25 October 2021

Air Conditioner Market - Forecast to 2028

The global air conditioner market size was USD 123.19 billion in 2020 and is expected to register a revenue CAGR of 5.5% during the forecast period. Market revenue growth is primarily driven by ongoing economic growth of developing countries and rising global temperature. Increasing humidity levels and temperature worldwide is a key factor expected to boost revenue growth of the market during the forecast period. Scorching heat waves are breaking records in many countries such as the U.S., Australia, and Siberia. Based on Future of Cooling 2018 reports by the International Energy Agency (IEA), it was estimated that around two-thirds of the world’s households could have air conditioners by 2025. Countries such as India, China, and Indonesia together are expected to account for half of the total number of units for that particular year. Moreover, extension of working from home practice and onslaught of sweltering summer are expected to have a positive impact on the air conditioner market. Consumers are trying to make their homes more comfortable as the time spent indoors has surged rapidly because of COVID-19 pandemic. Many air conditioner manufacturers such as Voltas are increasingly investing in the development of advanced air conditioners and outlined a 360-degree marketing plan to further increase market shares.

There is a growing demand for split and multi-split air conditioners in developing countries due to increasing disposable income of consumers and rising standards of living. Packaged air conditioners are commonly used in places such as restaurants, telephone exchanges, homes, and small halls. Rising number of individual clinics, hospitals, auditoriums, hotels, and other commercial buildings across the world is contributing to growing demand for Variable Refrigerant Flow (VRF). Emergence of technologically advanced air conditioners is also resulting in increasing demand for smart air conditioners.

Moreover, governments of various countries are setting higher efficiency standards for cooling which is driving demand for energy-efficient air conditioners. These higher efficiency standards for cooling are established by governments in order to reduce the need for new power plants, cut emissions, and reduce costs at the same time. The U.S. Department of Energy (DOE) established new energy conservation standards for portable air conditioners.

In February 2019, for instance, Super-efficient Air Conditioning Program for institutional consumers in the BSES area, was launched by the Energy Efficiency Services Limited (EESL). It is a joint venture of four National Public Sector Enterprises under Ministry of Power, Government of India. Besides promoting energy efficiency, the program is also aiming at reducing peak power demand in South and West Delhi. Environmental impact of air conditioners, rising energy demand across the world, and shutdown of non-essential stores due to the nation-wide lockdown are factors expected to restrain market growth during the forecast period.

Market Dynamics:
Driver: Rising Demand for Smart Air Conditioners is a Key Revenue Growth Driving Factor

Rising adoption of smart homes, increasing purchasing power, and surging living standards are key factors driving demand for smart air conditioners. Air conditioning manufacturers are increasingly investing to modernize various features in order to meet growing demand from consumers. Smart air conditioners use the internet and Wi-Fi technology in order to control air conditioning in homes. Air conditioner units can be connected to home assistants such as Alexa for easy voice activation. Any air conditioner such as mini-split, window, or portable air conditioner can be turned to smart versions, owing to introduction of AC controllers in the market. Increasing demand for energy-efficient air conditioners is another key factor boosting sales of smart air conditioners. Sleeping function optimized by smart air conditioners with wearable devices can reduce the energy consumption. Convenience, comfort, increased efficiency, error diagnosis & preventive maintenance, and reduced carbon footprint obtained with the usage of smart air conditioners is augmenting demand.

Restraint: Environmental Impact of Air Conditioners is a Key Growth Restraining Factor

Rising demand for air conditioners due to soaring humidity levels and temperature in developing countries is further resulting in increasing energy consumption, air pollution, and severe effect on climate change. Harmful Chlorofluorocarbons (CFC) gases emitted by air conditioners are considered to be a major air pollutant in the world and these are contributing to global warming. More than 1.2 billion window-mounted air conditioning units and other small-scale, room-cooling devices are currently in use worldwide. These consume large amounts of electricity. Fluorocarbons that these appliances use as refrigerants deplete the ozone layer and contribute to global warming. Hydrofluorocarbons (HFCs) used by air conditioners remain in the atmosphere for an average of 14 years and are approximately 1000 to 3000 times more potent than carbon dioxide as a greenhouse gas. Innovation of refrigerants with low global warming impact and energy-efficient technologies are expected to control negative impacts that air conditioners have on the environment.

Key Takeaways
Product Type Outlook:

Based on product type, the air conditioner market has been segmented into split & multi split, window, Variable Refrigerant Flow (VRF), Packaged Air Conditioner (PAC), and others (Portables & Chillers). Split & multi spilt segment is expected to account for largest share in global air conditioner market over the forecast period, owing to rising income levels of consumers in developing countries. Rising temperature & humidity levels across the world and extension of working from home policies are other significant factors boosting sales of split & multi spilt air conditioners. Ability to turn split & multi-split air conditioners into smart air conditioners with the help of smart AC controllers is also expected to drive revenue growth of the segment. Some major advantages of using multi split air conditioners are convenience & economic benefits, space saving installation, pliable installment, and independent control.

Distribution channel Outlook:

Based on distribution channel, the air conditioner market has been segmented into online, exclusive stores, multi-brand stores, and other channels. Online segment is expected to account for a stable revenue share in the global air conditioner market, owing to expansion of the e-commerce sector across the world. Rising penetration of smartphones is boosting growth of e-commerce portals in developing countries. Air conditioner market is expected to experience massive growth through e-commerce portals. Brands are likely to offer higher online discounts to boost sales of unsold stock ahead of festive seasons. Online discounts are likely to be higher for smartphones and air conditioners despite of rising manufacturing & transportation costs, as per reports. Some players such as Panasonic India claimed that a majority of the sale would come from e-commerce platforms. Availability of a wide range of products on e-commerce portals, discounts offered on debit & credit cards, and advantage of easy price comparison of air conditioners on online platforms are other factors boosting sales of these appliances on online channels.

End-use Outlook:

Based on end-use, the air conditioner market has been segmented into residential and commercial. Residential segment is expected to register robust revenue growth over the forecast period. Rising global temperatures, as well as growth of affluent middle class is boosting demand for air conditioners. Consumers are increasingly accepting air conditioners as utility products rather than just luxury products as rising temperature is resulting in deterioration of health of infants, the sick, and elderly. Rising energy bills and the need to meet higher efficiency standards for cooling established by governments of various countries are major factors booting demand for energy-efficient air conditioners among residential buildings. Moreover, adoption of smart homes and appliances is resulting in increasing popularity of smart air conditioners. Improvement in housing standards is also boosting demand for advanced spilt and multi split air conditioners.

Regional Outlook:

Based on regional analysis, Asia Pacific market is expected to expand at a rapid revenue CAGR and account for largest revenue share in the global market over the forecast period. Increasing usage of air conditioners in developing countries such as India and China due to rising temperature and growth of affluent middle class is expected boost market revenue growth in the region. Availability of low-priced room air conditioners and packaged air conditioners in the region is also contributing to increasing sales. Expansion of the e-commerce sector and availability of discounts on these portals are driving demand for air conditioners in the region. Various manufacturers such as Daikin Industries, Ltd., Gree Electric Appliances Inc., Midea Group, Hitachi-Johnson Controls Air Conditioning, Inc., LG Electronics Inc., Panasonic Corporation, Toshiba Corporation, and Haier Group Corporation, are offering innovative products in order to increase market share in Asia Pacific.

The market in North America is expected to register significant revenue growth over the forecast period. Record-breaking heat waves in the U.S. is a key factor augmenting sales of air conditioners in the region. Presence of higher efficiency standards for cooling established by governments is also boosting demand for energy-efficient air conditioners. Moreover, increasing adoption of smart homes and appliances is projected to drive demand for smart air conditioners in the region.

Competitive Landscape:

The global air conditioner market is moderately fragmented with a number of key players operating on global and regional levels. Key players are engaged in product development and strategic alliances to expand respective product portfolios and gain a robust footing in the global market.

Some players in the market include Daikin Industries, Ltd., Gree Electric Appliances Inc., Emerson Electric Co., Midea Group, Hitachi-Johnson Controls Air Conditioning, Inc., Carrier Global Corporation, LG Electronics Inc., Panasonic Corporation, Toshiba Corporation, and Haier Group Corporation.

Segments Covered in the report

This report offers historical data and forecasts revenue growth at a global, regional, & country level, and provides analysis of market trends in each of the sub-segments from 2018 to 2028. For the purpose of this report, Reports and Data has segmented global air conditioner market based on product type, distribution channel, end-use, and region: