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Heat Pumps Set to Shape Europe's USD 58.67 Billion HVAC Market Through 2031 | Arizton
The Europe's HVAC market is entering a major heating transition as replacement of conventional heating systems increasingly overlaps with the expansion of heat pumps. According to Arizton, the Europe HVAC market was valued at USD 45 billion in 2025 and is expected to reach USD 58.67 billion by 2031, growing at a CAGR of 4.52% during the forecast period. New construction continues to generate equipment demand, while significant replacement and renovation activity across residential and non-residential buildings is creating additional demand for modern HVAC systems.The shift toward heat pumps is being supported by policy incentives and boiler phase-out measures across Europe. Germany, France, Italy, and the Netherlands are offering direct installation grants, low-interest renovation loans, tax credits, and energy-efficiency subsidies for residential and commercial heat pump installations. These programs are improving the affordability of electrified heating while supporting the wider adoption of heat pumps across European buildings.
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Government Incentives Are Increasing Heat Pump Demand
Government support is reducing the upfront cost of heat pump installation across major European markets and strengthening the economics of replacing conventional heating systems:
• United Kingdom: The Boiler Upgrade Scheme has been extended to 2030, with approximately USD 390-395 million allocated for 2025/26. The scheme provides grants of nearly USD 10,000 for air-source and ground-source heat pumps, while air-to-air heat pumps were set to qualify for approximately USD 3,300 in incentives from April 2026.
• France: The MaPrimeRénov program provides up to USD 10,200 per household for heat pump installations.
• Germany: The Federal Funding for Efficient Buildings (BEG) program covers up to 70% of residential heat pump installation costs.
• Italy: Tax deductions for heat pump systems were extended at 50% in 2025 and 36% through 2026-2027.
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New Refrigerant Rules are Driving Heat Pump Innovation
Europe is tightening requirements for the refrigerants used in air-conditioning and heat pump equipment, pushing manufacturers toward lower-GWP alternatives. Several heat pump categories will require refrigerants with GWP below 150 from 2026 onward, compared with the earlier threshold of 750. Restrictions on servicing high-GWP systems are also increasing reliance on reclaimed refrigerants. These changes are encouraging manufacturers to update compressors, refrigerant circuits, and safety systems across residential and commercial heat pump portfolios.
Heat Pumps Are Moving into Larger Applications
Heat pumps are becoming a broader HVAC opportunity as manufacturers develop systems that can meet the heating needs of larger buildings and facilities. Daikin has introduced R-290-based modular heat pump platforms with capacity of up to 2,000 kW, opening applications across commercial buildings, industrial facilities, and district-level systems. Carrier expanded its AquaSnap R-290 portfolio in 2025 with compact residential units as well as high-temperature commercial systems for hospitals and multifamily housing. This expansion means heat pump demand is no longer limited to household heating, creating additional opportunities across commercial, industrial, and larger building applications.
Manufacturers Are Investing in European Production
Manufacturers are increasing European production capacity as heat pump demand grows, with investments focused on building local supply and increasing the number of units available to the market:
• Daikin Industries: Invested approximately USD 325-330 million in a new heat pump production facility in Poland in 2025.
• Vaillant Group: Expanded its factory in Senica, Slovakia, to support production of more than 500,000 heat pump units annually.
• Groupe Atlantic: Invested nearly USD 174 million to expand heat pump manufacturing capacity, targeting an additional 180,000 units annually by 2028.
• Mitsubishi Electric Europe: Operates an extensive partner and accredited installer network supporting heat pump deployment across residential and commercial applications in the UK and broader European markets.
• Daikin Industries, NIBE Group, and Vaillant Group: Are expanding residential heat pump and smart HVAC portfolios while strengthening installer partnerships and regional manufacturing capabilities.
Heat Pumps Set to Shape Europe's HVAC Market Through 2031
Europe's HVAC opportunity is increasingly tied to the modernization of its heating infrastructure. As heat pumps move beyond residential replacement into commercial, industrial, and district-level applications, manufacturers are expanding both technology portfolios and production capacity to serve a broader market. With heating equipment remaining the largest segment, the continued expansion of heat pump adoption is expected to be an important contributor to the Europe HVAC market reaching USD 58.67 billion by 2031.
Source: - https://www.arizton.com/market-reports/europe-hvac-market
About Us:
Founded in 2017, Arizton Advisory & Intelligence delivers data-driven market research and strategic consulting that empowers clients to make informed decisions and drive growth. Combining quantitative and qualitative insights, we provide in-depth analysis across industries including Agriculture, Consumer Goods, Technology, Automotive, Healthcare, Data Centers, and Logistics. Recognized by top-tier media, our expert team transforms complex market data into actionable strategies, helping clients anticipate trends, seize opportunities, and stay ahead of the competition.
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Source: Arizton Advisory & Intelligence
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