Heating and

cooling

revolution

By Andrew

Giles

October 2014

2 Excellence in Market Intelligence

Heating and Cooling Markets

Agenda

• Global HVAC market and the rise of China

• Western & Eastern Europe heating market trends in short term

• ErP in September 2015, the great divorce of condensing boilers, rise in hybrids and solar

• Heat pumps – China versus Europe and the top growing product types

• 2020 & 2035 market for heat generators and new technologies

• Traditional water heating losing to combination boilers and other sanitary hot water solutions

• Top manufactures – making acquisitions and positioning in the HVAC markets /market share

2

3 Excellence in Market Intelligence

Global Major Regions HVAC Market Value

Europe analysis based on following countries:

Austria, Belgium, Czech Rep., France, Germany, Italy, Netherlands, Poland, Spain, Sweden, Switzerland, Turkey, UK

Total 2013 market value: €100bn

NAmerica

€22.7bln

China

€39.0bln

Japan

€14.0bn Europe

€25.9bln

4 Excellence in Market Intelligence

China domestic boilers leaps to top spot

4

0

500

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016 2017

UK

South Korea

China

Russia

Number of of boilers sold

per annum

5 Excellence in Market Intelligence

ErP - Impact on products

Increase in Combined and Hybrid systems Eco Design

A +++ ≥150%

A ++ ≥125%

A + ≥98%

A ≥90%

B ≥82%

C ≥75%

D ≥36%

E ≥34%

Cogeneration Gas HP

Condensing

boilers

Non-

condensing

boilers

Ground /Water to

water HP

Air to water HP

From 26/9/2015

products with Label

D to G are no longer

allowed to be sold

Hybrid Heat Pumps

Combined CB + ST system

+ enhanced Controls

Fuel cell

Labels mandatory from Sep. 2015

5

6 Excellence in Market Intelligence

Combining systems

Product label

High efficiency

gas boiler

Solar thermal

system (VT)

Temperature

controls

System label example:

89%

6%

4%

+

+

System

efficiency 99%

A + ≥98%

System label

Separate labelling for

Space Heating and SHW.

6

7 Excellence in Market Intelligence

12% 15%

88%

85%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2017

condensing non-condensing

Boiler technology shift

Domestic gas and oil boiler sales 2012 - 2017

Outside the EU market Inside the EU market ‘000 units ‘000 units

70%

92%

30%

8%

-

1,000

2,000

3,000

4,000

5,000

6,000

2012 2017

condensing non-condensing

Source: BSRIA, based on the analysis of 9 largest European markets Source: BSRIA, based on the analysis of Turkey, Russia, China, S. Korea

7

8 Excellence in Market Intelligence

Hybrid heat pumps

Market potential by 2020

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2014 2015 2016 2017 2020

France Germany Italy UK Netherlands

units

CAGR 2014-2020

+51.7%

Hybrid Box

Gas cond. boiler & A/W

monobloc HP

Modulo Hybrido

Gas cond. boiler & A/W

split HP

8

9 Excellence in Market Intelligence

53,400

5,042 1,973 1,547 831

2,595

-

10,000

20,000

30,000

40,000

50,000

60,000

China Europe Turkey Brazil India Other

countries

Solar Thermal Market

World market

* 29 countries

Total world* market: 65.4 million m2 in 2014e (+7%)

• ~ +7% growth in 2014

• ~ 82% of world market

‘000 m2

2012 2013 2014

9

10 Excellence in Market Intelligence

Heat Pump Market

China - 2013

Total market estimated at 1 million units in 2013: (+ 15%) units

12.0%

5.0%

20.0%

17.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Ground / Water to Water Splits Monoblocks DHW Heat pumps

2014 Growth 2014

10

11 Excellence in Market Intelligence

Heat Pump Market

Europe* – ground/water/air-to-water

Ground/Water-to-Water

~110,600 in 2014

(+4.3%)

*Includes 21 countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden, Switzerland, UK, Croatia, Czech

Republic, Poland, Russia, Serbia, Slovakia, Slovenia

Air-to-Water

~196,500 in 2014

(+7%) units

units

-3.1%

2.8%

-6.0%

3.1%

4.3%

5.6% 6.3% 6.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2010 2011 2012 2013 2014 2015 2016 2017

Ground/ water to water Growth

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

-

50,000

100,000

150,000

200,000

250,000

300,000

2010 2011 2012 2013 2014 2015 2016 2017

Splits Monoblocs Growth splits Growth monoblocs

11

12 Excellence in Market Intelligence

*Includes 21 countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden, Switzerland, UK, Croatia, Czech

Republic, Poland, Russia, Serbia, Slovakia, Slovenia

Cylinder Integrated Water

Heaters Heat Pumps

~111,000 in 2013

(+15.7%)

Heat Pump Market

Europe* – Cylinder integrated

units

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2010 2011 2012 2013 2014 2015 2016 2017

Air to water –cylinder-integrated water heater HP Growth

12

13 Excellence in Market Intelligence

2020 European heating market

Top 6 Heating market by volume of sales, 2012 – 2020 – wall hung condensing, wall hung

non-condensing , floor standing, biomass, solar thermal & heat pump

13

‘000 units

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2012 2020 2012 2020 2012 2020 2012 2020 2012 2020 2012 2020

UK Italy France Germany Spain Netherlands

HP

ST

Biomass

FS

WH non-cond.

WH cond.

14 Excellence in Market Intelligence

Renewables sales curve until 2035

Powerful drivers for new technologies after 2020

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2012 2015 2020 2030 2035

Heat Pumps

Hybrid HP

ST systems

micro CHP

Fuel Cells

Units

14

15 Excellence in Market Intelligence

Water heater market declining

15

3,600

3,800

4,000

4,200

4,400

4,600

4,800

5,000

2013 2014 2015 2016 2017

Tho

usa

nd

un

its

Electric storage Air-water cylinder heat pumpSolar thermal residential system

Electric storage

Air-water Cylinder

integrated heat pump

Rise of combination boilers means less market for

traditional electric storage

16 Excellence in Market Intelligence

JCI

Midea

Acquisition speed

16

Diversification degree

Degree of diversification appreciated outside of the core HVAC business

Acquisition speed analysed over the last five years, based on company literature and industry sources

Low

Low High

Hig

h

Acquisition speed

AO Smith

Ariston

BDR

Thermea

Bosch Daikin

Dimplex

Ferroli Gree

Haier

Hitachi

LG

Mitsubishi

Electric

Panasonic

Riello

Toshiba

Carrier

Trane

Vaillant

Viessmann

17 Excellence in Market Intelligence

European Analysis

17

European Market Shares by value in Heating, AC and Renewables of Top 20 Companies, 2012

0.1%

4.3%

8.6% 10.3%

0.2% 0.1% 2.0% 1.0% 0.2%

10.2%

4.4%

14.2%

0.6% 0.5% 2.3% 2.2% 2.6% 1.6%

8.1%

3.0%

0.0%

3.5% 2.2%

0.4%

1.3%

2.1%

8.8%

5.0%

3.8% 0.1% 0.4% 0.1%

1.6%

0.4%

0.5%

0.6%

4.0%

6.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

European MS in Heating European MS in AC European MS in Renewables

18 Excellence in Market Intelligence

THANK YOU

18