The French heat pump market faces significant challenges, with production goals of one million units by 2027 now appearing unrealistic due to a downturn in sales and a struggling construction sector. Despite previous investments and rising demand fueled by government initiatives, recent market conditions, including a 10% decline in new housing starts and fluctuating subsidy processes, have led to reduced consumer interest and layoffs in the industry, resulting in a projected production of only 170,000 units for 2024.
Challenges in the Heat Pump Market
Balancing environmental sustainability with economic growth is a complex challenge. This is why Emmanuel Macron proudly introduced an ambitious ‘PAC plan’ for heat pumps just over a year ago. The objective was clear: to escalate French production from 100,000 to a staggering one million units annually by 2027. This initiative aimed not only to outpace Asian competitors like Mitsubishi, Panasonic, Hitachi, and Daikin but also to bolster the ecological transition. Heat pumps have the potential to reduce household electricity use by up to five times, and the sector was on an upward trajectory in France, with two consecutive years of increasing sales. Yet, despite significant investments from local manufacturers, the situation has taken a downturn.
Market Downturn and Consumer Challenges
Take the Intuis group as an example; they invested around 25 million euros in 2023 to expand operations and recruit more staff, motivated by soaring demand driven by the MaPrimeRénov’ initiative. However, a few months later, the landscape drastically changed. “The heat pump market has halved,” stated Eric Baudry, the director of public affairs at Intuis, in a recent interview. The company was forced to let go of temporary workers and streamline purchases, operating on a just-in-time basis. As a result, many employees from these manufacturers are now facing technical unemployment or have transitioned to other industries like Airbus.
So, what led to this market collapse? The construction sector is facing a crisis: despite lower interest rates and easing inflation, new housing starts are down by 10% year-on-year as of September. When homeownership is out of reach, homeowners are less likely to invest in renovations that include heat pump installations. Additionally, falling gas prices have made traditional 4,000-euro boilers more appealing compared to the 12,000 to 18,000 euros required for heat pumps, which often need substantial subsidies to be viable.
A significant issue stems from the frequently changing process for obtaining government subsidies. Earlier this year, assistance was tied to comprehensive home renovations, but as of May, simpler tasks like window replacements became eligible once again. This inconsistency can deter potential buyers. François Deroche, president of AFPAC (French Association for Heat Pumps), emphasizes the need for stability in support schemes, as most homeowners now require help from construction companies to navigate the complex application processes.
As it stands, the goal of producing one million heat pumps in France by 2027 appears increasingly unattainable. While French factories have adjusted their production targets significantly, it is projected that only 170,000 units will be produced in 2024. This represents a significant industrial and environmental setback for the nation.