Heat pumps are set for high growth as Tesla enters market Heat pumps are set for high growth as Tesla enters market Heat pumps are set for high growth as Tesla enters market

Heat pumps are set for high growth as Tesla enters market

Peter Garnry

Head of Saxo Strats

Summary:  Tesla is mostly associated with leading the adoption of electric vehicles and selling solar modules and energy storage solutions, but now the company has set its eyes on the heat pump market following a series of internally developed improvements to its own heat pump used in its EVs. Heat pumps do not sound very interesting but the market is growing very fast with the war in Ukraine accelerating adoption and demand as Europe aims to cut its dependence on natural gas from Russia. Heat pumps are also the biggest low hanging fruit in terms of reducing fossil fuel consumption globally.

Tesla sees heat pumps as critical to reduce fossil fuels

Tesla’s recently held Investor Day which did not really muster the excitement of investors or sell-side analysts as the presentation lacked details across many issues as next generation car platform, time schedules, and future price points. Many industry observers have pointed out that analysts and investors overlooked Tesla’s comments about heat pumps. Already back in January the EV maker featured its heat pumps, used initially in its Model Y and later the other models, as a device that is important for EV efficiency and range during cold weather conditions. According to Tesla in this featured video they made some interesting innovations on the heat pump increasing its efficiency while reducing manufacturing complexity.

In Tesla’s Investor Day presentation the company lays out a path to eliminate fossil fuels and a big part of that reduction is achievable with heat pumps which have the largest reduction potential relative to Capex needed. Tesla estimates that it will invest $300bn in manufacturing Capex for heat pumps to reach on its ambitions. Tesla wants to expand on its expertise in heat pumps for its EVs to heat pumps for heating buildings. The global heat pump market is going to be a fast growing market over the next decade, but whether Tesla will be a major player in this new market remains to be seen. In the meantime, Tesla’s share price will be linked to falling lithium carbonate prices in China which is key to Tesla’s aggressive price reduction strategy.

Tesla share price | Source: Saxo

A small device with a large potential

Already before the war in Ukraine in November 2021 we wrote about how our electrification of transportation and heating through air-to-water heat pumps would be key drivers of demand for copper. When Russia invaded Ukraine in February 2022 energy markets went into a tailspin and Europe was looking into an energy crisis forcing people to find alternatives for heating as gas prices initially soared. Air-to-water heat pumps were completely sold out in the matter of weeks as demand exploded and we highlighted a couple days after the invasion how the war in Ukraine would change everything in Europe’s energy infrastructure including the usage of heat pumps.

A heat pump is essentially a reverse air conditioner and they come in two types of air-to-air and air-to-water. The former is often used in summer houses, cars, storage rooms etc. while the latter is used for heating radiators, underfloor heating pipes, and hot water in central heating systems. According to IEA, there was 190mn heat pumps in operation in 2021 and this number is expected to expand to 600mn in 2030 (covering 20% of the world’s heating needs) translating into 13.6% annualised growth, but with the war in Ukraine this growth rate could likely increase as heat pumps will help Europe reduce its dependence on natural gas. Heat pumps have become 50% more energy efficient since 2010 and are more energy efficient than natural gas boilers with double the efficiency in Europe. The lifetime cost of heat pumps is also cheaper than oil and gas heating in most countries so the unit economics for heat pumps point to rapid adoption and growth ahead.

The largest markets for heat pumps are France, Italy, Germany, US, Japan, and China, with the highest growth rates observed in Europe overall. Governments around the world have implemented policies that provide different types of grants and incentives to switch to heat pumps. Pure exposure to the heat pump market is difficult for investors as the major manufacturers of heat pumps often make many other different industrial components and machines. The below highlights some of the publicly listed companies involved in manufacturing heat pumps. We have no good information on how much of revenue comes from heat pumps, but judging from the number of words in annual reports it seems that a company such as Swedish-based Nibe Industrier is getting a significant share of its revenue from heat pumps and are very dedicated to the future of heat pumps. GEA Group is more involved in larger scale industrial heat pumps. Other companies such as Samsung is only getting a limited share of its revenue from heat pumps.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.