by Brianna Crandall — May 19, 2017 — A recently published market intelligence study from U.K.-based building services and engineering consultancy BSRIA on the global air-conditioning (AC) market shows that contraction slowed down in 2016 compared to the previous two years. The recent indicators show that growth is expected to resume in 2017 across many regions.
The global AC market contracted by 1% in value terms in 2016, compared with a drop of 5% in 2015, was not as bad as was initially expected. The Chinese market saw a late recovery supported by hot weather and the government’s issue of a new five-year plan, which boosted sales. Brazil and Saudi Arabia were the other main contributors to the negative growth.
The global AC market was valued as US$92.6 billion, with packaged products accounting for almost 85% of the value.
The biggest packaged air-conditioning market is Asia Pacific, accounting for some 60% of the world market by volume. The market declined by 1% in 2016, a lower figure than previously expected; positive developments in China in the second half of the year saved the market from falling further.
The central plant markets performed poorly with the exception of the Americas. The United States, which is the second biggest central plant market, showed moderate growth. The slowdown in investments in industrial new construction and the low growth in healthcare and education restricted further market expansion. At the other end, the demand in the commercial office and hospitality verticals remained strong, leading to some growth.
Continued pressures on the Brazilian economy took their toll in the air-conditioning markets as the country experiences its worst recession on record.
Saziye Dickson, senior market research consultant, BSRIA, Worldwide Market Intelligence, said, “Overall, 2016 has been a good year in Europe and South East Asia region. The scorching heat and resumed growth — especially in southern Europe — has benefited the air-conditioning markets across the region and particularly saw a boost of the Italian market. South East Asia benefits from a hot climate with an immature air-conditioning market, which is boosted by economic growth through foreign direct Investments, new construction activities, tourism and public investments, resulting in a 7% overall growth.
“The Americas region contracted by 5% in volume terms, and reached nearly 27 million units in 2016. There was a real mixture of performances within the biggest markets in the region, with the USA, Canada and Mexico all showing strong growth while the Brazilian, (-46%) and Argentinian markets (-15%) plummeted. Political instability and economic downturn were the main reasons behind these drops.
“The overall growth in the U.S. air-conditioning market was promising, at an increase of 8% in 2016. The growth was evident across all product areas bar the large packaged segment. Consumer spending, new construction activities, especially in the office, hospitality and retail markets, as well as low interest rates were some of the main drivers in 2016.
“The European AC market grew by 13% in 2016 after sluggish performance in the last few years. Economic recovery in most European countries combined with the heat wave in southern Europe and replenishment of stocks resulted in a strong growth.
“Growth was evident in most of the large air-conditioning markets in Europe, apart from the U.K. The vote to leave the European Union caused a lot of uncertainty, and the British pound fell to its lowest in the last 31 years. Overall there was a lack of demand for office spaces, and those projects which were near completion were also pushed back due to uncertainty about tenant demand, impacting on completion dates and consequently the purchase and installation of air-conditioning.
“The MEIA region recorded a small decline in 2016 after two years of growth. The total air-conditioning market was valued at just over 13 million units. The biggest market in the region was India, which recorded an 8% growth, but the Saudi market continued to suffer due to the lack of government investments and contracted by 25%, bringing the whole region down by 1%. The growth in India was driven by the rapid increase of penetration levels of air-conditioning in the residential segment, soaring temperatures in May and a stable rupee allowing better business planning and foreign direct investments.”
Total sales of moveables for 2016 are estimated at some two million units, representing an increase of 15% compared to 2015, with a value of $563 million. The United States is the biggest moveables market, accounting for more than half of the global sales, and saw a 29% boost in the market. This was partly driven by favorable weather conditions, but also the availability of very competitively priced units.
This is a product which is highly volatile and very dependent on local summer conditions. Modest increases were seen in Europe and South East Asia, but the market is also seeing competition from low cost splits.
Windows / through the wall
The global windows / through the wall market dropped by 2% in volume. The market reduced to almost 12 million units and US$2.4 billion in 2016. However, this product is becoming obsolete in many countries as splits products continue to take share. The biggest market globally is the USA; accounting for 60% in volume terms. The favorable economic climate in the USA meant the market saw a 9% growth in 2016 to reach seven million units. The other major markets continue to be India and Saudi Arabia, but both recorded a fall in 2016.
This market is expected to show modest growth over the forecast period up to 2021, purely driven by the growth in the U.S. market.
Split systems represent the biggest segment of the world air-conditioning market, comprising over 80% of the market in volume terms. Among the splits, multi splits account for 3% and VRF accounts for 14% of the global market in 2016 in value terms. The total splits market has reached just over 100 million units, a 1% drop compared with 2015, with a corresponding value of $70 billion in 2016. China, the world’s biggest market, recorded a 5% drop, restricting global growth. The highest growth markets among the key AC countries were South Korea (35%), which benefitted from a hot summer, Vietnam (16%), India (11%) and the US (6%).
The uptake of inverter technology accelerated across many markets in 2016. The majority of Europe is now nearly 100% inverter, with the exception of Russia where legislation does not encourage inverters and the tough economic conditions means the market is dominated by low-cost products.
Dickson added, “2016 has been an amazing year for both multi splits and the VRF market, with both recording double-digit growth rates. The top three biggest multi splits markets recorded some growth, Italy (49%), South Korea (2%) and the USA (27%) contributing to global growth. The multi splits market meets the demand between the single splits and Mini-VRF (<20kW) range in both residential and commercial segment.
“The VRF market has been described as recession proof, as this product managed to record a growth even at the toughest times. The product’s adaptability in both new and refurbishment for residential and light commercial applications has proved to be key in recent years, where there has been a shift away from new construction towards refurbishment projects. The increasing ability for VRFs to be equipped with BACS systems is also generating new opportunities for the VRF market.
“Increasingly, ventilation products are being installed with VRF systems, so that VRFs are able to compete better with chiller solutions in applications, where fresh air is required.
“The global splits and VRF markets are expected to show a modest growth of 2% CAGR in volume terms between 2015 and 2021. An increase in the penetration of air-conditioning, especially in developing countries, combined with economic recovery in Europe will be the main drivers. The biggest growth by region is expected to be the Middle East India and Africa region followed by Europe.”
The global rooftops market was estimated at around 1.2 million units, with a corresponding value of around four billion units representing 1% drop compared to 2015 in volume terms.
The United States and Canada are by far the biggest two markets, accounting for nearly 90% of the global sales in 2016.
This product heavily relies on certain verticals, such as retail and fast food service restaurants. As online trading continues to take market share from the high street, the growth will be limited in this market. The global market is expected to show a modest growth of 2.6% CAGR in volume terms between 2015 and 2021.
The global chiller and airside market was valued as US$14.5 billion, representing a two% drop compared with 2015. Chillers represented some 50% of the central plant market by value in 2016. The Americas region was the only continent that recorded any growth thanks to strong performance in the US market.
Although economic growth is evident in many regions, the projects to get to the purchasing stage of building services is taking time and the market has continued to suffer from a lack of new commercial construction.
The biggest region, Asia Pacific, accounts for 35%, followed by Europe with 26%, the Americas region 25%, and MEIA region with 14%. Growth levels have generally been modest, with the largest markets being between 1%-5%. However, globally, the trend in the chiller market is driven by the two giants, the United States and China, which, combined, represents 45% of the global market.
The biggest developments in the chiller market were the increased uptake of inverter technology, as well as heat pump applications, especially in Europe. Energy efficiency laws and tough competition from DX systems is driving the chiller companies to up their game.
Overall, the central plant market is expected to show a moderate growth across all regions for the forecast period at around 3% CAGR in value terms between 2015 and 2021.
The article is based on the latest BSRIA’s World Air Conditioning Study, published in March 2017, covering 30 countries.