Daikin Industries Ltd. and other Japanese air-conditioning makers 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.
(Bloomberg) — Daikin Industries Ltd. and other Japanese air-conditioning makers 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 collect heat from the outdoors and bring it inside using compressed refrigerant. These split systems, with indoor and outdoor units, can also be used for air cooling. And they 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 new European regulations will spur their use. A year ago, the European Commission set a goal of installing a total of 10 million units over a five-year period. The UK, Germany and other countries are promoting a shift away from combustion heating by setting up their own incentives.
The Osaka-based company’s strengths lie in its own technology for compressors, heat exchangers and production capabilities, as well as the energy efficiency of its products compared with competitors, Takayuki Kamekawa, vice president of Daikin Europe, said in an interview with Bloomberg News.
The company’s shares rose 3.3% on Friday to close at their highest since September.
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 output by 2025 from 2021 levels.
Mitsubishi Electric Corp. sees demand for heat-pump systems doubling in Europe over the same period. Panasonic Holdings Corp. 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 AB of Sweden and Germany’s Vaillant GmbH are also pushing ahead with plans to ramp up heat-pump systems, according to Daikin. US, Chinese and Korean manufacturers are 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 knowhow to manage the transition to heat pumps from combustion heating, he said.
Elon Musk of Tesla Inc. is also interested in heat pumps, saying in March that the systems have the potential to dramatically lower home and office heating costs. While the billionaire may sense a growth market, selling the equipment presents different challenges from cars because of the need for installation services, Kamekawa said.
Still, new entrants from other industries could be a threat, a Mitsubishi Electric spokesperson said. Tesla is “doing a lot of things to decarbonize, so it’s normal” that heat pumps are also on their radar, Bloomberg Intelligence’s Kitaura said.
(Updates with share reaction in fifth paragraph)
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