The North American HVAC equipment market was valued at USD 32.64 billion in 2020, and it is expected to reach USD 43.20 billion by 2026 at a CAGR of 4.7% over the forecast period (2021 - 2026). Heating, ventilation, and air conditioning (HVAC) systems are finding widespread adoption across the North American region, due to the multiple advantages offered by HVAC systems, most notably, the power-saving techniques.

- Major factors driving the market studied include an increase in new households, rising average construction spending, rapid urbanization, and growth in disposable income across several major economies. The United States and Canada rank among the world's top 10 energy consumption countries in the world, with the United States ranking at second, only behind China.

- Most of the American population has air conditioning. For instance, according to IEA, the United States and China account for over half of the world's stocks of air conditioners. Daikin is expected to widen the adoption of lower GWP refrigerant R32, by developing ducted and ductless residential, light-commercial, and applied air conditioning products, for the North American region. According to Daikin, the choice of R32 is consistent with its broad global acceptance.

- Leading players in the market are investing significantly in M&A or R&D activities to gain a strong position. For instance, in January 2019, Huron Capital announced that its HVAC installations subsidiary, Pueblo Mechanical & Controls, acquired two additional businesses, namely, Newgaard Mechanical Inc. and CFM Mechanical LLC, to offer customized HVAC products and services.

- Similarly, the Electric Power Research Institute (EPRI) received a USD 4.7 million grant from the California Strategic Growth Council to develop advanced residential HVAC systems with low global warming potential (GWP) refrigerants and conduct community studies to bring the technology to low-income and disadvantaged Californians.

- With the outbreak of COVID-19, viral illness is wreaking havoc across North America and has claimed both lives and livelihood and has resulted in significant disadvantages for players operating in the HVAC equipment market. Although the World Health Organization (WHO) initially told that the virus could not be spread through aerosols, but WHO recently reversed its stance. The WHO guidelines now state that the airborne transmission of the coronavirus may be possible indoors, especially for people who spend extended periods in crowded, poorly ventilated rooms.

Key Market Trends

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Heat Pumps to Drive Market Growth

- Heat pumps are expected to hold the prominent share of the market. Heat pumps have grown steadily in the North American region owing to various reasons, such as climatic conditions, the convenience offered the equipment, government tax credit benefits, regulations, etc. For instance, the US shipments steadily grew till 2018, and the boost was partly due to a 30% federal tax credit, which customers can avail in the United States for GSHPs placed in service after 2008 and lasting through December 31, 2016.

- Heat pumps are more likely to lead the way in the immediate future as the heat source replacements for fossil-fueled radiant systems in the residential market. Geothermal heat pumps are a well-tried and tested technology that works exceptionally well if installed correctly. Still, the costs of drilled ground loop wells (depending on geographical location) has kept the adoption of this technology limited to high-end homes.

- Air to water heat pumps (ATWHP), on the other hand, has come a long way in recent years and can offer a much more cost-effective alternative for many structures, big or small, residential or commercial. Moreover, thermostats gain momentum with the increase in heat pumps as thermostats turn the heat pump on or off based on input criteria, such as time, current temperature, or other smart home features (geofencing, for example).
- Furthermore, the heat pumps have been regulated by the governments in the region for their energy efficiency. For example, beginning in 2023, all new residential air-source heat pump systems sold in the United States may be required to meet new minimum energy efficiency standards.

- The new standards effective in 2023 are required a seasonal energy efficiency ratio (SEER); a measure of a system’s cooling performance of no less than 14 SEER for residential systems in the northern part of the United States and 15 SEER in the southern part of the United States, where cooling loads are a larger share of home energy use. Owing to this, DOE calculated that households using central air conditioning or heat pump would collectively save USD 2.5 billion to USD 12.2 billion on energy bills during the 30 years following the implementation of standards.

United States to Hold Major Share

- To ensure a sustainable future, the United States Department of Energy (DOE) is heavily investing in improving energy efficiency standards throughout the country. The DOE's mission is to ensure America's security and prosperity by addressing its environmental, energy, and nuclear challenges through transformative science and technology solutions.

- Furthermore, green HVAC systems are being developed to improve energy efficiency and bring down costs. For instance, Ice Energy, based out of Glendale, California, released an ice-powered air-conditioning unit called the Ice Bear, to cool buildings and, in most cases, reduce a building's total net energy consumption.
- According to the Bureau of Labor, the HVAC industry will offer 13% more jobs by 2028, a much higher average employment growth than most industries. Moreover, players are collaborating to increase their presence further. For instance, In July 2020, Motili announced its partnership with The Storage Business Owners Alliance (SBOA) for bringing on-demand HVAC equipment. Motili offers nationwide coverage, with over 2,000 qualified HVAC contractors and 1,000 distribution centers located across the US.

- However, the Trump administration's initial steel and aluminum tariffs caused raw material prices to rise in March 2018, as foreign suppliers became subject to US tariffs. Domestic HVAC equipment manufacturers were affected severely by these price hikes when the United States applied tariffs on USD 34 billion worth of Chinese goods. Also, there will be many new regulations in 2023 with new minimum energy efficiency standards for both cooling and heating will be introduced in the US.

Competitive Landscape

The North American HVAC equipment market is highly competitive and consists of several major players. The major players with a prominent share in the market focus on expanding their customer base. Moreover, an increasing number of companies have started offering HVAC systems with higher energy efficiency, green technology, and compatibility with smart devices. Some of the key developments in the market are :

- In March 2019 - Emerson Electric Co. partnered with Engineering USA to create living Digital Twins for Emerson’s HVAC and sensor manufacturing divisions in North America. The collaboration was aimed at improving Emerson’s overall productivity and profitability, as well as order promising and better prediction of module completion dates. Engineering USA’s team leveraged Siemens Tecnomatix Plant Simulation to design and build a complete plant simulation model for Emerson’s new HVAC division line.

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