With the increasing competition among the leading manufacturers, the water heater market is poised to witness increased innovations and product offerings in the forthcoming years.
Various technological advancements and product innovations have been made in water heaters over the past decade. Increasing rural electrification rate primarily across Asian and African nations has led to mass product deployments.
Moreover, growing customer awareness toward energy-efficiency rating, new technologies, and quality, along with rising concerns toward high electricity bills, will further stimulate the product adoption.
In India, the demand for water heaters has been increasing over the last few years on account of growth in construction sector and increasing disposable income. Moreover, water heaters used in the country are no longer limited to the residential sector as demand for water heaters in industrial and commercial sectors of the country is surging. Requirement of critical hot-water supply primarily across hospitals and hospitality sector, coupled with the need for water savings across public amenities, is facilitating the product penetration.
Manufacturers are focusing toward enhancing their product portfolios with a wide price range suitable for different customer requirements. They are integrating new technologies including smart monitoring and control features to improve the product life and reduce the maintenance time.
Features that manufacturers are introducing in their product range are models with higher wattage for quicker heating of water, auto supply, pre-set time supply, manual control of water, larger storage tanks, and energy-efficient designs, among others.
Continuous improvement in private investments with companies planning to set their manufacturing units and operations across the developing regions is positively enhancing the global water heaters industry outlook.
Robust demand for efficient water heaters and the hike in the number of measures to control energy consumption, given the rapid depletion of non-renewable resources, is said to be responsible for the massive business growth across the globe. As these systems are reasonably priced, they appeal to a wide spectrum of consumers considering their economic condition, which helps in boosting their demand and elevating the market position as well.
Hence, rising ecological awareness in developed and developing regions is leading to industry growth. Accelerated demand for dependable, affordable, and eco-friendly technologies to heat water, particularly in residential and industrial sectors, is expected to help the market advance at a fast pace. Apart from this, technological developments in design of thermal energy collectors for augmenting the efficiency can have a lucrative effect on the market.
Ongoing funding by the government authorities and private institutions for the development of large manufacturing plants will positively influence the industry outlook.
Introduction of advanced designs with extensive features, including leakage detection systems and Wi-Fi integration, will accelerate the market growth. Advanced heating capabilities, energy optimization, and low standby losses will foster the tankless water heater market.
Improvement in key issues including calcium deposition, dry firing, and standby heat losses will stimulate the product deployment. In addition, development of smart water heaters with enhanced UI and integrated AI applications will further boost the market penetration.
Indian market dynamics
Water heaters are among the fastest growing home appliances that provide a continual supply of hot water. The Indian water heaters market has been smaller than other consumer durable markets, owing to low product penetration with seasonal demand, high energy costs, irregular electricity supply in rural areas, and availability of affordable alternatives like cooking stoves and immersion rods for heating water.
The Indian water heaters market in 2019 is estimated at Rs 2525 crore and 4 million units. The electric storage heaters continue to lead the segment with a 42.3 percent market share, estimated at Rs 1070 crore. Electric instant heaters are gaining preference gradually; however, they currently maintain a ratio of 1:2 with their storage counterpart. The gas heaters saw a 13-percent increase over 2018.
Some of the key drivers in the Indian water heaters industry are:
Rising disposable incomes and electricity availability. The penetration of water heaters has been low on account of high energy costs and availability of affordable substitutes like cooking stoves, fireplaces, and immersion rods. However, with government initiatives for universal availability of electricity along with rising disposable incomes, the adoption of water heaters is rising.
Product development with enhanced features. Manufacturers are adding new features (Wi-fi control, automated temperature adjustments, and leak detection, among others) to water heaters in order to differentiate products from solar and water heaters. These developments are expected to drive growth in the mid-to-long term.
Energy-efficient products. With BEE’s Standards and Labelling Program having included water heaters as a mandatory appliance, manufacturers produce more energy-efficient products, in turn reducing energy costs and improving demand for water heaters.
Organized players have gradually improved their market share from ~57 percent in FY14 to ~62 percent in FY18. With rising disposable incomes and a shifting preference for branded and quality products, organized players are expected to improve their share to ~70 percent by FY23.
Further, GST implementation is likely to reduce the organized-unorganized price gap, thereby catalyzing a shift toward branded players.