Residential heat pumps Market Outlook 2026–2035: Growth Drivers, Key Companies, Strategic Developments & Adoption Forecast — A Meticulous Next™ Foresight Brief

This Meticulous Next™ brief examines residential heat pumps, meaning electric heat pumps that supply space heating and hot water to homes, together with the supply chain of compressors, heat exchangers, refrigerants, assembly and installers that sits behind them. It tests whether European sales recover to the pace set by EU targets, and which participants capture value among manufacturers, component suppliers, installers and utilities.

Sales recovered in 2025 after two years of decline. The European Heat Pump Association reported on 3 March 2026 that sales in 16 countries rose 11% to about 2.63 million residential units, and its fuller release of 6 August 2026 puts 2025 sales at about 2.9 million domestic heat pumps across 21 countries, 13% above 2024, taking the installed base to 29.3 million. Those heat pumps avoid about 25 billion cubic metres of gas imports a year and save an estimated EUR 9.7 billion annually. The conclusion is that the 2023 and 2024 fall reflected energy prices and support cuts, and the market has returned to growth.

Price and policy decide the pace. Sales spiked in 2022 after gas prices rose, fell as energy prices eased and some countries cut support, and rebounded in 2025 with stronger incentives and lower electricity taxes in several countries, while electricity remains taxed far more heavily than gas in many markets. The European Commission Electrification Action Plan aims for an electricity to gas price ratio of 2.5 for households and 2.0 for industry by 2030. The conclusion is that heat pumps sell best where electricity is priced close to gas, and tax reform is as important as subsidy.

The target requires a step up in volume. REPowerEU sets an aim of 60 million heat pumps installed by 2030, about 30 million more than today and an average of about 6 million a year, against sales of about 2.9 million in 2025, and the revised Energy Performance of Buildings Directive requires new buildings to be zero-emission from 2030. Manufacturers including Daikin, Mitsubishi Electric, Bosch and Vaillant are scaling production, while an installer shortage is being addressed through training programmes. The conclusion is that factory capacity is being added, and installer supply is the more likely constraint.

The brief treats residential heat pumps as an accelerating signal with a nine year horizon to 2035. It identifies which products, countries and suppliers scale first and what each means for manufacturers, component suppliers, installers and utilities. It is a focused 106-page decision brief that presents an indicative trajectory rather than a segmented market model.

A residential heat pump moves heat from outdoor air, water or the ground into a home using a compressor and a refrigerant, and delivers about three to four units of heat for each unit of electricity used. Air-to-water units feed radiators or underfloor heating and supply hot water, air-to-air units heat and cool rooms directly, and ground-source units draw from buried loops.

The supply chain starts with compressors, heat exchangers, valves, controls and refrigerants, moves to assembly in factories and distribution to wholesalers, and ends with installers who size, fit and commission the system.

Performance depends on seasonal efficiency in cold weather, correct system design, noise limits for outdoor units and the skill of the installer.

Uses are heating and hot water in new and existing homes that replace gas, oil or direct electric heating.

The limits are the higher tax on electricity than on gas, cuts in national support schemes, an installer shortage and upfront cost. The period turns on the electricity to gas price ratio and installer capacity.

The residential heat pump market in Europe, covering air-to-water, air-to-air, ground-source and hybrid heat pumps sold to households for space heating and hot water at manufacturer prices, and excluding installation labour, commercial and industrial heat pumps and gas or oil boilers, is valued at USD 13–18 billion in 2026 and is projected to reach USD 28.23–39.09 billion by 2035, at a CAGR of 9%.

The 2026 base rests on sales of about 2.9 million units in 2025 across 21 European countries. Growth then follows the recovery of sales in large markets, the EU rule that new buildings be zero-emission from 2030, factory additions and installer training.

The forecast is sensitive to the electricity to gas price ratio, national support schemes, interest rates and installer supply. Regionally, Germany is the largest market, where heat pumps made up almost half of heat generators sold in 2025, the United Kingdom grew 27% to 125,000 units and Belgium grew 7% to 111,000 units, while sales fell in Poland and France. Norway, Finland and Sweden each sold more than 30 units for each 1,000 households against fewer than five in Poland and the United Kingdom, which shows the headroom in lower penetration markets.

The base case assumes sales rise toward the 6 million a year that the EU target requires, with heat pumps outselling fossil boilers in the main markets by 2030 and reaching the mainstream by then. An accelerated case assumes the price ratio target is met early and installer training scales quickly, bringing the inflection to 2028 and lifting the 2035 value to the top of the range. A delayed case assumes further cuts in support and persistent installer shortages, moving the inflection to 2033 and holding growth at the bottom of the range.

Growth drivers

• Building rules for new homes.
• Incentives and lower electricity taxes.
• Gas import savings.
• Product range and efficiency.

Enablers

• Manufacturer capacity and investment.
• Installer training programmes.
• Utility and retailer offers.
• Heat pump financing.

Restraints and barriers

• Higher tax on electricity than on gas.
• Cuts in national support schemes.
• Installer shortage.
• Upfront cost.

The direction of residential heat pumps is set by EU heating electrification targets, the electricity to gas price ratio, manufacturing expansion, incentives and building rules, and the installer shortage.

The key participants in residential heat pumps include Daikin Industries, Ltd., Mitsubishi Electric Corporation, Robert Bosch GmbH, Vaillant GmbH, Carrier Global Corporation, NIBE Industrier AB, Stiebel Eltron GmbH & Co. KG, Panasonic Holdings Corporation, Samsung Electronics Co., Ltd., LG Electronics Inc., Ariston Holding N.V., BDR Thermea Group B.V., Midea Group Co., Ltd., Gree Electric Appliances, Inc. of Zhuhai, Danfoss A/S, Copeland LP, Groupe Atlantic, European Heat Pump Association, European Commission, International Energy Agency, Wolf GmbH, Viega Holding GmbH & Co. KG, Fujitsu General Limited, Nidec Corporation, Zhejiang Sanhua Intelligent Controls Co., Ltd., The Chemours Company, Honeywell International Inc., Arkema S.A., E.ON SE, Octopus Energy Group Limited, Enel S.p.A., Électricité de France S.A., Bundesverband Wärmepumpe, Heat Pump Association, Swedish Heat Pump Association, Federal Office for Economic Affairs and Export Control, Department for Energy Security and Net Zero, Agence de la transition écologique, Fraunhofer Institute for Solar Energy Systems, International Renewable Energy Agency and Eurostat.

The brief profiles representative participants in each archetype and assesses which are positioned to lead as sales move toward the EU target.

Daikin, Mitsubishi Electric, Bosch, Vaillant and NIBE lead among manufacturers in Europe, and Danfoss and Copeland lead among component suppliers. Competitive intensity is high among manufacturers and rising as Asian producers expand in Europe.

Where value migrates.

In 2026 value sits with manufacturers that hold European factories and distribution channels, because demand is returning and installer supply is limited. By 2031 it moves toward manufacturers and installers with service networks, because a large installed base needs maintenance and replacement. By 2035 it settles in platforms that combine equipment, installation and energy supply. Margins hold for firms with scale, component supply and installer relationships and narrow for assemblers that depend on subsidy-driven demand.

The signals converge on recovery and policy. Sales growth of 13% in 2025, stronger incentives, lower electricity taxes in several countries and EU targets for 2030 support growth, while the higher tax on electricity than on gas, cuts in national schemes and the installer shortage limit the pace.

Structural limits show where progress could slow: electricity taxation, support schemes, installer supply and upfront cost. The brief therefore tracks four indicators: annual unit sales, the share of heat generators sold, the electricity to gas price ratio and the number of trained installers.

Recovery in large markets first, then growth in low penetration markets, then replacement of fossil boilers in existing homes are the expected order of adoption.