Air Conditioning (AC) Market Analysis, Size, and Forecast 2025-2029: North America (US and Canada), Europe (France, Germany, and UK), APAC (Australia, China, India, Japan, and South Korea), and Rest of World (ROW)

Air Conditioning (AC) Market Size 2025-2029

The air conditioning (AC) market size is valued to increase by USD 14.12 billion, at a CAGR of 2% from 2024 to 2029. Rise in residential construction activity will drive the air conditioning (AC) market.

Major Market Trends & Insights

• APAC dominated the market and accounted for a 52% growth during the forecast period.
• By Product - Split segment was valued at USD 98.98 billion in 2023
• By Distribution Channel - Offline segment accounted for the largest market revenue share in 2023

Market Size & Forecast

• Market Opportunities: USD 17.29 billion
• Market Future Opportunities: USD 14119.20 billion
• CAGR from 2024 to 2029 : 2%

Market Summary

• The market is experiencing significant growth, driven by the rising residential construction activity and increasing demand for energy-efficient cooling solutions. One of the key trends shaping the market is the shift towards the use of R32 refrigerant in split AC systems. This refrigerant, which has a lower global warming potential than the previously used R22, is becoming increasingly popular due to its environmental benefits.
• However, the market is not without challenges. Operating costs and raw material prices remain volatile, posing significant risks for businesses in the sector. For instance, a leading HVAC manufacturer in the US has implemented supply chain optimization strategies to mitigate the impact of raw material price fluctuations on its bottom line. By closely monitoring market trends, investing in research and development, and adopting sustainable business practices, companies in the AC market can navigate these challenges and continue to deliver innovative cooling solutions to their customers.

What will be the Size of the Air Conditioning (AC) Market during the forecast period?

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How is the Air Conditioning (AC) Market Segmented ?

The air conditioning (AC) industry research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD billion" for the period 2025-2029, as well as historical data from 2019-2023 for the following segments.

• Product
  • Split
  • Chillers
  • Airside
  • Others
• Distribution Channel
  • Offline
  • Online
• End-user
  • Residential
  • Commercial
  • Industrial
• Geography
  • North America
    • US
    • Canada
  • Europe
    • France
    • Germany
    • UK
  • APAC
    • Australia
    • China
    • India
    • Japan
    • South Korea
  • Rest of World (ROW)

By Product Insights

The split segment is estimated to witness significant growth during the forecast period.

The market continues to evolve, with a significant shift from traditional window units to energy-efficient split systems. Samsung is among the companies leading this trend, having ceased production of window air conditioners in favor of sleek, modern split models. Inverter-based split air conditioners are gaining popularity due to their improved energy efficiency. The market has seen a decline in demand for ducted standard split air conditioners, as Japanese-style mini-splits become increasingly preferred. Refurbished products are also driving demand, as LEED certifications push for better energy efficiency and customers seek to replace outdated systems. Key technological advancements include the integration of smart thermostats, remote monitoring systems, and refrigerant leak detection.

Air filtration technology and thermal comfort modeling are also essential components of modern HVAC system design. The market is further characterized by the use of energy modeling software, variable refrigerant flow, and chilled water systems. A recent study reveals that energy consumption from HVAC systems accounts for nearly 40% of total energy usage in commercial buildings. This underscores the importance of optimizing air handling units, fan performance curves, and compressor technology for enhanced energy efficiency.

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The Split segment was valued at USD 98.98 billion in 2019 and showed a gradual increase during the forecast period.

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Regional Analysis

APAC is estimated to contribute 52% to the growth of the global market during the forecast period.Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.

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Air conditioning markets continue to evolve, driven by increasing affordability and demand for comfort in countries like India, China, and Vietnam. The residential market, in particular, is experiencing growth as air conditioners expand beyond bedrooms to living spaces. China and Japan dominate the APAC market, accounting for approximately 80% of the total share. India, fueled by urbanization and rising disposable incomes, is poised for significant growth.

This trend underscores the global shift towards improved living conditions and the increasing importance of comfort in daily life. 

Market Dynamics

Our researchers analyzed the data with 2024 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.

The market is experiencing significant growth due to the increasing demand for comfortable indoor environments in both new and existing buildings. The design of HVAC systems plays a crucial role in achieving energy efficiency and optimizing performance. Variable refrigerant flow (VRF) systems, an advanced AC technology, is gaining popularity due to its ability to improve energy efficiency by adjusting refrigerant flow based on the cooling demand. Refrigerant choice also impacts HVAC performance, with heat pump technology emerging as a preferred solution in buildings. Innovative methods for optimizing airflow and improving cooling tower efficiency are essential to reducing energy consumption in AC systems. Advanced control strategies, such as smart thermostat technology, ensure effective temperature management and prevent energy waste.

Designing efficient HVAC systems for buildings requires a holistic approach that considers the building envelope's role in energy efficiency. Preventative maintenance and monitoring HVAC system performance are essential for longevity and reliability, reducing maintenance costs and ensuring optimal thermal comfort. Strategies for improving energy efficiency in HVAC systems include methods for optimizing airflow, implementing smart thermostat technology, and utilizing advanced control strategies. Technologies like VRF systems, heat pump technology, and cooling tower optimization are driving innovation in the AC market, providing effective ways to reduce energy consumption and enhance thermal comfort in buildings. The role of HVAC systems in ensuring indoor air quality is increasingly important, making it essential to explore new methods for improving air quality and system performance.

What are the key market drivers leading to the rise in the adoption of Air Conditioning (AC) Industry?

• The significant increase in residential construction activity serves as the primary catalyst for market growth. 

• The market has experienced notable expansion across various industries in response to increasing construction activities and infrastructure development, particularly in the residential sector. According to recent reports, the global residential real estate industry is projected to reach substantial growth, with direct investment reaching approximately USD10.2 trillion by the end of 2024. This surge in investment will lead to a significant increase in new residential construction projects, necessitating the installation of energy-efficient AC systems to ensure compliance with regulatory standards and enhance overall building performance.
• The adoption of advanced AC technologies, such as smart HVAC systems, has led to substantial improvements in efficiency, reducing energy consumption and associated costs by up to 30%. Furthermore, the integration of IoT sensors and predictive analytics has enabled real-time monitoring and forecasting of AC system performance, improving forecast accuracy by 18%. These advancements contribute to informed decision-making, minimizing downtime and optimizing overall operational efficiency.

What are the market trends shaping the Air Conditioning (AC) Industry?

• The use of R32 refrigerant is becoming more prevalent in split air conditioning systems. This emerging market trend mandates increased adoption.

• Air conditioning (AC) systems have evolved significantly over the years, with various sectors relying on them for temperature control and comfort. Refrigerants, compounds that absorb heat from the environment, play a crucial role in AC functionality. R-410A refrigerant, widely used due to its zero-ozone depletion potential (ODP) and low global warming potential (GWP), is a common choice among manufacturers. However, R-410A consumes more energy compared to other alternatives. Consequently, companies are increasingly adopting R32 refrigerant, which reduces electricity consumption by up to 10% and has a GWP three times lower than R-410A and R-22. This shift towards energy-efficient and environmentally-friendly refrigerants not only contributes to faster product rollouts but also enhances regulatory compliance and cost optimization in the AC market.

What challenges does the Air Conditioning (AC) Industry face during its growth?

• The volatility in operating costs and raw material prices poses a significant challenge to the industry, as it negatively impacts growth by introducing uncertainty and potential financial instability. 

• The market is undergoing significant evolution, driven by advancements in technology and increasing demand across various sectors. According to recent reports, the global AC market size was valued at over USD170 billion in 2020 and is projected to reach USD270 billion by 2027, growing at a CAGR of 6.5% during the forecast period. The market's expansion is attributed to factors such as growing urbanization, rising disposable income, and increasing awareness of energy efficiency. The manufacturing process of air conditioning systems involves the procurement and use of several raw materials, including steel, iron, plastic, glass, electronic equipment, petroleum products, and paints.
• The price of these materials is subject to change and fluctuates with international prices. For instance, the price of crude oil, a primary component of petroleum products, can significantly impact the manufacturing cost of AC units due to its extensive use in refrigerants and insulation materials. The procurement of raw materials includes add-on costs such as transportation and other necessary services, constraints of suppliers, and the inability to maintain favorable arrangements with suppliers for adequate and timely delivery. These factors can lead to increased costs and impact the profitability of manufacturers. Therefore, managing the procurement process effectively is crucial for manufacturers to optimize costs, ensure regulatory compliance, and maintain product quality.

Exclusive Technavio Analysis on Customer Landscape

The air conditioning (ac) market forecasting report includes the adoption lifecycle of the market, covering from the innovator's stage to the laggard's stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the air conditioning (ac) market report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.

 Customer Landscape of Air Conditioning (AC) Industry

Competitive Landscape

Companies are implementing various strategies, such as strategic alliances, air conditioning (ac) market forecast, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the industry.

Blue Star Ltd. - This company specializes in providing fixed speed split air conditioning solutions, delivering efficient and effective climate control for various applications. Their product offerings cater to diverse cooling needs with a focus on energy efficiency and reliability.

The industry research and growth report includes detailed analyses of the competitive landscape of the market and information about key companies, including:

• Blue Star Ltd.
• Daikin Industries Ltd.
• DeLonghi Group
• Electrolux group
• Emerson Electric Co.
• Fujitsu Ltd.
• Haier Smart Home Co. Ltd.
• Hitachi Ltd.
• Honeywell International Inc.
• Johnson Controls International Plc
• LG Corp.
• MIDEA Group Co. Ltd.
• Mitsubishi Electric Corp.
• Panasonic Holdings Corp.
• Samsung Electronics Co. Ltd.
• Toshiba Corp.
• Trane Technologies Plc
• Transform Holdco LLC
• Voltas Ltd.
• Whirlpool Corp.

Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key industry players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.

Recent Development and News in Air Conditioning (AC) Market

• In January 2024, Carrier Global Corporation, a leading player in the air conditioning market, announced the launch of its new line of energy-efficient residential air conditioners, the Infinity Touch Series. This innovative product line, featuring advanced technologies such as Greenspeed intelligence and a touchscreen control, was designed to enhance user experience and reduce energy consumption (Carrier Global Corporation Press Release, 2024).
• In March 2024, LG Electronics and Amazon announced a strategic partnership to integrate LG's ThinQ AI technology into Amazon's Alexa voice assistant. This collaboration aimed to provide customers with more convenient and efficient air conditioning control, further popularizing smart home solutions (LG Electronics Press Release, 2024).
• In May 2024, Daikin Industries, Ltd. Completed the acquisition of FAGRAS S.P.A., a leading Italian manufacturer of air conditioning and refrigeration systems. This strategic move expanded Daikin's European market presence and strengthened its product portfolio (Daikin Industries, Ltd. Press Release, 2024).
• In August 2024, the European Union passed the new Ecodesign Regulation, setting stricter energy efficiency standards for air conditioners and other appliances. The new regulation, which took effect in January 2025, is expected to drive the market towards more energy-efficient solutions (European Commission Press Release, 2024).

Dive into Technavio's robust research methodology, blending expert interviews, extensive data synthesis, and validated models for unparalleled Air Conditioning (AC) Market insights. See full methodology.

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Research Analyst Overview

• The market continues to evolve, driven by advancements in technology and shifting consumer preferences. Building envelope design plays a crucial role in AC system efficiency, with thermal insulation methods and heat pump technology being key areas of focus. HVAC maintenance schedules and remote monitoring systems ensure optimal condenser performance and refrigerant lifecycle management. Air handling units and energy modeling software facilitate thermal comfort modeling and energy efficiency ratings, while dehumidification processes and load calculations help optimize cooling capacity metrics. Variable refrigerant flow and compressor technology enhance system control strategies, reducing energy consumption data and improving refrigerant efficiency.
• Indoor air quality is a growing concern, leading to the integration of air filtration technology and air quality sensors. Chilled water systems and cooling tower operation require ongoing attention, with energy efficiency ratings and cooling capacity metrics shaping industry expectations. Smart thermostat integration and duct design optimization further contribute to market dynamism. For instance, a leading construction firm reported a 25% increase in energy savings by implementing ductless mini-split systems and optimizing air distribution systems in their latest project. The global AC market is projected to grow by 5% annually, fueled by the adoption of advanced technologies and increasing demand for energy-efficient solutions.

What are the Key Data Covered in this Air Conditioning (AC) Market Research and Growth Report?

• What is the expected growth of the Air Conditioning (AC) Market between 2025 and 2029?

  • USD 14.12 billion, at a CAGR of 2%

• What segmentation does the market report cover?

  • The report is segmented by Product (Split, Chillers, Airside, and Others), Distribution Channel (Offline and Online), End-user (Residential, Commercial, and Industrial), and Geography (APAC, Europe, North America, Middle East and Africa, and South America)

• Which regions are analyzed in the report?

  • APAC, Europe, North America, Middle East and Africa, and South America

• What are the key growth drivers and market challenges?

  • Rise in residential construction activity, Volatility in operating costs and raw material prices

• Who are the major players in the Air Conditioning (AC) Market?

  • Blue Star Ltd., Daikin Industries Ltd., DeLonghi Group, Electrolux group, Emerson Electric Co., Fujitsu Ltd., Haier Smart Home Co. Ltd., Hitachi Ltd., Honeywell International Inc., Johnson Controls International Plc, LG Corp., MIDEA Group Co. Ltd., Mitsubishi Electric Corp., Panasonic Holdings Corp., Samsung Electronics Co. Ltd., Toshiba Corp., Trane Technologies Plc, Transform Holdco LLC, Voltas Ltd., and Whirlpool Corp.

Market Research Insights

• The market for air conditioning (AC) systems is a dynamic and ever-evolving industry. Two significant data points illustrate its continuous growth and evolution. First, the global market for variable speed drives in HVAC systems is projected to expand at a steady rate, reaching over 30 billion US dollars by 2025. This growth is driven by the increasing demand for energy efficiency and cost savings in building operations. Second, retrofit solutions for HVAC systems are gaining traction, with industry experts anticipating a growth rate of approximately 5% annually.
• For instance, a large commercial building in New York City implemented a retrofit project, resulting in a 20% reduction in energy consumption and a corresponding cost savings of millions of dollars per year. These figures underscore the potential for significant improvements in system efficiency and overall cost reduction through the adoption of advanced technologies and solutions in the AC market.

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