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BSRIA Global Air Conditioning Study shows contraction in 2016May 2017

The recently published BSRIA market intelligence study on the global air conditioning (AC) market shows that contraction slowed down in 2016 compared to the previous two years. The recent indicators show that growth is expected to resume in 2017 across many regions.


Saziye Dickson, Senior Market Research Consultant at BSRIA, discusses the 20th annual BSRIA market study on global air conditioning

The global AC market contracted by one per cent in value terms in 2016, compared with a drop of five per cent in 2015, was not as bad as was initially expected. The Chinese market saw a late recovery supported by hot weather and the Government’s issue of a new five year plan, which boosted sales. Brazil and Saudi Arabia were the other main contributors to the negative growth.

The global AC market was valued as US$92.6 billion, with packaged products 1 accounting for almost 85 per cent of the value.

The biggest packaged air conditioning 1 market is Asia Pacific accounting for some 60 per cent of the world market by volume. The market declined by one per cent in 2016, a lower figure than previously expected; positive developments in China in the second half of the year saved the market from falling further.

The central plant 2 markets performed poorly with the exception of the Americas. The US, which is the second biggest central plant market, showed moderate growth. The slowdown in investments in industrial new construction and the low growth in healthcare and education restricted further market expansion. At the other end, the demand in the commercial office and hospitality verticals remained strong, leading to some growth.

Continued pressures on the Brazilian economy took their toll in the air conditioning markets as the country experiences its worst recession on record.

Saziye Dickson, Senior Market Research Consultant, BSRIA, Worldwide Market Intelligence, said:

“Overall, 2016 has been a good year in Europe and South East Asia region. The scorching heat and resumed growth – especially in southern Europe – has benefited the air conditioning markets across the region and particularly saw a boost of the Italian market. South East Asia benefits from a hot climate with an immature air conditioning market, which is boosted by economic growth through foreign direct Investments, new construction activities, tourism and public investments resulting in a seven per cent overall growth. 


Top 10 performing central plant products markets in 2016, by value in US$ (click image to zoom)
The Americas
region contracted by five per cent in volume terms and reached nearly 27 million units in 2016. There was a real mixture of performances within the biggest markets in the region with the US, Canada and Mexico all showing strong growth while the Brazilian, (-46 per cent) and Argentinian markets (-15 per cent) plummeted. Political instability and economic downturn were the main reasons behind these drops.

The overall growth in the US air conditioning market was promising at an increase of eight per cent in 2016. The growth was evident across all product areas bar the large packaged segment. Consumer spending, new construction activities, especially in the office, hospitality and retail markets, as well as low interest rates, were some of the main drivers in 2016. 

The European AC market grew by 13 per cent in 2016 after sluggish performance in the last few years. Economic recovery in most European countries combined with the heat wave in southern Europe and replenishment of stocks resulted in a strong growth.

Growth was evident in most of the large air conditioning markets in Europe, apart from the UK. The vote to leave the European Union caused a lot of uncertainty and the British pound fell to its lowest in the last 31 years. Overall there was a lack of demand for office spaces and those projects which were near completion were also pushed back due to uncertainty about tenant demand, impacting on completion dates and consequently the purchase and installation of air conditioning.


Top 10 performing packaged products markets in 2016, by volume (click image to zoom)
The MEIA region recorded a small decline in 2016 after two years of growth. The total air conditioning market was valued at just over 13 million units. The biggest market in the region was India which recorded an eight per cent growth but the Saudi market continued to suffer due to the lack of government investments and contracted by 25 per cent, bringing the whole region down by one per cent. The growth in India was driven by the rapid increase of penetration levels of air conditioning in the residential segment, soaring temperatures in May and a stable Rupee allowing better business planning and foreign direct investments.”

Moveables

Total sales of moveables for 2016 are estimated at some two million units representing an increase of 15 per cent compared to 2015, with a value of US$563 million. The US is the biggest moveables market, accounting for more than half of the global sales and saw a 29 per cent boost in the market. This was partly driven by favourable weather conditions, but also the availability of very competitively priced units.

This is a product which is highly volatile and very dependent on local summer conditions. Modest increases were seen in Europe and South East Asia but the market is also seeing competition from low cost splits.

Windows / through the wall

The global windows / through the wall market dropped by two per cent in volume. The market reduced to almost 12 million units and US$2.4 billion in 2016. However, this product is becoming obsolete in many countries as splits products continue to take share. The biggest market globally is the US; accounting for 60 per cent in volume terms. The favourable economic climate in the US meant the market saw a nine per cent growth in 2016 to reach seven million units. The other major markets continue to be India and Saudi Arabia, but both recorded a fall in 2016.

This market is expected to show modest growth over the forecast period up to 2021, purely driven by the growth in the US market.


World package products market by region in 2016, in volume (click image to zoom)
Splits 3

Split systems represent the biggest segment of the world air conditioning market, comprising over 80 per cent of the market in volume terms. Among the splits, multi splits account for three per cent and VRF accounts for 14 per cent of the global market in 2016 in value terms. The total splits market has reached just over 100 million units, a one per cent drop compared with 2015, with a corresponding value of US$70 billion in 2016. China, the world’s biggest market, recorded a five per cent drop, restricting global growth. The highest growth markets among the key AC countries were South Korea (35 per cent), which benefitted from a hot summer, Vietnam (16 per cent), India (11 per cent) and the US (six per cent).

The uptake of inverter technology accelerated across many markets in 2016. The majority of Europe is now nearly 100 per cent inverter, with the exception of Russia where legislation does not encourage inverters and the tough economic conditions means the market is dominated by low cost products.

Saziye added:

“2016 has been an amazing year for both multi splits and the VRF market with both recording double digit growth rates. The top three biggest multi splits markets recorded some growth, Italy (49 per cent), South Korea (two per cent) and the US (27 per cent) contributing to global growth. The multi splits market meets the demand between the single splits and Mini-VRF (<20kW) range in both residential and commercial segment. 

The VRF market has been described as recession proof as this product managed to record a growth even at the toughest times. The product’s adaptability in both new and refurbishment for residential and light commercial applications has proved to be key in recent years, where there has been a shift away from new construction towards refurbishment projects. The increasing ability for VRFs to be equipped with BACS systems is also generating new opportunities for the VRF market.

Increasingly, ventilation products are being installed with VRF systems, so that VRFs are able to compete better with chiller solutions in applications, where fresh air is required.

The global splits and VRF markets are expected to show a modest growth of two per cent CAGR in volume terms between 2015 and 2021. An increase in the penetration of air conditioning, especially in developing countries, combined with economic recovery in Europe will be the main drivers. The biggest growth by region is expected to be the Middle East India and Africa region followed by Europe.” 


World central plant products market by region in 2016, in value US$m (click image to zoom)
Rooftops

The global rooftops market was estimated at around 1.2 million units with a corresponding value of around four billion units representing a one per cent drop compared to 2015 in volume terms. 

The US and Canada are by far the biggest two markets accounting for nearly 90 per cent of the global sales in 2016. 

This product heavily relies on certain verticals such as retail and fast food service restaurants. As online trading continues to take market share from the high street, the growth will be limited in this market. The global market is expected to show a modest growth of 2.6 per cent CAGR in volume terms between 2015 and 2021.

Central plant 2

The global chiller and airside market was valued as US$14.5 billion, representing a two per cent drop compared with 2015. Chillers represented some 50 per cent of the central plant market by value in 2016. The Americas region was the only continent that recorded any growth thanks to strong performance in the US market.

Although economic growth is evident in many regions, the projects to get to the purchasing stage of building services is taking time and the market has continued to suffer from a lack of new commercial construction.

The biggest region, Asia Pacific, accounts for 35 per cent, followed by Europe with 26 per cent, the Americas region 25 per cent and MEIA region with 14 per cent. Growth levels have generally been modest with the largest markets being between one to five per cent. However, globally, the trend in the chiller market is driven by the two giants, the US and China, which, combined, represents 45 per cent of the global market.

The biggest developments in the chiller market were the increased uptake of inverter technology, as well as heat pump applications, especially in Europe. Energy efficiency laws and tough competition from DX systems is driving the chiller companies to up their game. 

Overall, the central plant market is expected to show a moderate growth across all regions for the forecast period at around three per cent CAGR in value terms between 2015 and 2021.


For more information on the availability and costs of BSRIA’s reports, contact: Mike Vardanian, mike.vardanian@bsria.co.uk; +44 (0) 1344 465 630 or view: www.bsria.co.uk/wmi

Contact details (content & methodology):- Saziye Dickson at saziye.dickson@bsria.co.uk

(The 13th) Chinese five year plan (2016-2020)

The Chinese government makes a development plan every five years: this plan stated that the government would promote the development of green technologies and energy saving industries.

1 Packaged Products include: windows, portable units, splits, indoor packaged and rooftops. 
2 Central Plant products include: Chillers, Air Handling Units and Fan coils.
3 Splits contains un-ducted and ducted single splits, multi splits and VRF.


The article is based on the latest BSRIA’s World Air Conditioning Study, published in March 2017, covering 30 countries.

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