Warmer temperatures on a worldwide scale assure that air conditioning is and will remain quite popular. As a result, market participants such as Carrier Corporation, Daikin Industries, LG, Johnson Controls, and others are assisting in meeting demand by supplying air conditioners to various industries, whether they are central air conditioners, duct or ductless air conditioners, or portable air conditioners. Due to such efforts by market players, according to OMR Research, the market is expected to grow at a CAGR of 9.7% during the forecast period of 2023-2029.
Market Demand and Stats (2018-2050)
According to 2019 data reported by the Japan Refrigeration and Air Conditioning Industry Association, in 2018, the total estimated demand for residential air conditioners (RAC) was 96.07 million units and for commercial air conditioners was 14.90 million units. China dominated the RAC market with 42.15 million units, while North America had the highest market share in the commercial air conditioners segment with 7.35 million units.
Additionally, according to a 2018 report by the International Energy Agency (IEA), by 2050, around two-thirds of the world's houses might have an air conditioner. China, India, and Indonesia will account for half of the total. According to the projections of the IEA, by 2050, approximately 5,577 million units of air conditioners will be used all across the globe. Of which, China will lead the market with about 1,400 million units, followed by India with 1,144 million units.
Air Conditioner Production and Export/Import, Based on Region
China—the Largest Contributor to the Market
China is not only the biggest consumer of air conditioner on the market, but according to Statista, its total air conditioner production in 2021 was 218 million units, the highest among all regions. According to the IEA's 2019 study, China manufactures around 70% of the world's room air conditioners and covers approximately 22% of the installed cooling capacity worldwide. The country accounted for approximately 36% of the 1.7 billion ACs installed globally in 2017.
Furthermore, according to OEC (oec.world), China shipped $16.7 billion in air conditioners in 2020, making it the world's top exporter of air conditioners. Air conditioners were the 28th most exported product from China the same year.
According to an Inside Climate News article from 2020, China produces 154 million air conditioners each year, accounting for about 75% of the marketplace. The UN-funded production lines transformed about 5% of China's manufacturing capacity, allowing the country's manufacturers to begin to transition away from older hydrochlorofluorocarbon (HCFC) refrigerants, which deplete atmospheric ozone and are climate pollutants, and toward propane, a climate- and ozone-friendly alternative. China intends to switch more lines to propane in the few next months and years.
India—the Second Major Contributor to the Market
According to a new World Bank analysis, as temperatures in India continue to climb owing to climate change, keeping places cool with alternative and innovative energy efficient technology can open up a $1.6 trillion investment potential by 2040. According to the World Bank, India would generate demand for a new air conditioning unit every 15 seconds in 15 years.
Air conditioners’ access will expand to around 40% of homes by 2037-38, with substantially higher uptake in urban areas compared to rural families, according to the India Cooling Action Plan (ICAP), a program begun in 2019 to offer sustainable cooling solutions. As per the same source, nearly 50% of the total commercial floor area in India in 2038 is anticipated to be air conditioned. As a result of all of these factors, air conditioner output in the Indian market is expected to increase in the near future.
According to the EEPC 2022 study, India is now rated 25th for air conditioners. It is estimated that India exported $2,026.20 million in HVAC-R products in 2020, with exports of equipment and parts for air conditioners, refrigeration, and ventilation accounting for 77.67%, followed by 11.35% for heating equipment, 6.64% for refrigerating units, and 4.3% for air conditioning units.
Furthermore, public and private organizations are planning ahead for future air conditioner demand and market fulfillment, resulting in air conditioner market growth in the future. For instance, in 2021, the Refrigeration and Air-conditioning Manufacturers Association of India (RAMA) pledged to the government an export target of 50% of its sales of over $12 billion from air conditioners (up from $1.9 billion in 2021) in the next five years. It also stated that the segment may improve domestic value addition for room air conditioners from 25% to 75%.
Additionally, Daikin Industries Ltd., the world's largest air conditioner maker, is anticipating that sales and manufacturing in India will eventually account for a larger portion of the corporation as the country outpaces worldwide expansion. In September 2022, the company announced the construction of its third factory in India, with a 15 million yen (approximately $115,000) investment. Once the construction is complete, this facility can produce 3 million units per year. This will meet India’s air conditioner demand, and the company will export to the Middle East and Africa regions as well.
Key Drivers of the Market
Technologies and Innovations that are Climate-Friendly
The development of technology to create cleaner, more efficient air conditioners is assisting the market's growth.
• Daikin and Gree Electric Appliances, two major air conditioner manufacturers, shared the top prize in last year's Global Cooling Prize, a worldwide competition focused on designing climate-friendly AC technology. Both firms developed air conditioners with improved internal performance and fewer ecologically destructive refrigerants. The new machines could potentially lower air conditioners' environmental impact by five times. These models aren't yet on the market; Gree intends to release its prototype in 2025, and Daikin expects to adopt the new technology in future products.
• Blue Frontier, which is supported by Bill Gates' investment fund, Breakthrough Energy Ventures, intends to begin selling its revolutionary air conditioning systems in 2025. The company's technique employs a specific salt solution that can either release or pull water from the air, allowing the AC to regulate its temperature. According to Blue Frontier, this strategy can save up to 90% of the energy required by a standard air conditioner and can avoid draining electricity from the grid during peak hours.
• Transaera, a company, is striving to reduce energy consumption by developing a more efficient air conditioner that utilizes safer refrigerants to cool houses. When compared to standard air conditioners, the business estimates its machine might have one-fifth the environmental effect. Currently, the business is a finalist in a global competition to revamp the air conditioner. The winner of the Global Cooling Prize will get $1 million to market their equipment.
Increasing Population and Heat
The rising population with increased purchasing power, as well as global warming, are said to be driving the rising demand for air conditioners in emerging markets. According to NOAA (the United States National Oceanic and Atmospheric Administration), the global average temperature in July 2019 was roughly 1°C higher than the 20th century average, which is further expected to increase.
Furthermore, according to United Nations figures, the total world population hit 8 billion in mid-November 2022, with a projected increase to 9.7 billion by 2050. These elements will propel the market forward.
Increasing Construction Activities
The other key cause of the expansion of the air conditioner market's end-use sectors is increased building activity and urbanization. According to Oxford Economics, the global construction market was worth $10.7 trillion in 2020 and is predicted to expand by $4.5 trillion between 2020 and 2030, reaching $15.2 trillion. According to the same source, worldwide construction investment is expected to exceed $14 trillion between 2010 and 2037.