Heating, Ventilation, Air Conditioning & Refrigeration .
Heating, Ventilation,Air Conditioning & Refrigeration(HVAC R) Market in Saudi ArabiaA knowledge paper prepared for
Contents03Foreword04Executive Summary05Saudi Vision 203006Saudi Arabia Economic Outlook08HVAC Market Overview15Refrigeration Market Overview20Market Dynamics25Market Trends & Developments26Policy & Regulatory Landscape30Case Studies32Way Forward34About Us & Disclaimer
ForewordSaudi Arabia is one of the leading countries in the Gulf Cooperation Council (GCC) region. In 2018, the Kingdom had one of the highest GDPs (USD782.48 billion) in the region. Geographically, a large part of the country is an arid desert. The Kingdom witnesses extreme heat with temperatures reaching to around 50oC for much part of the year.The economy of Saudi Arabia is largely dependent on oil exports that constitute about75% of budget revenues and 90% of export earnings. The Government of Saudi Arabiawants to make the Saudi economy less dependent on oil in the future. Presently, theprivate sector in Saudi Arabia accounts for around 40% of the Nominal GDP.Moreover, the Government of Saudi Arabia has implemented new rules to promote energy efficiency, especially for HVAC R systems, which consume the largest share of electricity in the country. Thus, there is growing demand for more efficient cooling solutionsfrom residential and commercial construction sectors along with surging demand forthe replacement of old cooling systems. As a result, Saudi Arabia is emerging as one ofthe largest markets for indoor cooling and refrigeration in the region.HVAC R systems market in Saudi Arabia stood at USD3.65 billion in 2018 and exhibiteda CAGR of 10.52% during 2014-2018, The market is forecast to grow at a CAGR of 11.89%during 2019-2024. The total HVAC R market in the country represents close to 2.02% ofthe global HVAC R market.Saudi Arabia is experiencing huge demand for more efficient cooling systems, as utilities represent close to one-third of per capita expenditure in the country. Some of theleading companies in the country are Carrier, LG Shaker, Zamil, Samsung, Gree andDaikin. The central region including the territories of Ha’il, Qasim and Riyadh representsmore than a third of the country’s HVAC R market, while the sparsely populated northernregion (Jawf and Northern borders) represents approximately a tenth of the market.
Executive SummaryHeating, Ventilation, Air Conditioning, and Refrigeration (HVAC R) is a system that performs cooling and/orheating for residential, commercial, industrial and institutional buildings. The system also provides fresh airto dilute interior airborne contaminants. For varied industrial applications, different types of air conditioningsystems are available in the market such as split-system, packaged-system, heat pumps, window air conditioners and chilled water systems.Global HVAC market stood at over USD150 billion in 2018 and is projected to cross USD250 billion by 2024,exhibiting a CAGR of 8.39% during 2019-2024. With increasing food wastage across the world, governmentsacross the globe are taking initiatives to reduce food wastage, which is anticipated to fuel the refrigerationmarket during forecast period.Global HVAC market is segmented by producttype i.e. direct expansion systems and centralizedair conditioning systems. The direct expansionsystems segment captured the largest share inglobal HVAC market in 2018, whereas the centralair conditioning systems segment is expected toexhibit the fastest growth rate of 8.65% during2019-2024. The growth in the demand for centralair conditioning systems is primarily on accountof expanding commercial and industrial sectors inemerging economies like India and China. HVACmarket, globally, is highly competitive and fragmented with the presence of many global and regional level players. Japan-based Daikin Systems,one of the major market players in global HVACmarket, accounted for a revenue share of over10.22% in 2018, followed by UTC.HVAC R market in Saudi Arabia reached USD3.65billion in 2018, backed by increasing number of infrastructure and construction projects in differentcities such as Riyadh, Makkah, and Eastern Region. Other contributing factors include the country’s hot and arid climate and the Government’sefforts towards the efficient use of energy.Global HVAC market stood atover USD150 billion in 2018and is projected to crossUSD250 billion by 20244Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
Saudi Vision 2030Aims at diversifying the country’s economy by investing andpromoting non-oil based sectors.Key Goals and Objectives of Vision 2030Key Initiatives to Achieve Vision 2030 Saudi Arabia aims to set up a sovereign wealth fund amounting toaround USD2 trillion to support the development projects associated with the Vision 2030. FDI worth USD1 trillion is anticipated to flow in the country during2017-2032, thereby boosting the private sector growth.National Transformation Program 2020 To increase the public investment fund’sassets from USD159.89 billion in 2016 To build the capabilities required to achieve the goals of “Vision2030,” the National Transformation Program 2020 (NTP) wasto USD1,865.40 billion by 2030.launched as a vision realization program (VRP), involving 24government agencies. To increase the share of non-oil based exports from 16% in 2016 to 50% by 2030.To increase the share of Foreign Direct Investment (FDI) in GDP from 3.8% in 2016to 5.7% by 2030. NTP 2020 is aims toimproving economic enablers, enhancing standardof living, and achievinggovernmental operational To increase the private sector contributionfrom 40% in 2016 to 65% of GDP by2030, thereby opening up different sectorsfor private sector players.excellence. In addition,Vision 2030 also plans to attract 36 millionpilgrims a year to the country’s holy places.social empowerment, laborthere are 433 initiativesin NTP 2020 under eightthemes such as healthcare,market, and tourism.Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia5
Saudi ArabiaEconomic OutlookRegardless of falling oil costs, Saudi Arabia will pay its citizens cost-of-living allowances. The budget will boostspending even as Saudi Arabia attempts to close its budget deficit, indicating Riyadh’s priority to urge growthin an economy hurt by lower oil prices. State spending willincrease by more than 7 percent next year to 1.106 trillionriyals ( 295 billion) from 1.030 trillion riyals.The Government of Saudi Arabia is facing several challenges, especially in controlling the fiscal debt, diversifying government revenues and in minimizing dependenceon oil. Non-oil based sectors have shown growth in theirrevenues as government focuses on reducing oil dependence, which is an important contributor to the country’sGDP. The large budget indicates that KSA is expectingsignificant revenue growth in the years to come. Declining crude oil prices have led to increased investments inthe non-oil sector, through various initiatives like the National Transformation Program (NTP) 2020, undertaken todrive the institutional capacity and capabilities needed toachieve Saudi Arabia’s Vision 2030.Saudi Arabia GDP, 2013-2018(USD Billion)2013Saudi Arabia Crude Oil Prices,2013-2018 0142015Source: World Bank6Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia201620172018Source: World Bank
Global HVAC R Market Size, By Value,2014-2024F (USD 0155,6002015181,050145,1002014167,500135,450CAGR (2014-2018)By Value: 7.52%278,050CAGR (2019E-2024F)By Value : 9.14%2018 2019E 2020F 2021F 2022F 2023F 2024FSource: TechSci ResearchSaudi Arabia HVAC R Current ScenarioThe Saudi Arabia HVAC R market valued at USD3,655.80 million in 2018,and projected to grow at a CAGR of11.89% during 2019-2024. This growthis highly attributed to the recovering economy and increasing focus on infrastructuraldevelopment in the country.In 2018, Northern & Central region of SaudiArabia accounted for the largest share i.e.,40.85% in the Saudi Arabia HVAC R market, owing to the increasing constructionprojects for commercial and residentialbuildings.Saudi Arabia captured a 49.25% share inthe HVAC R market in overall GCC countries including the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait. Saudi Arabia is one of the fast growing and strongeconomies in the GCC, occupying almost46.90% share in GCC GDP in 2017.Share of Housing Units in Saudi Arabia,By Area, 2018Rest of theWorld,97.98%Saudi Arabia,2.02%Saudi Arabia HVAC R Market Share in TotalGCC Market, By Value, 2018Rest of GCC,50.75%Saudi Arabia,49.25%Source: TechSci ResearchHeating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia7
HVAC MarketOverviewGlobal HVAC Current ScenarioGlobal HVAC market is forecast to grow from USD157,530 million in 2018 to USD253,800 million by 2024. Some of the equipment of HVAC include heat pumps, furnaces, humidifiers, air conditionersand air handling units. The demand for air handling units such as air purifiers is increasing rapidly with growingpollution levels across the globe. Strong growth in the hospitality and travel & tourism industries across theworld is boosting the demand for HVAC systems, globally.Global travel & tourism industry registered a CAGR of 15.79% during 2016-2018 and its contribution to theglobal GDP also increased from 10.20% in 2016 to 11.70% in 2018. The travel & tourism industry plays animportant role in the global HVAC market, as travel & tourism industry players generates huge demand forHVAC systems in order to provide comfort to domestic and international tourists.8Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
Global HVAC Market Size, By Value,2018, 2019E & 2024F (USD Million)157,530169,660253,800CAGR (2019E-2024F)By Value : 8.39%20182019E2024FSource: TechSci ResearchRevenue from Travel & Tourism Industry and %Contribution to Global GDP, 2016 & 2018 10.50%4,0003,00010.00%2,0009.50%1,000Revenue% Share ofGDP201620187,6008,80010.20%11.70%9.00%Source: World Tourism Organization & TechSci ResearchHeating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia9
Saudi Arabia HVAC Current ScenarioIn 2018, Saudi Arabia HVAC market held a 1.21% share inglobal HVAC market, and this share is projected to growto 1.51% by 2024. The travel & tourism sector is a majordriving factor for the country’s HVAC market. The latestfigures released by World Travel and Tourism Council indicate that the tourism industry contributed 9.4% of totalSaudi Arabia’s GDP in 2017, more than the Middle Eastaverage of 8.9%. In addition, the traveler expenditure isalso growing at more than 10% annually in the country.During religious holidays of Ramadan and Hajj, over 3million pilgrims gather in Mecca and Medina to performHajj and Umrah pilgrimages. As per the World Travel andTourism Council, international tourist arrivals are expected to reach around 22 million in Saudi Arabia by 2025.Saudi Arabia HVAC Market Size, By Value,2014-2024F (USD 1,350.0020142,138.001,205.10CAGR (2014-2018)By Value: 11.40%2023F3,834.30CAGR (2019E-2024F)By Value : 12.26%2024FSource: TechSci Research10Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
Percentage Change in GDP (Constant Prices) of GCC Member Countries, -2.00%-3.00%-4.00%201320142015201620172018Saudi 1.15%0.50%0.59%2.93%-3.48%1.74%United Arab Emirates5.05%4.40%5.07%2.99%0.79%1.69%Source: General Authority of Statistics and International Monetary FundSaudi Arabia is a strong and fast-growing economy in the Middle East region. With increasing oil prices, theeconomy of GCC countries is recovering. Moreover, the economy of Saudi Arabia is shifting towards non-oilsector, as the fluctuation in oil prices in 2015, negatively impacted the GDP growth of all of GCC countries asshown in the below graph. The government of Saudi Arabia is targeting to increase the contribution of non-oilsector in GDP from around 57% in 2016 to 70% in 2020. As of 2018, oil & gas industry contributes around40% to Saudi Arabia’s GDP.Saudi Arabia HVAC Market Share, By End-User,By Value, 2018 & 2024FInstitutional, 11.55%Commercial RealEstate, 26.35%Power, 5.02%Institutional, 11.72%Commercial RealEstate, 26.73%Power, 5.12%Oil & Gas, 4.05%2018Residential,28.10%Oil & Gas, 4.11%Marine & Marine & Offshore,3.08%Others,22.59%Others include Automotive, Data Centers, Cold Storage, etc.Source: TechSci ResearchHeating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia11
Residential sector dominated Saudi Arabia HVAC market in 2018, accounting for a 28.10% share, followed bycommercial and real estate industry. The number of smart buildings is increasing in the GCC countries, especially in the UAE and Saudi Arabia, owing to the convenience and energy efficiency they provide. Moreover,increasing commercial registrations are positively influencing the demand for HVAC systems in Saudi Arabia.For instance, Riyadh and Makkah jointly accounted for around 52% share in total commercial registrations inthe country in 2018.Moreover, market players are constantly introducing new products in the market and enhancing their productportfolio to boost their customer base. For example, in 2017, Carrier, one of the major HVAC system provider,launched AquaForce 30XV air-cooled screw chiller, XPower variable refrigerant flow system (VRF) and Airovision 39HQM air-handling unit in Saudi Arabia.Building Permits Issued By Municipalities inSaudi Arabia, 2018RegionsTotal Number ofUnitsNumber of Permits% Share of PermitsAl-Riyadh876142373526.75%Makkah Al-Mokarramah1038151575317.76%Madinah Al-Monawarah190771162013.10%Eastern 3123368207.69%Hail938834293.87%Northern a25736210.69%Total34637988713100.00%Source: Ministry of Municipal and Rural AffairsSaudi Arabia HVAC Market Share, By ProductType, By Value, 2018 & 2024FDirectExpansion,73.85%2018Central entral AirConditioning,26.50%Source: TechSci Research12Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
Share of Commercial Registrations in SaudiArabia, By Region, 201829.38%RiyadhMakkah23.14%Eastern .58%13.47%Source: Ministry of Municipal and Rural AffairsShare of Housing Units in Saudi Arabia, By Area, 2018ProjectLocationCostStatusAl-Diriyah Festival CityRiyadhUSD1.6 billionApproved in 2016Jazan Economic City (JEC)JazanUSD26.72 billionExpected to complete in 2037Pilgrim City (Dar Al-Hijrah)MadinahUSD14.7 billionUnder ConstructionAl-Faisaliya City ProjectMakkahUSD25 billionUnder ConstructionRiyadh MetroRiyadhUSD6.7 millionExpected to complete in 2022Qiddiya Entertainment CityQiddiya-first phase expected to complete in 2022NEOM- MegacityNeomUSD500 billionExpected to complete in 2025Source: TechSci ResearchHeating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia13
Saudi Arabia’s King Abdullah Economic City (KAEC) and King AbdullahFinancial District (KAFD) are amongthe most ambitious projects in theworld.The USD100 billion KAEC project would be home to 2 millionpeople and one of the world’sbiggestdeep-waterports,which is expected to attractglobal business and tourism inSaudi Arabia.Share of Housing Units in Saudi Arabia,By Area, 2018Total Housing Units3.60 Million24.96%MakkahRiyadh23.68%Eastern RegionQiddiya Entertainment City is another major transformational project,including theme parks, water parks,motor sports, hotel resorts and heritage events, which is expected topositively impact the demand forHVAC systems in the country. Moreover, companies such as Hitachi andDaikin are launching new productsand technologies supported by SaudiStandards, Meteorology and QualityOrganization (SASO) regulations tocater to growing demand in the Middle Eastern 88%Al-Jouf1.60%Northern Borders1.04%Source: General Authority of StatisticsSaudi Arabia Average Weekly Operational Hoursof Electrical Energy Use, 2018Average Operation Hours / WeekNumber ofEquipment UsedWinterRest of the YearHeating6,695,1294805Water Heating12,781,2947521Air ooking3,381,27009108,512,342167167295,321,35867Use TypeFood PreservationTotal63Source: Saudi Arabia Household Energy Survey 201814Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
RefrigerationMarket OverviewIn 2018, Saudi Arabia refrigeration market was valued at USD1,750.20million and is projected to grow at a CAGR of 11.32% during the forecastperiod. Increasing government initiatives towards reducing food wastage are majorly driving the country’s refrigeration market. The Ministry of Environment, Water and Agriculture (MEWA) ranked Saudi Arabianumber one in food wastage in the world. In one year, approximately30% of the total food produced is wasted, which roughly costs aroundUSD13 billion.To reduce this food wastage, in 2018, the General Sports Authority signeda deal with the Saudi Food Bank, aimed at promoting the preservationof food and reducing food wastage. This program is expected to targetmore than 100 hotels and restaurants in the country.Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia15
Saudi Arabia Refrigeration Market Size, By Value,2014-2024F (USD 50.0020142,359.701,245.002,125.11CAGR (2014-2018)By Value: 8.89%2,943.00CAGR (2019E-2024F)By Value : 11.32%2024FSource: TechSci ResearchSaudi Arabia experiences extreme climatic conditions, with temperatures often shooting up to50 C during peak summer. This significantly impacts the usage of electric energy and food consumption behavior of the population.Hence, the operation of refrigeration systemsplays an essential role in maintaining the comfortsof daily life.Saudi Arabia Annual ConsumptionExpenditure in Domestic Market,2017 (USD Million)Gross Rent, Fuel & Power68,547Food, Beverages & Tobacco60,943Transport & Communication46,544Recreation, EntertainmentEducation & Cultural Services31,503Furnitures, Furnishing &Households Equipment23,034Clothing & Footwear16,963Medical Care & Health Expenses5,659Other Goods & Services18,918Source: General Authority for Statistics, KSA16Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia
In 2018, food storage application accounted fora 75.51% share in Saudi Arabia refrigerationmarket. Food storage and pharmacy come under the cold storage application. The food storage application majorly includes storage of foodproducts such as milk, meat, vegetables andfruits. As the country largely depends on theimport of food products from other countries,these food items are required to be stored at aproper temperature for keeping them safe andconsumable for a longer period. Furthermore,the demand for healthy and hygienic food products is also gaining momentum across SaudiArabia. Refrigeration system provide a suitabletemperature for the prolonged sustenance offood produc
8 Heating, Ventilation, Air Conditioning & Refrigeration (HVAC R) Market in Saudi Arabia HVAC Market Overview Global HVAC market is forecast to grow from USD157,530 million in 2018 to USD253,800 mil - lion by 2024. Some of the equipment of HVAC include heat pumps, furnaces, humidifiers, air conditioners and air handling units.
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