The global air conditioning system market size was valued at USD 119.77 billion in 2022. It is estimated to reach USD 202.34 billion by 2031,growing at a CAGR of 6.0% during the forecast period (2023–2031).
Aircon, AC, and A/C are common abbreviations for air conditioning. It has a fan to circulate the conditioned air inside the confined area. An electrical device explicitly designed to remove heat and moisture from the interior of a populated space is known as an air conditioning system. In the air conditioning system, cooling is typically accomplished by a refrigeration cycle, though evaporation or free cooling may also be used occasionally. It is frequently used to create a more comfortable environment for people and animals. Additionally, it is employed in industrial settings to guarantee the proper operation of machinery or equipment that must function under particular environmental conditions or to enable the performance of specific industrial processes, such as welding, which generate a sizable amount of heat that must be eliminated in some way.
Air conditioning systems are increasingly being integrated with the construction of offices, commercial buildings, residential constructions, and others. Thus, the rise in the construction sector is expected to positively impact the air conditioning market over the forecast period. The need to bridge the gap between infrastructure and development gap around the world is driving the growth of the construction industry. In addition, the U.S. dominates the global real estate market due to consumers' high disposable income.
Additionally, the positive trends, such as the emergence of various real estate investment vehicles including real estate investment trusts (REITs), commercial mortgage-backed securities, and real estate private equity funds observed in the residential sector, are vital propellers to the real estate industry. This upward growth in real estate has a positive impact on the global AC market, supported collectively by an increase in construction spending and a rise in building permits for the construction of residential, commercial, and industrial spaces. For instance, in the U.S., the construction sector is expected to grow as the Federal Government spends aggressively on infrastructural development. Private commercial construction projects are increasing, propelling market expansion and government-sponsored commercial building projects.
The air conditioning market is expected to witness increased sales with the availability of tax credit and rebate programs and other monetary benefits associated with purchasing energy-efficient systems. Governments at various levels have established standards to improve the operation of AC systems. The governments have set some criteria to manufacture energy-efficient systems, thereby reducing environmental hazards and carbon footprints.
Furthermore, proactive government initiatives will emerge as market growth drivers over the forecast period. For instance, under the Taxpayer Relief Act of 2012 (U.S.)-2017, customers can apply for the Federal Energy Tax Credit. The credit does not apply to all HVAC units. HVAC systems, including ACs eligible for the tax credits, can claim 25C tax credits, which is 10% of the overall installation costs (maximum up to USD 500) or a certain amount ranging from USD 50 to USD 300. Therefore, launching similar programs would be pivotal in driving market growth over the forecast period.
The high cost of maintaining and installing HVAC units poses a fundamental challenge to this market. The average maintenance cost for domestic use in the U.S. is USD 350 and may rise as high as USD 1,500. Installation charges are relatively much higher, although variable, depending on the unit type. As regular maintenance of existing units is necessary to sustain the Quality of Life (QoL), the high cost hinders market growth, especially in economically constrained areas. Moreover, high prices drive customers toward low-cost options that may be less effective.
The Internet of Things is a revolutionary technology in the AC industry, especially for residential and commercial applications. IoT-enabled AC systems significantly reduce the risk of system downtime by providing an appropriate reminder for equipment serviceability. This technology also helps reduce energy costs and enhance the system's operational efficiency. Additionally, IoT-enabled AC systems offer real-time alerts for the maintenance and services required by systems, which help increase the overall product's lifecycle. Besides, cloud-based technology delivers a seamless customer experience by providing remote operability functionalities to this equipment. Technicians can access systems anywhere with the help of internet connectivity and rectify the system's faults. As a result, it reduces the overall expenses and the time consumed during service and maintenance.
Furthermore, prominent manufacturers such as Blue Star Limited, Onida, and Daikin Industries, Ltd. intensely focus on developing IoT-enabled AC systems that help enhance the company's product portfolio and overall market presence. Hence, the introduction of IoT-enabled air conditioners and the integration of these systems with cloud technology is expected to create a significant opportunity for market players to increase the adoption of the equipment among consumers over the forecast period.
Based on type, the global air conditioning system market is divided into unitary, rooftop, and packaged terminal air conditioners (PTAC).
The unitary segment is responsible for the largest market share and is anticipated to grow at a CAGR of 8.7% over the forecast period. Unitary ACs are expected to record healthy growth over the coming years. This growth is attributed to the significantly increasing demand for unitary AC in residential applications owing to their various benefits, such as low energy consumption, affordable costs, and providing green cooling to consumers. In addition, a unitary AC can be easily paired with warm furnaces in the same ductwork in commercial and residential buildings, which is estimated to boost segment growth.
The increased use of package terminal air conditioners in the residential and hospitality industries drives the market growth. Due to technological improvements, including inverter technology, energy-efficient systems, and wireless connectivity, PTACs are also becoming more popular. For instance, Friedrich's FreshAire PTAC has an inverter compressor that reduces temperature swings, increases efficiency, and improves dehumidification.
Based on technology, the global air conditioning system market is segmented into inverter and non-inverter.
The inverter segment owns the highest market share and is estimated to grow at a CAGR of 7.5% during the forecast period. Inverter technology is expected to experience significant growth owing to its ability to control the speed of the compressor motor, which helps in the continuous regulation of temperature. The variable speed compressor helps in saving almost 50% more energy and power compared to non-inverter air conditioners. The demand for inverter technology is also anticipated to increase due to other advantages, such as no temperature swings, longer durability, quicker cooling, and lower noise than non-inverter ACs.
The non-inverter market is predicted to increase moderately in comparison to its rival. Several issues, including high energy consumption, erratic frequency, and short lifespan, might be blamed for this. However, the low price of these air conditioning systems might assist the market share of the segment increase.
Based on end-user, the global air conditioning system market is bifurcated into residential, commercial, and industrial.
The residential segment is the highest contributor to the market and is estimated to grow at a CAGR of 8.3% over the forecast period. The principal product category for many market participants will still be the residential market. In recent years, temperatures have risen in several nations due to climate change. Due to increasing temperatures, air conditioning systems have become less of an indulgence and more of a necessity. As a result, customers are installing air conditioning systems in their homes, and this trend is anticipated to continue developing as global temperatures climb. Due to the changing climatic circumstances, residential air conditioners are expected to grow healthy during the forecast period.
The commercial segment will grow significantly during the projection period due to rapid urbanization and rising demand for office space. Commercial AC units take up a lot of room. They are typically installed on the rooftops of malls, hotels, large restaurants, theaters, and business offices, where energy consumption is at its highest. Therefore, it is anticipated that increasing the use of AC across the business market will result in retrofitting and replacing these units to reduce energy usage.
Asia-Pacific Dominates the Global Market
Based on region, the global air conditioning system market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
Asia-Pacific is the most significant shareholder in the global air conditioning system market and is anticipated to grow at a CAGR of 6.8% during the forecast period. The global air conditioning systems market is expected to experience significant growth in the region owing to the establishment of new industries, changing business environment in terms of infrastructure, strengthening of public infrastructure, and strong economic growth in Asian countries. The region's expansion is driven by rising demand from the expanding residential market in developing nations like China and India. According to statistics, China is leading in the number of air conditioning units sold, with more than two times the number of AC units in the U.S.
Along with the growth in the residential sector, other factors contributing to rising demand for air conditioning systems in the region include rising disposable income, growing middle-class population, and increasing urbanization and purchasing power. Encouraged by the burgeoning demand in the region, key players are focused on setting up manufacturing facilities in Asia to meet the customers' demands. For instance, in May 2018, Daikin Industries, Ltd. announced the start of full-scale operations of its air conditioner factory in Vietnam. The factory was a part of the company's strategic management plan to boost the air conditioning business in the rapidly growing Asian market. The Japanese company also has manufacturing facilities in other Asian countries such as China, India, Indonesia, Thailand, and Malaysia.
North America is estimated to grow at a CAGR of 4.6% over the forecast period. The significant revenue share of the region is attributed to the high penetration of air conditioners in the U.S. In addition, record-breaking heat waves in the United States contribute significantly to the region's rise in air conditioner sales. Furthermore, the region is expected to experience steady growth owing to increasing demand for replacing and refurbishing the existing systems. The presence of numerous key players, such as Carrier Corporation, Amana, Lennox International Inc., Whirlpool Corporation, and others that are coming up with new energy-efficient products, is expected to fuel the regional market growth further.
In addition, the government in the region is coming up with several energy efficiency policies to promote the use of air conditioning systems in the region. For instance, the COOLAdvantage Program is an initiative by the New Jersey government to offer tax credits and rebates for energy-efficient central heat pumps or air conditioners. Similarly, Con Edison, an energy company based in New York, provides rebates on purchasing energy-efficient room air conditioners. The launch of similar programs is fueling the market growth over the forecast period.
The Europe market is anticipated to expand moderately over the forecast period. The industrial and food and beverage industries are the largest in the UK. The worth of produced food and drink to the nation's economy, according to the Food and Drink Federation (FDF), was roughly 32.76 billion USD. Likewise, the UK's fast-growing food and beverage industry is a significant driver of the country's air conditioning needs. In order to control the temperature inside buildings, warehouses, and vehicles, food producers and logistics firms around the country are using air conditioning systems more regularly.
The air conditioning market in the Middle East and Africa is expected to grow considerably due to changing climatic conditions, rising use of consumer electronics, and increasing tourists, among others. Moreover, increasing residential and commercial construction projects and technological advancements are anticipated to boost the air conditioning market growth in the region. Mega events like the 2022 FIFA World Cup hosted by Qatar and EXPO 2020 in U.A.E are further fueling demand for infrastructural development in these countries, encouraging new constructions and driving the market's growth.
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