Heat Pump Market Size & Share Analysis - Trends, Drivers, Competitive Landscape, and Forecasts (2025 - 2032)

Heat Pump Market Emerging Trends

Increasing Need to Reduce Carbon Footprint Propels Market Growth

• Energy production from fossil fuels results in the expulsion of GHGs in huge volumes, which leads to climate change through ozone depletion.
• Thus, major countries across the globe are making efforts to reduce their reliance on non-renewable sources and rapidly shifting toward renewable sources, to limit harmful emissions.
• For instance, the Indian government has set new strategies to fight climate change and achieve net-zero emissions by 2070.
• Similarly, the Government of the Netherlands has introduced the National Climate Agreement, extending the Climate Act, which calls for a 49% reduction in greenhouse gas emissions by 2030 from the 1990 levels and a 95% reduction by 2050.
• In addition, the Russian government has passed a law to limit greenhouse gas emissions and encourage Russian companies to undertake environmental restoration projects and shun practices that harm the national economy and the climate.
• This technology is considered a favorable solution for diminishing greenhouse gas emissions.
• These pumps extricate the heat from the air and then use electricity to either raise or lower its temperature depending on whether they are being used for heating or cooling.
• These pumps can source up to 77% of the heat from the air; thus, its usage can cut down non-renewable energy source utilization extensively when compared to alternative HVAC technologies, thereby eventually lowering the carbon emissions.
• The integration of IoT with these systems is creating a major growth opportunity for the heat pump market.
• IoT-based heat pumps empower real-time monitoring, predictive maintenance, and remote diagnosis of its parts.
• These pumps consist of smart regulators that help check environmental changes and connect with their water heater equipment.
• Automation and remote operations have been the key areas of focus during the creation of next-generation heat pumps, for ease of operations.
• The incorporation of machine learning and AI in heat pumps to reduce electricity consumption and enhance efficiency can also act as a major opportunistic factor for the market.
• Due to this, manufacturers are focusing on integrating different technologies and innovating their heat pumps, to reduce energy consumption.
• Researchers at the Swiss Federal Institute of Technology Lausanne (EPFL) are leveraging AI to create a compressor that consumes 25% less energy than conventional ones.

High Costs of Heat Pump Hamper Market Growth

• The costs of raw materials and installation and permit fees have an impact on the overall costs of heat pumps.
• The price of these systems can range from USD 7,000 to USD 13,000, depending on whether additional ducts need to be placed in facilities.
• The ducted central air source heat pump systems’ installation prices might range from USD 10,000 to USD 18,975.
• Additionally, depending on the size of the heat pump system, customers who qualify for a refund might lower installation expenses by USD 2,000 to USD 3,000 or more.
• As an illustration, PSEG Long Island provides a rebate of up to USD 1,000 per metric ton of systems, which normally run three metric tons for a typical home.
• Similarly, the report from the committee on climate change indicated that around USD 5,647.03 may be needed to install a low-carbon heating pump in a new home.
• However, the difference is quite noticeable for an existing house. The costs can go as high as USD 30,941.03.
• Such high installation costs may hinder the market growth during the forecast period.

Segmentation and Category Analysis

Analysis by Type

The heat pump market was dominated by the air-to-air category, with 55% share, in 2024. Quick and easy installation, long life, and low emissions are some of the prominent drivers accelerating the usage of these variants. They work by absorbing heat from the outside air and transmitting it to an enclosed space through the central heating system. Major investments in the production of tailored systems for operations across regions with extreme climatic conditions will further encourage business expansion for the key manufacturers.

The water-source category will witness the fastest growth during the forecast period. This is because these variants are highly energy efficient as they draw most of their heat energy form waterbodies, rather than electricity or by burning gas. Moreover, they are cost-effective to operate in the long run, which offers handsome savings in times of the rising utility costs. Additionally, their versatility for heating and cooling makes them ideal for places that witness vast changes in temperatures.

These types are covered:

• Air-to-Air (Largest Category)
• Water-Source (Fastest-Growing Category)
• Geothermal

Analysis by End User

The residential will continue to dominate the market during the forecast period. This is primarily due to the adoption of heat pumps to provide heating solutions in the winter season and cooling solutions on hot days. Thus, the need for these systems is fueled by climate change and the government initiatives to enhance energy efficiency in the residential sector. The International Energy Agency (IEA) states that in the U.S., heat pump sales share for newly constructed buildings exceeded 40% for single-family dwellings and about 50% for multi-family buildings in 2020.

The commercial category will witness the highest CAGR during the forecast period, of 12.41%. This is because commercial properties subject owners to high electricity expenditures, where the energy efficiency and cost-effectiveness of heat pumps offers visible advantages. Additionally, the rapid construction of shopping malls, indoor stadia and performance venues, hotels and resorts, hospitals, and other kinds of commercial spaces drives the market. Since visitor comfort is key at these places, effective heating and cooling are a must here.

These end users are covered:

• Residential (Largest Category)
• Commercial (Fastest-Growing Category)
• Industrial

Heat Pump Market Regional Growth Dynamics

The APAC heat pump market the largest, with 35% share in 2024, and it will also witness the highest CAGR, of 11.62%, over the forecast period. The increasing scale of residential and commercial construction, including of offices, hotels, and educational institutions, is driving the market. In addition, the stringent energy efficiency regulations and the growing R&D for upgrading technologies, to lessen the impact of human activities on the environment, would continue to lead to an expansion in the market size.

The increasing scale of residential and commercial construction, including offices, hotels, and educational institutions, is driving the market. In addition, the stringent energy efficiency regulations and the growing R&D for upgrading technologies, to lessen the impact of human activities on the environment, would continue to lead to the expansion in the market size. Another key factor propelling the market is the changing climate throughout the region. Moreover, the need to reduce reliance on fossil fuels, the search for energy-efficient furnace and air conditioner replacements, the rise in disposable income, the changing energy prices, and the expansion of the building and construction sector for both single-unit and multi-unit residences all contribute to the market's growth. The market is additionally influenced by the crucial role that heat pump technology plays in reducing CO₂ emissions and the extensive government assistance in the form of subsidies, incentives, and other financial benefits.

Moreover, the integration of IoT with these systems is creating a major growth opportunity for the heat pump market. IoT-based heat pumps empower real-time monitoring, predictive maintenance, and remote diagnosis of its parts. These pumps consist of smart regulators that help check environmental changes and connect with their water heater equipment. Automation and remote operations have been the key areas of focus during the creation of next-generation heat pumps, for ease of operations.

Moreover, the National Infrastructure Pipeline of India has 8,964 projects worth INR 108 lakh crore under implementation. Further, in the 2025–26 budget, the government allocated INR 10.5 lakh crore to the construction sector, 9% more than in the previous budget. Moreover, as per estimates, the output of the Chinese construction industry in 2023 stood at USD 4.4 trillion (RMB 31.6 trillion).

These regions and countries are covered:

• North America
  • U.S. (Larger and Faster-Growing Country Market)
  • Canada
• Europe
  • Germany (Fastest-Growing Country Market)
  • France (Largest Country Market)
  • U.K.
  • Italy
  • Spain
  • Rest of Europe
• Asia-Pacific (APAC) (Largest and Fastest-Growing Regional Market)
  • Japan
  • China (Largest Country Market)
  • India (Fastest-Growing Country Market)
  • South Korea
  • Australia
  • Rest of APAC
• Latin America (LATAM)
  • Brazil (Largest Country Market)
  • Mexico (Fastest-Growing Country Market)
  • Rest of LATAM
• Middle East and Africa (MEA)
  • South Africa (Fastest-Growing Country Market)
  • Saudi Arabia (Largest Country Market)
  • U.A.E.
  • Rest of MEA

Heat Pump Market Competitive Landscape

• The market is fragmented as heat pumps have been in existence for a long time, which is why a large number of companies develop and offer these systems.
• Moreover, the most popular technology, viz. air-to-air, water-source, and geothermal, varies across countries depending on which resource is the most easily available.
• Moreover, based on the total area to be heated or cooled, these systems are highly diverse in their capacity.
• While some companies majorly offer low-capacity heat pumps for individual homes, other specialized in high-capacity variants for large commercial and industrial spaces.

Heat Pump Market Developments

• In February 2025, Viessmann, which is a brand of Carrier Global Corporation, announced the launch of ductless air-to-air heat pumps ion Canada. The product line, which uses the R-410a refrigerant, includes three models: the Vitocal 100-S Ductless single-zone, the Vitocal 100-S Ducted single-zone; and Vitocal 200-S Ductless multi-zone.
• In February 2025, Panasonic Holdings Corporation showcased its air-to-water heat pumps and heat pump water heaters targeted at North America, which it co-developed with A. O. Smith Corporation, at AHR Expo 2025, held in Orlando, Florida, on February 10–12.
• In January 2025, Government of the Canadian province of Ontario announced two new programs to encourage energy-efficient home renovations. One of those, the Home Renovation Savings Program, will offer a 30% rebate on the purchase of new doors and windows, air sealing, insulation, smart thermostats, rooftop solar panels, heat pumps, and battery storage systems. The other is the Peak Perks program, which will be extended to small businesses. Under it, each smart thermostat connected to a heat pump or central air conditioning system will make property owners eligible to a CAD 75 virtual prepaid credit card, with additional CAD 10 every year henceforth.
• In December 2024, Mitsubishi Electric Corporation announced plans to retrofit a factory in the U.S. with an investment of USD 143.5 million, manufacture compressors for heat pumps.