Heating and Cooling Industry Statistics and Forecasts

This article was written by our expert who is surveying the industry and constantly updating the business plan for an air conditioning company.

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The Dojo Business Team

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We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the heating and cooling market.

What is the current global market size of the heating and cooling industry?

The global heating and cooling industry is valued at $292.8 billion in 2025, with steady unit sales growth driven by both new installations and equipment replacements.

The HVAC subsector alone accounts for $245.8 billion of this total market value. North America represents 25.9% of the global HVAC market share, while Europe contributes approximately 20.8%. The residential segment dominates with 42.9% of total market revenue, followed by commercial and industrial applications.

Unit sales volumes are rising consistently across all major product categories, though exact global unit figures are not uniformly reported by manufacturers. The growth in units reflects both population increases in developing markets and replacement cycles in mature economies. Subscription-based heating and cooling service models currently generate $85 billion in revenue, representing an emerging business model within the industry.

For air conditioning companies entering the market, this $293 billion industry offers multiple entry points across residential installation, commercial projects, and ongoing maintenance services. The market size indicates substantial room for new players, particularly those focusing on energy-efficient solutions and service-based business models.

What are the projected growth rates for the heating and cooling industry?

The heating and cooling industry is projected to grow at a compound annual growth rate of 5.1% from 2025 to 2035, reaching $481.5 billion by the end of that period.

The North American HVAC market specifically is forecast to expand at 6.16% CAGR through 2033. The subscription-based "heating and cooling as a service" segment is expected to grow even faster, doubling from $85 billion in 2025 to over $176 billion by 2032. This represents one of the most dynamic growth areas within the industry, offering recurring revenue opportunities for air conditioning companies that adopt service-based models.

Regional growth rates vary significantly, with China projected at 6.9% CAGR, India at 6.4% CAGR, and Germany at 5.9% CAGR. The Asia-Pacific region overall is expected to reach $590 billion by 2032, making it the fastest-growing geographic market. Heat pumps represent another high-growth subsegment, with the global market forecast to reach $134.8 billion by 2030.

These growth projections are driven by urbanization, climate change increasing cooling demand, regulatory mandates for energy efficiency, and rising middle-class populations in emerging markets. For new air conditioning companies, these growth rates suggest a favorable market environment for the next decade, particularly for businesses positioning themselves in high-growth segments and regions.

You'll find detailed market insights in our air conditioning company business plan, updated every quarter.

Which regions are driving the largest share of demand in the heating and cooling industry?

Asia-Pacific is the dominant regional market for heating and cooling equipment, both in current size and projected growth, expected to exceed $590 billion by 2032.

What are the main product categories within the heating and cooling industry?

The heating and cooling industry divides into two primary product categories: heating systems account for 51.8% of global revenue in 2025, while cooling systems are expanding rapidly, particularly in warmer climates.

Heating products include furnaces, boilers, heat pumps, and radiant heating systems. The heating segment's dominance reflects both the geographic distribution of cold climates and the higher energy requirements for space heating in temperate regions. However, cooling is the faster-growing category due to climate change, increasing temperatures in traditionally moderate climates, and rapid adoption in developing countries.

The industry also segments by application: residential systems represent 42.9% of the market, commercial applications form another substantial segment, and industrial cooling and heating round out the categories. Service and maintenance have emerged as a distinct revenue stream, with subscription-based models growing from $85 billion to a projected $176 billion by 2032.

Heat pumps represent a crossover category that provides both heating and cooling, making them increasingly popular in markets with moderate climates. The global heat pump market is forecast to reach $134.8 billion by 2030, representing one of the fastest-growing product segments. For air conditioning companies, offering a mix of cooling-focused products, heat pump solutions, and ongoing maintenance services provides the most balanced revenue approach across different customer needs and seasonal demand patterns.

What are the current average prices for heating and cooling units?

Pricing for heating and cooling equipment varies significantly based on technology type, capacity, region, and installation complexity, with standard residential units ranging from hundreds to thousands of dollars.

In Southeast Asian markets, standard split-system air conditioning units average between $200 and $700 per unit for residential applications. Advanced multi-zone heat pumps and high-capacity systems for commercial use typically cost several thousand dollars, while industrial chillers and large-scale heating systems can reach tens of thousands of dollars depending on capacity and efficiency ratings.

North American and European markets generally see higher equipment prices due to stricter energy efficiency standards, labor costs, and regulatory compliance requirements. Entry-level residential HVAC systems in these markets typically start around $2,500 to $4,000 for basic installations, while premium high-efficiency heat pumps and smart-enabled systems range from $5,000 to $15,000 or more, including installation.

Subscription-based service models and equipment leasing are gaining traction, particularly for commercial clients, providing cost predictability and eliminating large upfront capital expenditures. These pricing models typically range from $50 to $500 monthly depending on system size, service level, and equipment included. For air conditioning companies, offering flexible pricing options—including outright purchase, financing, and service subscriptions—can significantly expand the addressable customer base across different market segments.

Which companies hold the largest market share in heating and cooling?

The heating and cooling industry features several dominant global players: Daikin, Carrier, Trane, Lennox, Johnson Controls, Mitsubishi Electric, and Gree lead the market with established brand recognition and extensive distribution networks.

The market structure is moderately consolidated at the top, with these major manufacturers controlling significant portions of global sales, but it remains highly competitive at regional and local levels. Market share distribution is expected to evolve toward companies that successfully develop and market energy-efficient products, smart home integration capabilities, and low-global-warming-potential refrigerant systems.

Regional players also hold substantial market positions in their local markets, particularly in Asia-Pacific where brands like Gree, Midea, and Haier compete effectively on price and features. In emerging markets, local manufacturers often capture meaningful market share by offering affordable options tailored to regional climate conditions and consumer preferences.

For new air conditioning companies, competing directly with these established manufacturers is challenging. However, opportunities exist in specialized installation services, maintenance contracts, regional distribution partnerships, and serving underserved customer segments. Companies that position themselves as local experts with superior customer service, rapid response times, and specialized knowledge of regional building codes and climate conditions can build sustainable competitive advantages despite the presence of larger competitors.

This is one of the strategies explained in our air conditioning company business plan.

What are the key factors influencing demand for heating and cooling equipment?

• Construction Activity: New residential and commercial building construction directly drives demand for heating and cooling installations. Major retrofit projects in existing buildings also create substantial equipment replacement opportunities, particularly when older buildings are upgraded to meet modern energy standards.
• Climate Conditions: Extreme weather events, rising average temperatures, and increasingly variable seasonal patterns are pushing both cooling and heating demand higher. Regions experiencing more frequent heat waves are seeing accelerated air conditioning adoption, while areas with unpredictable winters drive heating system upgrades.
• Population Growth and Urbanization: Rapidly growing urban centers, particularly in Asia-Pacific and developing markets, create concentrated demand for HVAC systems. Urban density and multi-story construction favor centralized and efficient cooling and heating solutions.
• Government Regulations and Incentives: Energy efficiency mandates, building codes requiring minimum SEER ratings, refrigerant phase-outs, and financial incentives for high-efficiency equipment significantly influence both product specifications and consumer purchasing decisions. Many markets now offer tax credits, rebates, or subsidized financing for energy-efficient HVAC upgrades.
• Rising Middle Class in Emerging Markets: Income growth in developing countries is enabling millions of households to purchase air conditioning for the first time. This represents one of the largest sources of unit volume growth globally, as air conditioning transitions from luxury to necessity in warm-climate developing markets.
• Energy Costs: Rising electricity and natural gas prices motivate consumers and businesses to invest in higher-efficiency systems that reduce operating costs. This trend particularly benefits heat pump technology and smart thermostats that optimize energy consumption.
• Indoor Air Quality Awareness: Increased focus on health and air quality, accelerated by recent global health concerns, is driving demand for advanced filtration systems, ventilation upgrades, and HVAC solutions with superior air purification capabilities.

How is the transition to energy-efficient technologies affecting the industry?

The shift toward energy-efficient and environmentally friendly heating and cooling technologies is fundamentally reshaping product development, market demand, and regulatory requirements across the industry.

High-efficiency heat pumps, smart thermostats, low-global-warming-potential refrigerants, and renewable-powered systems are no longer optional premium features—they are becoming regulatory requirements in many advanced markets. European markets and several U.S. states have implemented strict regulations phasing out high-GWP refrigerants and mandating minimum efficiency standards that effectively eliminate older technology from new installations.

This transition is driving significant investment in green heating and cooling solutions, which now outpace legacy system sales in regulatory-driven markets. Manufacturers are redirecting research and development budgets toward heat pump technology, variable-speed compressors, smart controls, and integration with renewable energy sources like solar panels. The global heat pump market's projected growth to $134.8 billion by 2030 exemplifies this shift.

For air conditioning companies, this technological transition presents both challenges and opportunities. Initial equipment costs are typically higher for energy-efficient systems, which can create price resistance from cost-conscious customers. However, these systems offer compelling long-term value through reduced operating costs, and many markets provide financial incentives that offset upfront premiums. Companies that develop expertise in modern efficient technologies, understand available incentive programs, and can effectively communicate total cost of ownership will be positioned to capture growing market demand. The transition also creates recurring revenue opportunities through system monitoring, optimization services, and maintenance contracts for sophisticated smart HVAC systems.

What innovations are most likely to disrupt or accelerate industry growth?

Several emerging technologies and business models are positioned to significantly impact the heating and cooling industry over the next five to ten years.

What is the current supply chain situation for heating and cooling components?

The heating and cooling industry continues to experience supply chain challenges affecting electronics, compressors, and refrigerants, resulting in extended lead times and cost volatility since 2020.

Global supply chain disruptions that began during the pandemic have not fully resolved. Semiconductor shortages impact smart thermostats and control boards, while compressor availability from major Asian manufacturers faces periodic constraints. Refrigerant supply is additionally complicated by regulatory transitions, as older formulations are phased out and production ramps up for newer low-GWP alternatives.

These supply issues translate directly to increased equipment costs and longer project timelines for air conditioning companies. Lead times for specialized equipment can extend from the typical 2-4 weeks to 8-16 weeks or longer during peak construction seasons or when supply constraints tighten. Raw material costs, particularly copper and steel used in heat exchangers and ductwork, remain elevated compared to pre-2020 levels, though volatility has decreased somewhat.

Energy prices significantly impact both manufacturing costs and customer operating expenses, creating additional uncertainty. Natural gas and electricity rate fluctuations affect demand patterns, as consumers become more or less motivated to upgrade to efficient systems based on utility costs. For new air conditioning companies, managing supply chain risk requires establishing relationships with multiple equipment suppliers, maintaining strategic inventory of common components, clearly communicating realistic lead times to customers, and building price escalation clauses into longer-term project contracts.

We cover this exact topic in the air conditioning company business plan.

What are the main challenges facing the heating and cooling industry?

The heating and cooling industry faces multiple significant challenges that impact business operations, profitability, and long-term strategic planning.

Regulatory compliance represents one of the most substantial challenges, particularly regarding refrigerant phase-outs and energy efficiency mandates. The transition from high-GWP refrigerants requires equipment redesign, technician retraining, and management of legacy system service as older refrigerants become scarce and expensive. Energy efficiency regulations vary by region and are constantly tightening, forcing manufacturers to continuously update product lines and creating complexity for companies operating across multiple jurisdictions.

Environmental sustainability pressures extend beyond refrigerants to include broader concerns about energy consumption, material sourcing, and end-of-life equipment disposal. These pressures come from regulators, corporate customers with sustainability commitments, and increasingly environmentally conscious consumers. Meeting these expectations requires ongoing investment in technology development and operational changes.

Competition from alternative solutions poses a growing challenge in some market segments. Passive cooling techniques, improved building design, natural ventilation systems, and radiant heating/cooling systems offer lower-energy alternatives in certain applications. While these alternatives cannot fully replace mechanical HVAC systems in most climates, they can reduce system sizing requirements and compete for a portion of market demand.

Cost management amid supply chain volatility creates ongoing operational challenges. Fluctuating material costs, component availability issues, and energy price volatility make accurate project bidding difficult and can compress profit margins unexpectedly. Labor shortages, particularly for skilled HVAC technicians, drive up wage costs and can limit business growth capacity. For air conditioning companies, addressing these challenges requires strategic planning, operational flexibility, continuous workforce development, and careful risk management in pricing and contracting approaches.

What are the profit margins in different segments of the heating and cooling industry?

Profit margins in the heating and cooling industry vary substantially across product types, customer segments, and service offerings, with traditional equipment installation showing moderate margins while premium and service offerings command higher profitability.

Traditional HVAC equipment installation and replacement in mature markets typically generates profit margins between 8% and 16% after accounting for equipment costs, labor, overhead, and project management. These margins face pressure in competitive markets where multiple contractors bid on standard residential and light commercial projects. Commodity-level equipment and lower-value installations tend toward the lower end of this range, particularly when competing primarily on price.

Premium energy-efficient systems command higher margins, often reaching 18-25%, due to additional value customers perceive from lower operating costs, environmental benefits, and available incentives. These systems also require more technical expertise to properly specify and install, creating differentiation from competitors focused on basic equipment. Smart HVAC systems with advanced controls, integration capabilities, and monitoring features support premium pricing and improved margins.

Service and maintenance contracts represent the highest-margin segment of the business, often achieving 25-35% margins or higher. Recurring maintenance agreements provide predictable revenue, build customer relationships that lead to upgrade sales, and require lower upfront capital investment compared to equipment installation projects. The subscription-based "as a service" business model, projected to reach $176 billion by 2032, offers similar margin profiles with improved customer lifetime value.

Future margin trends will likely favor companies that successfully navigate the transition to green technologies, build service-based revenue streams, and maintain regulatory compliance without excessive cost increases. Companies focused solely on commodity equipment installation will face continued margin pressure, while those offering specialized expertise, premium products, and ongoing service relationships should maintain or improve profitability. For air conditioning companies entering the market, building a business model that balances installation revenue with high-margin service contracts provides the most sustainable path to profitability.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

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2. Future Market Insights - Heating and Cooling Market
3. Precedence Research - Heating and Cooling Market
4. Coherent Market Insights - Cooling and Heating as a Service Market
5. GM Insights - Heating Cooling Market
6. BCC Research - Global Heat Pump Industry
7. Mordor Intelligence - Heat Pumps Market
8. ServiceTitan - HVAC Statistics
9. Grand View Research - HVAC Equipment Industry
10. GM Insights - Residential Heating Equipment Market