​Top air-conditioner firm Daikin targets European heating market

Daikin Industries and other Japanese air-conditioning manufacturers are ramping up production in anticipation of greater sales of heat-pump systems in Europe, where energy prices are soaring and many homes and businesses still burn fuel during cold seasons.

The machines that collect heat from outside air and transfer it indoors using compressed refrigerant run on electricity. These split systems, with indoor and outdoor units, which can also be used for air cooling, run on electricity, which — if sourced sustainably — can help reduce carbon emissions. Daikin, the top provider of heat-pump systems in Europe since 2019, is betting on new European regulations spurring their use.

A year ago, the European Commission revised its target for the introduction of heat-pump systems to set a goal of installing a total of 10 million units over a five-year period. The UnitedKingdom, Germany and other countries are promoting a shift away from combustion heating by setting up their own incentive programs. Takayuki Kamekawa, vice president of Daikin Europe, said the company’s strengths in the market lie in its own technology for compressors, heat exchangers and production capabilities, and the energy efficiency of its products compared with competitors.

Daikin began construction of a new plant in Poland this month, and will also increase capacity at existing plants in Belgium, Germany and the Czech Republic to quadruple its output by 2025 from 2021 levels. Mitsubishi Electric projects demand for heat-pump systems to double in Europe over the same period. Panasonic Holdings is also increasing production in the Czech Republic and said in March that it will invest more to meet growing demand, aiming for an annual global production capacity of 1 million units in the medium term.

Manufacturers in Europe, such as NIBE Industrier of Sweden and Germany’s Vaillant, are also pushing ahead with plans to ramp up heat-pump systems, according to Daikin. U.S., Chinese and South Korean manufacturers are also seeking to break into Europe, but their market shares remain low. Japanese air-conditioning providers have a decent chance to grab part of the market, according to Takeshi Kitaura, a Bloomberg Intelligence analyst. “If they secure enough production capacity, there’s opportunity” to break into Europe before rivals do, Kitaura said.

The key will be working with local companies with sales networks and installation in order to manage the transition to heat pumps from combustion heating, he said. Elon Musk of Tesla is also keenly interested in heat pumps, saying in March that they have the potential to dramatically lower home and office heating costs. While Musk may be interested in a growth market, it’s a different challenge from the way Tesla sells cars because of the need for installation services, Kamekawa said. A Mitsubishi Electric spokesperson said that the entry of a competitor from a different industry could be seen as a threat. Tesla is “doing a lot of things to decarbonize, so it’s normal” that heat pumps are also on their radar, Kamekawa said.