Tankless Water Heater Market By Fuel Type (Electric, Gas), By Application (Residential, Commercial), And Region for 2024-2031

Tankless Water Heater Market Size and Forecast

Tankless Water Heater Market size was valued at USD 3.1 Billion in 2024 and is projected to reach USD 4.92 Billion by 2031, growing at a CAGR of 6.55% from 2024 to 2031.

A tankless water heater, also known as an on-demand water heater, heats water immediately and does not require a storage tank. When a hot water tap is switched on, cold water travels via a heat exchanger. It is heated by a gas burner or an electric element, resulting in a continuous hot water supply as needed. This technology avoids the standby energy losses associated with standard tank heaters, making it more energy efficient, especially for households using less than 41 gallons of hot water daily.

Tankless water heaters are small, can be put on walls, and are suitable for a variety of uses, including domestic settings, remote bathrooms, and as boosters for equipment such as dishwashers and washing machines.

Global Tankless Water Heater Market Dynamics

The key market dynamics that are shaping the tankless water heater market include:

Key Market Drivers

Energy Efficiency and Cost Savings: Tankless water heaters' higher energy efficiency over traditional storage tank models is a major driver of market expansion. Tankless water heaters, according to the US Department of Energy, can be 24-34% more energy efficient than traditional storage tank water heaters for residences that use 41 gallons or less of hot water each day. Tankless water heaters can save 8-14% on electricity in homes that consume a lot of hot water (about 86 gallons per day). An average household can save up to $108 per year on energy costs because of this greater efficiency.

Growing Construction Industry: The increasing construction industry, particularly in emerging nations, is driving up demand for tankless water heaters. According to the US Census Bureau, construction spending is expected to reach $2,091.3 billion seasonally adjusted annually in February 2024, 5.3% higher than in February 2023. This expansion, combined with the increased integration of smart home technology, is pushing tankless water heater adoption.

Environmental Concerns and Government Regulations: Rising environmental awareness and stronger government requirements on energy efficiency are driving the tankless water heater market ahead. The United States Environmental Protection Agency (EPA) estimates that if all residential gas water heaters sold in the United States were ENERGY STAR certified (as many tankless models are), energy costs would be reduced by nearly USD 13 Billion per year, and greenhouse gas emissions would be reduced by 61 billion pounds per year. This is equivalent to the emissions from almost 5.8 million cars. Tankless water heaters are gaining popularity among customers and authorities due to their enormous environmental benefits.

Key Challenges:

Higher Upfront Costs: The higher upfront expenses associated with purchasing and installing tankless water heaters present a substantial hurdle to the market. Tankless heaters require a higher initial investment than typical tank-based heaters because of their advanced technology and installation requirements. This deters cost-conscious consumers, particularly in places with lower energy prices, because they do not perceive immediate financial benefits despite long-term reductions in energy bills.

Limited Hot Water Output Capacity: While tankless heaters deliver hot water on demand, they struggle to handle simultaneous high-demand circumstances, such as many showers or appliances operating at the same time. This constraint caused user dissatisfaction in bigger families or during high usage hours, forcing the installation of numerous units to ensure adequate supply, further increasing expenses.

Key Trends:

Growing Demand for Energy-efficient Solutions: Tankless water heaters, which heat water only when needed and prevent standby energy losses, are becoming more and more popular as people become more conscious of their energy and carbon footprints. This transition is being driven by increasing environmental rules and incentives for energy-efficient appliances, making tankless solutions an appealing choice for both home and commercial applications.

Integration of Smart Home Technology: Manufacturers are introducing modern technologies like Wi-Fi connectivity and smartphone apps, which allow users to remotely monitor and manage their water heating systems. This trend increases convenience by allowing homeowners to alter settings, track energy usage, and receive maintenance warnings, which aligns with the growing consumer preference for connected home solutions.

Expansion of Commercial Applications: The expansion of commercial applications is another major trend in the tankless water heater market. These systems are rapidly being used in a variety of commercial contexts, including hotels, restaurants, and healthcare institutions, due to their small size and ability to provide continuous hot water on demand. Tankless water heaters are becoming a popular choice in high-traffic areas as businesses look for efficient solutions to suit their specific hot water needs while reducing energy expenses.

Global Tankless Water Heater Market Regional Analysis

Here is a more detailed regional analysis of the tankless water heater market:

North America:

According to Verified Market Research, North America is estimated to dominate in tankless water heater market over the forecast period. North America, particularly the United States, is experiencing an increase in home renovation and remodeling operations, owing to aging housing infrastructure. According to Harvard University's Joint Center for Housing Studies, home improvement and repair expenditures in the United States reached USD 495 Billion in 2023, up significantly from previous years. According to the Census Bureau's American Housing Survey, the median age of owner-occupied residences in the United States is 39 years. This aging housing stock, along with a push for energy-efficient renovations, is pushing the use of tankless water heaters in remodeling projects across North America.

Furthermore, North American countries, particularly the United States and Canada, have set stringent energy efficiency regulations that favor tankless water heaters. The U.S. Department of Energy's 2015 update to the National Appliance Energy Conservation Act (NAECA) increased the energy factor (EF) requirements for water heaters. According to the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), shipments of gas tankless water heaters in North America grew by 7.3% in 2022 compared to 2021, which was largely due to these rules. The Canadian government's Pan-Canadian Framework on Clean Growth and Climate Change wants to cut emissions from heating equipment, which will enhance the region's tankless water heater market.

Asia Pacific:

The Asia Pacific region is estimated to exhibit the highest growth within the tankless water heater market during the forecast period. The Asia Pacific region is rapidly urbanizing, increasing the demand for contemporary, energy-efficient household products such as tankless water heaters. According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the region's urban population is projected to increase from 2.3 billion in 2019 to 3.5 billion by 2050. This increases the urbanization rate from 50% to 66%. China alone is expected to have 255 million urban inhabitants by 2050. This tremendous urban expansion is fueling new home building and infrastructure development, resulting in a sizable market for tankless water heaters.

Furthermore, the growing middle class in Asia-Pacific countries is a major driver of the tankless water heater market. According to the World Economic Forum, Asia's middle class is expected to grow to 3.5 billion by 2030, accounting for 65% of the global total. According to the Brookings Institution, consumer spending in Asia Pacific is predicted to total USD 32 Trillion by 2030, accounting for around 42% of worldwide consumption. This rise in disposable income allows more households to invest in high-end, energy-efficient appliances such as tankless water heaters. According to China's National Bureau of Statistics, per capita disposable income in urban households increased by 5.8% in 2023.

Global Tankless Water Heater Market: Segmentation Analysis

The Tankless Water Heater Market is segmented based on Product, Application, and Geography.

Tankless Water Heater Market, By Product

• Electric Tankless Water Heater
• Gas Tankless Water Heater

Based on Product, the market is segmented into Electric Tankless Water Heater and Gas Tankless Water Heater. The electric tankless water heater segment is estimated to dominate the tankless water heater market due to their reduced initial costs and ease of installation compared to gas models, which require venting and gas line hookups. Electric units are also preferred for their energy economy and adaptability for smaller rooms, making them especially appealing to home users and those in places with restricted access to natural gas.

Tankless Water Heater Market, By Application

• Residential
• Commercial

Based on Application, the market is divided into Residential and Commercial. The residential segment is estimated to dominate the market over the forecast period. This expansion is being driven by the increasing adoption of energy-efficient and environmentally friendly water heaters, as well as the steadily increasing number of residential units as a result of the rise in middle-class population, primarily in developing countries such as China, India and Indonesia. Increasing consumer knowledge of the health risks connected with gas and other forms of heaters, as well as standardized consumer living, are likely to drive the residential segment's rapid growth.

Tankless Water Heater Market, By Geography

• North America
• Europe
• Asia Pacific
• Rest of the World

Based on Geography, the tankless water heater market is classified into North America, Europe, Asia Pacific, and the Rest of the World. North America is expected to dominate the tankless water heater market during the forecasted period due to several factors, including a high acceptance rate for energy-efficient products, broad distribution networks, and significant government incentives supporting environmentally friendly appliances. The United States leads this trend, driven by increased consumer awareness of energy savings and sustainability, as well as severe building requirements that encourage the use of tankless systems.

Key Players

• The "Tankless Water Heater Market" study report will provide valuable insight with an emphasis on the global market. The major players in the market are O. Smith, Rheem Manufacturing Company, Rinnai Corporation, Navien, Inc., Noritz America, Takagi, Stiebel Eltron, Inc., EcoSmart Green Energy Products Inc., Robert Bosch LLC, and Bradford White Corporation.

Our market analysis also entails a section solely dedicated to such major players wherein our analysts provide an insight into the financial statements of all the major players, along with product benchmarking and SWOT analysis. The competitive landscape section also includes key development strategies, market share, and market ranking analysis of the above-mentioned players globally.

• Tankless Water Heater Market Recent Developments
• In November 2023, President Biden invoked a Cold War-era rule to direct government dollars toward American manufacturing of electric heat pumps, an alternative to gas-powered residential furnaces. This effort intends to increase domestic production, reduce reliance on fossil fuels, and promote energy-efficient home heating solutions, all in line with the broader goals of improving energy security and addressing climate change.
• In March 2024, Bradford White Corporation, an industry-leading manufacturer of water heaters, boilers, and storage tanks, will highlight innovative products offered by its Bradford White Water Heaters and Laars(R) Heating Systems brands at the Canadian Mechanical and Plumbing Exposition (CMPX) in Toronto.
• In January 2024, the Midea Kitchen and Water Heater Appliances Business Division (Midea KWHA) recently attended the AHR Expo, a significant event for HVACR experts, held in Chicago. The AHR Expo brings together manufacturers and suppliers of all sizes and specialties, creating an atmosphere for idea sharing and displaying the future of HVACR technology.