What the Viessmann deal means for heat pump buyers

The sale of Viessmann’s heat pump business to the USA raises questions: is Germany making the same mistakes it made in the solar industry? And what does the deal mean for homeowners?

The air conditioning division with the heat pump business is “the economic heart of the Viessmann Group” – so it says on the company website of the Hessian family company. But this “heart”, of all things, which accounts for 85 percent of sales, is now being sold to the US company Carrier Global for twelve billion euros. What’s behind it?

At first glance, the deal comes as a surprise, as the market for heat pumps is booming – especially in Germany and Europe. According to the International Energy Agency (IEA), eleven percent more heat pumps were sold worldwide last year. In Europe, the heat pump market grew by 40 percent. For Germany, the Association of Heating Manufacturers BDH recorded an increase in sales figures by more than half.

Why Viessmann is cashing in now

So why is Viessmann launching its heat pump business now of all times? “From a company perspective, it may be the best time to sell,” explains competition economist Jens Südekum tagesschau.de. Finally, the strong growth of the heat pump market has also called the Asian manufacturers into action.

These are now increasingly penetrating the German market, which in turn is likely to put pressure on the profit margins of German manufacturers. “The twelve billion euros that Viessmann is now receiving from Carrier Global would probably not have been received in the near future,” emphasizes the economist from the Institute for Competition Economics at the University of Düsseldorf.

Heat pump prices are likely to fall rapidly

In this respect, the Viessmann deal can also be seen as a positive signal for consumers: it is a sign that even insiders expect heat pump prices to fall significantly in the future. According to the Agora Energiewende think tank, representatives of the heat pump industry see a realistic cost reduction potential of 40 percent by 2030.

The magic word in this context is “scale effects”: The costs per manufactured heat pump can be reduced enormously by rapidly increasing quantities. The Asian manufacturers play a central role here: companies such as Daikin, Panasonic and Mitsubishi from Japan or LG and Samsung from South Korea have many years of experience in the manufacture of air conditioning systems and huge production capacities. “Heat pumps will develop even more into a standard series product. But this is not the type of product that is typically produced in Germany,” explains economist Südekum.

dwindling Competitive advantage German manufacturer

So far, the German manufacturers in this country still have a major competitive advantage. This is based on the good market access via the plumbers, who have just learned their trade on devices from Viessmann, Buderus and Vaillant and have so far only offered the installation of these products.

But this advantage is fleeting: Experts are convinced that tradesmen in this country will not be able to escape the pressure from customers to install cheaper Asian heat pumps in the future, for which there may also be shorter delivery times.

Parallels to the solar industry sell-off to China?

Economist Südekum still sees a drop of bitterness in the deal with regard to the future of Germany as a location: “I find it a bit regrettable that the Viessmann family has now given up control. Viessmann could have said that we are trying to do it on our own ‘Green Champion’ for the heat transition in Germany. The company would certainly not have had any problems finding a strong partner and capital for the necessary expansion of production volumes.”

While some politicians are already warning of a “sell-out” of German heat pump technology abroad, drawing parallels to the German solar industry, Südekum sees the situation differently: In the solar industry, not only did production migrate to China at the time, but also the entire area of ​​research and development.

“This mistake shouldn’t be made again,” warns Südekum. “The heat pump of tomorrow should be developed in Germany.” But this also requires a certain amount of production in this country, because research and development does not happen in a vacuum. “The federal government should pay attention to that.”

The “08/15” heat pump will come from Asia

Then German manufacturers could continue to attract customers with certain competitive advantages over Asian companies, for example by producing better quality heat pumps or heat pumps for special solutions.

But one thing is also clear: the “run-of-the-mill” heat pump is likely to become significantly cheaper in the coming years – and come less and less from German production. It is only a matter of time before heat pumps from Japanese and South Korean manufacturers will spread in the basements and on the outside of houses in this country. The competition from Asia is unstoppable – the Viessmann deal is proof of that.