According to the UN, heatwaves in 2024 are predicted to break global temperature records and to continue to do so over the next five years. This generates a situation where households will need to find means to cool their homes. With the global air conditioners market expected to grow at a relatively small volume CAGR of 0.7% from 2023 to 2028, where will growth specifically come from?
The Forecast Model for Consumer Appliances and Consumer Electronics was built to help the industry understand growth drivers in an easy-to-understand visual presentation. The Forecast Model provides tools to easily compare market growth and growth decomposition by product and country. In this piece, we will take you through a step-by-step methodology to identify which are high growth markets and the growth drivers behind them. Some of the questions we will seek to answer are:
- Which countries are forecast to grow the fastest?
- What is the market potential for these countries?
- What are the forecast drivers behind this?
Identifying high growth regions and countries using the Forecast Model
As summer heatwaves struck consumers around the world in 2022 and 2023, many households in countries with traditionally mild summers were unprepared to cope with the discomfort. With the UN predicting that summer heatwaves will only get worse, sales of air conditioners and other cooling devices will continue to grow.
With the Forecast Model’s “Overview” tab, we can visualise and identify markets with high forecast growth.
In this case, the Western European and Latin American markets, with growth projected of 5.3% and 3.8%, respectively, will lead growth over the next five years
Source: Euromonitor International's Forecast Model
Between these two regional markets, sales in Latin America, categorised as a “growing” market, are expected to be higher on top of a higher baseline. 
As we investigate further into Latin America, two countries – Brazil and Mexico – stand out, and for very different reasons. The Mexican market is expected to have the fastest volume growth (5.2%) but in terms of quantum, it is behind Brazil with a much bigger baseline. This holds as Mexico is classified as a “growing” market, with a bigger forecast potential, compared to “mature” Brazil.
Measuring the potential market for selected countries
In the previous section, we identified Mexico and Brazil as high growth markets. The next step is to measure their unmet potential. Using the “Market Potential” tab of the Forecast Model, one now has a view of the addressable market available in the forecast period. Based on the chart below, potential sales in Mexico are the highest. In particular, split air conditioners is expected to be the primary growth driver.
The Forecast Model also provides you with the ability to quickly view the unmet potential in the market. In this case, over the next five years, we forecast an unmet potential of 7.8 million units of split air conditioners in the Mexican market, as seen in the following chart:
What are the drivers behind the forecast growth in Mexico?
We have now determined that forecast growth in Mexico will be one of the highest in Latin America, along with a large unmet potential. It would be prudent now to determine the exact drivers behind this growth. Using the Forecast Model’s “Growth Decomposition” tab, we can view the forecast market over the next five years, along with the growth drivers behind it.
Euromonitor’s Forecast Model can provide you with the detailed drivers used to model forecast growth. In this instance, we forecast volume growth in 2027 to be 4.4%, based on several drivers and restraints. Among the drivers are growth in number of households and housing completions per capita. A restraining factor in market growth will be from soft drivers, including substitutional effect, innovation, availability, lifestyle trends etc. The summation of these driver effects generates the forecast growth. In the case of the Mexican market, macroeconomic variables, housing and population factors will be the key drivers to future growth in the air conditioners market.
Through a step-by-step method using our highly visual interactive Forecast Model, one can now identify high growth markets and determine their growth drivers. Further insights are supplemented by accessing our Air Treatment Products in Mexico and Air Treatment Products in Brazil country reports.
For further information or to request a demo, please contact your Euromonitor International account representative. All Passport subscribers have access to the Market Overview with the option to upgrade to the full model.