Electric Segment Dominates the Tankless Water Heater Market Share Globally

According to a new report published by Allied Market Research, the global tankless water heater market size was valued at $6.3 billion in 2021 and is estimated to reach $12.3 billion by 2031, growing at a CAGR of 6.9% from 2022 to 2031. The increasing demand for energy-efficient heating solutions, rapid urbanization, and expansion of smart city infrastructure are key factors driving the growth of the tankless water heater market worldwide.

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A tankless water heater is an advanced heating system that heats water instantly using electricity or gas without storing it in a tank. Unlike traditional storage water heaters, tankless systems operate with a built-in water flow sensor that automatically activates the heating process when water flow is detected. This on-demand heating capability enhances energy efficiency, reduces standby heat loss, and ensures continuous hot water supply, making it a preferred choice across residential and commercial sectors.

Growing Demand from Residential Sector Boosting the Tankless Water Heater Market

The rising demand for efficient and space-saving appliances among residential consumers is significantly contributing to the growth of the tankless water heater market. Homeowners are increasingly adopting tankless systems due to their compact design, long lifespan, and energy-saving benefits. These systems provide instant hot water, making them ideal for modern households with high and continuous hot water requirements.

In addition, increasing disposable income and improvement in living standards are encouraging consumers to invest in advanced home appliances. The shift toward smart homes and energy-efficient solutions is further expected to accelerate the demand for tankless systems, thereby strengthening the tankless water heater market outlook during the forecast period.

Advantages of Tankless Systems Driving Market Expansion

One of the major factors fueling the tankless water heater market growth is the numerous advantages associated with these systems. Tankless water heaters offer higher efficiency, lower operational costs, and minimal energy losses compared to conventional storage water heaters. Their compact size allows easy installation in limited spaces, making them highly suitable for apartments, small homes, and commercial establishments.

Moreover, manufacturers are continuously focusing on developing innovative and cost-effective designs to enhance product performance and durability. Technological advancements in heating elements, safety mechanisms, and smart control systems are further expected to create new opportunities in the tankless water heater market.

Smart City Development and Infrastructure Upgrades Supporting Growth

Rapid growth of smart city projects and increasing investments in upgrading aging government infrastructure are major factors propelling the tankless water heater market. Governments across the globe are focusing on energy-efficient building systems to reduce energy consumption and carbon emissions.

The expansion of commercial infrastructure such as hotels, educational institutions, healthcare facilities, and office complexes is also driving the adoption of tankless water heating solutions. As urban populations continue to rise, the demand for reliable and efficient hot water systems is expected to surge, thereby boosting the tankless water heater market size.

Condensing Segment Dominates the Market

Based on type, the condensing segment accounted for about 62.7% of the global tankless water heater market share in 2021 and is expected to maintain its dominance throughout the forecast period. Condensing tankless water heaters are widely preferred due to their ability to provide a higher volume of hot water and improved energy efficiency compared to non-condensing systems.

These heaters are increasingly used in applications such as apartment buildings, hotels, nursing homes, and commercial facilities where continuous hot water supply is essential. Their superior performance and operational efficiency are expected to significantly contribute to the growth of the tankless water heater market in the coming years.

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Electric Segment Leads by Energy Source

On the basis of energy source, the electric segment held the highest share of approximately 56.7% in 2021 and is projected to remain dominant during the tankless water heater market forecast period. The growing preference for electric tankless water heaters is attributed to their high efficiency, low operating costs, longer lifespan, and reduced standby energy losses.

Additionally, increasing electrification rates and the rising adoption of sustainable energy solutions are supporting the expansion of the electric segment. Electric tankless systems are particularly suitable for residential and small commercial applications, further strengthening their demand in the global tankless water heater market.

High Energy Factor Systems Gaining Popularity

By energy factor, the 0.91 to 0.99 EF segment accounted for the largest share of about 71.7% in 2021. The rising demand for highly efficient water heating systems is driving the growth of this segment. Benefits such as utility cost savings, sustainability, lower operational expenses, and extended product lifespan are encouraging consumers to adopt high-efficiency tankless water heaters.

As energy efficiency regulations become more stringent globally, the adoption of high energy factor systems is expected to increase, thereby positively influencing the tankless water heater market growth.

Commercial Sector Emerging as a Key End User

On the basis of end user, the commercial segment holds the largest share and is expected to grow at a CAGR of 7.1% during the forecast period. Rapid urbanization and the expansion of commercial infrastructure are key factors driving demand in this segment.

Tankless water heaters are widely used in commercial settings such as hotels, warehouses, educational institutions, healthcare facilities, offices, and food service establishments. The need for continuous hot water supply and energy-efficient systems in these sectors is significantly boosting the tankless water heater market demand globally.

Regional Insights: Europe Leading the Global Market

Region-wise, the tankless water heater market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. Europe dominated the market in 2021, accounting for more than 31.4% of the global share, and is expected to maintain its dominance during the forecast period. This growth is attributed to the presence of major manufacturers, high consumer awareness, and increasing electrification rates in the region.

Moreover, rising disposable income, rapid urbanization, and strong adoption of energy-efficient appliances across European countries are further driving the tankless water heater market growth. Asia-Pacific is also anticipated to witness significant growth due to expanding construction activities and increasing adoption of smart residential solutions.

Impact of COVID-19 on the Tankless Water Heater Market

The COVID-19 outbreak had a negative impact on the tankless water heater market, as several industries such as construction, automotive, transportation, and energy experienced a slowdown due to global lockdowns. Building and construction activities were temporarily halted, which reduced the demand for water heating systems during 2020.

In addition, disruptions in raw material supply, labor shortages, and temporary shutdown of manufacturing facilities further hampered market growth. Strict social distancing measures across countries like Germany, France, Spain, and Italy also affected infrastructure development projects.

However, the market began recovering by the end of 2021 as construction activities resumed and industrial operations restarted. The renewed focus on energy-efficient appliances and sustainable infrastructure is expected to accelerate the growth of the tankless water heater market in the post-pandemic period.

Competitive Landscape

Key players operating in the tankless water heater market include A.O. Smith, Bradford White Corporation, EcoSmart Energy Products, Inc., General Electric, Noritz Corporation, Navien, Inc., Robert Bosch GmbH, Stiebel Eltron, Inc., Westinghouse Electric Corporation, and V-Guard Industries, Ltd. Other notable companies include Takagi, Rheem Manufacturing Company, Bajaj Electricals Ltd., Atmor, Hubbell Electric Water Heater Company, and Rinnai Corporation.

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Future Outlook

The tankless water heater market is expected to witness steady growth over the next decade, driven by rising demand for energy-efficient appliances, smart infrastructure development, and increasing awareness about sustainable heating technologies. Continuous product innovations, improved safety features, and enhanced energy efficiency will play a crucial role in shaping the future of the global tankless water heater market.

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