Investing.com -- The European heat pump sector faces a challenging landscape in 2025, with contrasting trends across major markets.

While the United Kingdom (TADAWUL: 4280 ) emerges as a growth area, Germany and France continue to see a decline in sales, reflecting broader policy and economic uncertainties.

As per analysts at Jefferies, heat pump sales in Germany fell sharply in 2024, dropping by 48% year-on-year.

This decline followed a period of significant growth in 2023 when sales surged by 59% due to high natural gas prices, strong government subsidies, and anticipated heating regulations.

However, uncertainty surrounding the implementation of the Building Energy Act, along with a slowdown in subsidy approvals, has dampened consumer interest.

The prospect of a grand coalition government in Germany further complicates the outlook, with major political parties divided over the future of subsidies and heating regulations.

Meanwhile, the UK is positioning itself as an emerging market for heat pumps. Sales grew by 63% in 2024, defying the European trend of declining demand.

The increase is largely attributed to the expansion of government incentives, including the rise in the Boiler Upgrade Scheme grant from £5,000 to £7,500 per installation.

Additional support, such as zero-interest loans, has also contributed to the growth. However, the UK’s target of 600,000 annual installations by 2028 remains ambitious, requiring a substantial acceleration in adoption rates from the 99,000 units installed in 2024.

France, traditionally one of Europe’s largest heat pump markets, is also experiencing a slowdown. Sales declined by 24% in 2024, following cuts to key subsidy programs such as MaPrimeRénov’.

The French government’s decision to cap incentives for hybrid heat pumps and reduce the overall budget for home energy renovations has been cited as a major factor in the decline. Jefferies analysts highlight that the lack of clarity and complexity of financial incentives have contributed to consumer hesitation.

The trend is expected to continue in 2025, as the recently approved budget includes further reductions to MaPrimeRénov’ funding.

The broader European market is grappling with a significant downturn, with average sales declining by 23% across key countries in 2024.

This decline underscores the sector’s sensitivity to policy changes and economic conditions. While governments remain committed to net-zero targets, shifting political landscapes and evolving subsidy structures are shaping the industry’s short-term trajectory.

Despite current headwinds, the long-term outlook for heat pumps in Europe remains tied to decarbonization goals.

Analysts at Jefferies emphasize that stability in policy and financial support will be critical for regaining consumer confidence and driving further adoption.

The UK’s recent growth suggests that targeted government intervention can make a major impact, while Germany and France highlight the risks of policy uncertainty.