Market evolution: Heat pumps (CN 841861) — 2015–2025

Introduction

Heat pumps have become a cornerstone of the European energy transition, driven by decarbonisation targets, building-renovation incentives, and the gradual phase-out of fossil-fuel heating. This report examines how the EU's extra-EU trade in heat pumps (customs code 841861, excluding air conditioning machines of heading 8415) evolved between 2015 and 2025. Drawing on the Trade Dashboard overview, three overarching dynamics emerge: a dramatic reversal of the EU's trade balance, a surge in imports—largely from Asia—that reshaped sourcing patterns, and a reconfiguration of intra-EU production specialisation. The data reveal a market that has been transformed in scale, geography, and competitive structure over a single decade.

1. The EU's Trade Balance Reversal: From Surplus to Deficit

The single most striking feature of the 2015–2025 period is the EU's shift from a comfortable net-export position to a structural trade deficit in heat pumps.

1.1 Imports surged far more than exports

EU extra-EU imports grew by 320.6 % in value (from €177.6 million in 2015 to €747.1 million in 2025) and by 245.5 % in volume (from 17,189 t to 59,379 t). By contrast, exports rose a more modest 38.9 % in value (from €426.5 million to €592.4 million) while their volume barely changed (+3.0 %, from 25,787 t to 26,563 t). Export growth was therefore almost entirely price-driven (+34.9 % in unit price), whereas import growth reflected both a real expansion in quantity and a rise in prices (+21.8 % per tonne). These figures are drawn from the trade summary in the General Overview.

1.2 The trade balance collapsed and only partially recovered

The EU's heat-pump trade balance swung from +€248.9 million in 2015 to –€154.7 million in 2025—a net deterioration of 162 %. The trough was even deeper: at its worst the deficit reached –€837.6 million as shown in the General Overview, indicating that import volumes surged to a peak of over 106,000 tonnes before correcting. The net import reliance indicator confirms the structural nature of this shift: the EU moved from a net-reliance of –28.7 % (i.e. a net exporter) in 2015 to +3.3 % in 2025, with the peak reaching +16.6 %.

1.3 Export propensity fell sharply while production grew domestically

A key reason the trade balance deteriorated is that EU producers increasingly served the domestic market rather than exporting. The export propensity—the share of EU production exported to non-EU partners—fell from 28.9 % to 16.0 % (–44.7 %), the most salient vulnerability metric according to the data. Meanwhile, EU production volumes grew by 179 % in quantity (from 391,952 to 1,093,439 units) and by 106 % in value (from €1.64 billion to €3.38 billion), peaking at 1.6 million units and €5.22 billion. Domestic demand absorbed much of this expansion, reducing the export share even as absolute exports grew.

2. Asia's Ascendancy in EU Heat-Pump Supply

The import surge was overwhelmingly driven by Asian suppliers, with China playing a dominant and growing role.

2.1 China became the EU's dominant import source

China's exports of heat pumps to the EU grew by 442 % in value—from €91.6 million in 2015 to €496.9 million in 2025—reaching a peak of €897.6 million at the height of the boom according to the top partners data. China's share of total EU imports rose correspondingly, making it by far the largest single origin.

2.2 Other Asian suppliers grew rapidly from smaller bases

Several other Asian origins expanded even faster in relative terms:

South Korea's growth is especially notable, though the volatility data (Volatility & Shocks) shows its trade flows were highly unstable (coefficient of variation of 1.28 for imports from Korea, and 1.35 for Malaysia). Thailand experienced a notable price shock in 2017, with a 45.3 % price shift and an abnormality score of 8.2, as identified in the supply shocks analysis.

2.3 Switzerland and the UK remained important European-adjacent partners

Among non-EU partners in Europe, Switzerland stood out on both sides of the ledger. It was the EU's largest export destination (growing from €82.2 M to €217.7 M, +165 %) and also a significant import source (from €7.5 M to €56.7 M, +660 %). The United Kingdom was the second-largest export market (€101.8 M → €156.3 M, +54 %) and a stable import partner (€26.1 M → €30.1 M, +15 %), as shown in the top partners by value. Export flows to these partners were notably more stable than imports from Asia (CV of 0.28 for Switzerland and 0.14 for the UK in export volatility).

3. Internal Restructuring: Specialisation, Concentration, and the Reshaping of EU Production

Behind the headline trade figures, the EU's internal production landscape underwent significant change, with certain member states consolidating competitive positions while import sourcing became more concentrated.

3.1 Sweden, Slovakia, and Austria emerged as specialised exporters

The specialisation analysis for 2025 reveals a clear hierarchy of EU member states with comparative advantage in heat-pump production:

Sweden and Slovakia stand out for having both high RCA values and high relative product specialisation (RSCA), while France, despite accounting for the largest share of EU production (13.8 %), shows lower relative specialisation—suggesting its broader industrial base dilutes the heat-pump sector's weight.

3.2 Import roles shifted within the EU: Germany, Italy, and the Netherlands surged

Among EU importing member states, the most dramatic growth came from:

Germany and France together accounted for the two largest import values in 2025 (€130.1 M and €143.6 M respectively). The Netherlands' explosive growth suggests it may have served partly as a distribution hub. Meanwhile, Sweden's imports actually declined by 9.9 % (from €17.2 M to €15.5 M), consistent with its strong domestic production base.

3.3 Import sourcing became more concentrated while export destinations diversified

The Herfindahl-Hirschman Index (HHI) tells a nuanced story:

Import concentration by volume (6,182) places EU heat-pump sourcing in the "moderately concentrated" zone by standard antitrust thresholds, primarily reflecting China's growing dominance. Export concentration also rose, though from a lower base, indicating that EU exports became somewhat more focused on fewer destination markets—particularly Switzerland and the UK. This growing concentration on the import side constitutes a supply-chain vulnerability, especially given the high volatility observed for several Asian suppliers (Malaysia CV 1.35, South Korea CV 1.28, Türkiye CV 1.69).

Conclusion

The EU heat-pump market (CN 841861) underwent a profound structural transformation between 2015 and 2025. The region went from being a comfortable net exporter (+€249 M) to a net importer (–€155 M), driven by a 320 % surge in inbound shipments—predominantly from China. Domestic production nearly tripled in volume, but the growth was largely absorbed by booming internal demand, causing export propensity to halve. Within the EU, specialised producers like Sweden, Slovakia, and Austria consolidated their comparative advantage, while major economies such as Germany, Italy, and the Netherlands sharply increased their reliance on imports. The concentration of import sourcing—now heavily tilted toward Asia—combined with high volatility in several supplier relationships, points to a latent supply-chain vulnerability that policymakers may wish to monitor. Looking ahead, the balance between scaling domestic production capacity, diversifying supply origins, and meeting the EU's accelerating demand for clean heating solutions will be the central challenge for this strategically important sector.