Market evolution: Reversible heat pumps (CN 841581) — 2015–2025

Introduction

Reversible heat pumps — classified under customs code 841581 — are a cornerstone of the European Union's energy transition. As buildings account for roughly 40% of Europe's energy consumption and about 36% of its greenhouse-gas emissions, replacing fossil-fuel boilers with reversible heat pumps has become a central policy objective under the Fit-for-55 package and the REPowerEU plan.

This report analyses EU trade flows for CN 841581 over the period 2015–2025. Three major dynamics emerge: a structural rise in demand that has reshaped the supplier landscape, a clear "premiumisation" of EU production and exports, and a significant — if uneven — improvement in the Union's strategic autonomy. Each is examined in turn below.

1. Surging Demand Reshapes the Supplier Landscape

Total imports grew in value despite a largely stable price environment

EU extra-EU imports of reversible heat pumps rose from €547 million in 2015 to €629 million in 2025, a cumulative increase of 15.0%. In physical terms, the volume imported increased by 13.9%, climbing from 56,748 tonnes to 64,617 tonnes. Import prices remained broadly stable over the period, edging up just 1.0% to €9,740 per tonne.

Source: EU trade overview

The trade deficit — the gap between imports and exports — widened from −€360 million in 2015 to −€430 million in 2025 (a 19.5% deterioration), underscoring the EU's persistent structural dependence on external supply to meet domestic demand. The deficit was at its widest (−€616 million) in the years when import surges coincided with slower export growth.

China consolidated its dominance, while Türkiye and Korea emerged rapidly

The composition of EU suppliers shifted dramatically over the decade. China saw the most striking growth, with EU imports from China rising 65.8% — from €215 million to €356 million — cementing its position as the EU's single largest supplier. In contrast, several traditional partners saw steep declines: Thailand fell by 33.6%, Japan by 67.7%, and the United Kingdom by a remarkable 85.7% (from €54 million to just €8 million), a collapse likely linked to Brexit-induced trade restructuring.

Source: Top import partners

Two suppliers stand out for their explosive growth: Türkiye (from €1.5 million to €54.2 million, a 3,520% increase) and South Korea (from €2.7 million to €59.5 million, up 2,134%). Both likely benefited from strategic investments in manufacturing capacity closer to the European market and from competitive positioning in mid-range heat pump technology.

Import source concentration increased, raising supply-chain risk

The Herfindahl-Hirschman Index (HHI) for EU imports by value rose from 2,845 to 3,750 (+31.8%). In volume terms, the increase was even sharper (from 3,766 to 5,504, +46.2%). Although the EU diversified by onboarding new suppliers such as Türkiye and Korea, the simultaneous decline of the UK, Japan, and Thailand as sourcing origins has meant that a larger share of imports is now concentrated in fewer hands — primarily China. This growing concentration warrants attention from a supply-chain resilience perspective.

2. A Premiumisation of EU Production and Exports

EU production volumes have fallen sharply, but unit values have surged

Perhaps the most striking feature of the data is the divergence between production volume and production value. EU output of reversible heat pumps fell from 1.38 million units to 800,000 units (−41.9%), while production value rose from €1.61 billion to €3.14 billion (+95.3%). This implies that the average value per unit nearly doubled over the period — a hallmark of a premiumisation strategy in which EU manufacturers focus on higher-end, higher-margin products rather than competing on volume with low-cost Asian producers.

Source: Production volumes

Export prices rose by nearly 47%, compensating for a volume decline

This premiumisation dynamic is mirrored in exports. EU exports to non-EU countries grew in value by 6.3% (from €188 million to €200 million), but this masked a 27.6% decline in exported volume (from 12,524 tonnes to 9,067 tonnes). The compensating factor was a 46.9% surge in export unit prices, from €14,986 per tonne to €22,009 per tonne — the highest unit value recorded in the period.

Source: EU trade overview

The EU thus appears to be trading volume for value in its export strategy — consistent with a focus on high-performance, large-capacity commercial/industrial reversible heat pumps that command premium prices.

A handful of Member States drive the EU's export specialisation

The specialisation data for 2025 reveals that only a small number of Member States hold a genuine comparative advantage in reversible heat pump exports:

Italy dominates, accounting for 27.9% of EU exports in this product category despite representing only 8% of total EU goods exports. Czechia and Spain are the next-largest exporters. In contrast, Germany — the EU's largest overall exporter — has a revealed comparative disadvantage (RCA of 0.11) in this specific product, confirming that the heat pump export market is led by Mediterranean and Central European producers rather than by the traditional German industrial powerhouse.

Italy, Spain, and France are the largest intra-EU exporters

Among EU Member States, export performance shows notable divergences:

Spain and Czechia nearly doubled their export values, while Denmark and Austria saw steep declines. Germany's exports halved, suggesting a structural retreat from this product segment in favour of other mechanical and engineering goods.

3. Strategic Autonomy Improved, but Geopolitical Risks Persist

Net import reliance fell dramatically, from 37% to under 3%

The most favourable development over the decade is the sharp improvement in the EU's net import reliance. This metric — defined as the trade balance divided by apparent consumption — dropped from 36.7% in 2015 to just 2.9% in 2025, a 92.2% reduction. This means the EU has moved from a position of considerable external dependence to near self-sufficiency in reversible heat pumps.

Source: Net import reliance

Several factors likely drove this improvement: rising EU domestic production value (despite lower unit counts), the premiumisation of exports, and potentially the early effects of EU industrial policy incentives for heat pump manufacturing.

Trade intensity declined, signalling partial reshoring

Trade intensity — the ratio of extra-EU trade (imports + exports) to EU production value — fell from 59.2% to 42.2% over the period. This is consistent with a partial reshoring dynamic: as EU production has grown in value, the relative weight of extra-EU trade in the overall market has diminished. Meanwhile, export propensity — the ratio of exports to production — remained broadly stable at approximately 25%, indicating that EU manufacturers are serving both the domestic and export markets in roughly the same proportions as before.

China's import price shock in 2022 highlighted supply-chain fragility

Despite improved self-sufficiency, the data reveals vulnerability to supply-side shocks. The most significant shock event detected was a price shock from China in 2022, with import prices jumping 48.7% year-on-year (abnormality score: 28.1). Given that China accounts for 66.4% of the value of EU imports of this product, such a shock has outsized macroeconomic consequences — potentially feeding into higher installation costs for heat pumps and slowing adoption rates.

Source: Supply shocks

Volatility analysis further underscores the risk. Among EU import sources, Malaysia (CV: 1.82) and Singapore (CV: 2.04) show very high volatility in import flows, while China's coefficient of variation is relatively low (0.20), making it a more predictable — if dominant — supplier. On the export side, trade with Russia collapsed entirely (−100%, from €12.5 million to zero), reflecting the impact of EU sanctions following the 2022 invasion of Ukraine.

The UK remains the EU's top export market despite a turbulent decade

The United Kingdom was the EU's largest extra-EU export destination for reversible heat pumps in 2025 (€52.2 million), having grown 146.2% from €21.2 million in 2015. Switzerland was the second-largest market (€42.7 million, +52.9%), followed by Norway (€9.9 million) and Morocco (€6.6 million, +275.8%). The UK's continued importance as an export market — even as it has become a negligible supplier to the EU — illustrates the asymmetric post-Brexit trade relationship in this sector: the EU sells finished heat pumps to the UK, while the UK no longer supplies them in meaningful quantities.

Conclusion

Over the decade 2015–2025, the EU market for reversible heat pumps (CN 841581) has undergone a profound transformation. Demand has grown, driven by decarbonisation policies, and the supplier landscape has shifted decisively: China is now the dominant importer, while Türkiye and South Korea have rapidly gained market share at the expense of Thailand, Japan, and post-Brexit UK. Simultaneously, EU producers have pursued a clear premiumisation strategy — producing fewer units but at much higher value — which has allowed exports to hold steady in value terms even as volumes declined.

The most encouraging finding is the dramatic improvement in the EU's net import reliance, which has fallen from nearly 37% to under 3%, suggesting that Europe is on track toward self-sufficiency in this strategic product category. However, risks remain. Growing import concentration — with China alone accounting for over two-thirds of extra-EU import value — and the 2022 price shock serve as reminders that supply-chain diversification must remain a policy priority. The collapse of EU-Russia trade, the reconfiguration of UK-EU flows, and the volatility of some Asian suppliers all underline the geopolitical dimension of this market. Maintaining the balance between cost-effective imports and resilient domestic production will be key to sustaining Europe's heat pump ambitions through the remainder of the decade.