segment / product group level, as well as all market data at country level in detail.

16/06/2020

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