Tankless Water Heater Market Analysis & Forecast: 2025-2032

Tankless Water Heater Market Size and Trends

The tankless water heater market is estimated to be valued at USD 4.47 Bn in 2025 and is expected to reach USD 8.02 Bn by 2032, exhibiting a compound annual growth rate (CAGR) of 8.7% from 2025 to 2032.

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The adoption of energy efficient products along with growing construction of green buildings are the major factors driving the demand for tankless water heaters globally. The market is witnessing rising demand for energy efficient and space saving water heating solutions among consumers. Growing environmental consciousness and need for conservation of resources are further boosting the popularity of tankless water heaters. Various government regulations regarding energy efficiency are also fostering the replacement of conventional water heaters with advanced tankless variants.

Drivers of the Market:

Growing energy efficiency concerns

The rising costs of energy and growing concerns over carbon emissions have prompted many homeowners to seek ways to reduce their energy usage and lower utility bills. Tankless water heaters address these needs far better than traditional storage tank models. They are able to heat water on demand only when it is needed rather than continuously maintaining water temperature in a storage tank. This makes them much more energy efficient as heat energy is not lost through the insulated walls of a storage tank. Some tankless water heater models over 30% more efficiency than standard units. As environmental stewardship and sustainable living continue to gain mainstream appeal, the energy savings potential of tankless water heaters becomes an important driver for many consumers. Their lower operating costs have them paying for themselves over time through savings on utility bills. With gas and electricity prices projected to rise further in the coming years amid supply constraints, tankless water heaters offer homeowners a way to minimize the impact of higher energy rates on household budgets.

Market Concentration and Competitive Landscape

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Preference for larger homes and bathrooms

The average size of new single-family homes has steadily increased over the past few decades. Homebuyers now commonly seek out spacious floor plans with multiple bathrooms, sometimes even including master baths with soaking tubs and walk-in showers. Larger homes naturally require more hot water, especially when multiple bathrooms need to be used simultaneously. Traditional tank water heaters struggle to keep up with the demand without running out of hot water. Tankless systems solve this problem by being able to produce an unlimited supply. The on-demand heating avoids wasting energy maintaining a reserve and allows the entire home's fixtures to be used together without interruption. Their space-saving wall-mounted compact design is also preferable to homeowners instead of storing an often aging tank in the basement or garage. As builders focus on offering larger luxury features, tankless water heaters become a necessity for reliable hot water supply. Their ability to meet the higher hot water requirements of expansive new homes remains an important consideration for builders and homeowners alike.

Key Takeaways from Analyst:

One of the major drivers for growth is the inherent energy and cost efficiency of tankless water heaters. Since these systems heat water on demand without storing hot water in a tank, they can save up to 30% in energy costs compared to traditional storage tank water heaters. Growing environmental consciousness among consumers is further expected to drive demand.

High initial installation costs could hamper widespread adoption. Tankless systems require specialized wiring and venting components that increase upfront expenses. Lack of brand awareness in certain regions also poses a challenge. Furthermore, issues with sizing and installation complexity add to restraints faced by market players.

Opportunities lie in the Asia Pacific region where rapid urbanization and rising disposable incomes are increasing bathroom renovations and new construction activities. Increased promotion showcasing long term energy and cost savings could help overcome restraints. Additionally, the North America region is expected to dominate the market owing to harsh winters necessitating higher hot water usage.

Market Challenges: Higher installation cost than traditional tank heaters

Higher installation cost than traditional tank heaters is one of the major factors restraining the growth of the tankless water heater market. Tankless water heaters require significant modification and renovation of the existing water supply and heating system in the house or building as compared to conventional tank heaters. The high additional costs associated with installing a tankless heater deter many potential customers. It requires installing new gas lines or electric circuits with higher capacity, flues or vents depending on fuel type, and mounting the unit itself which takes more time and efforts than a simple drop-in replacement of a tank heater. Some homes with older distribution systems may even require partial re-piping of the existing water lines to optimal gas pressure levels. All these factors contribute to nearly 4-5 times higher installation expenses for tankless systems. This significant premium that customers have to bear to switch from a tank to a tankless system poses a major adoption barrier, especially for replacing functioning tank heaters.

Market Opportunities: Product innovation

Product innovation has the potential to be a huge driver of growth in the tankless water heater market. As concerns over energy efficiency and environmental sustainability continue to rise globally, tankless water heaters are increasingly becoming the preferred choice over traditional tank water heaters. Tankless water heaters provide a significant reduction in energy usage as they heat water only as it flows through the system versus keeping a large tank continuously heated. As consumers become more educated on the cost and carbon footprint savings of tankless water heaters, product innovation that further improves their energy efficiency could help accelerate adoption rates.

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Insights by type: Lowered energy costs and flexibility in heating water

In terms of type, the gas-fired tankless segment is expected to contribute 65.0% estimated share of the market in 2025. Gas-fired tankless water heaters have gained popularity in recent years due to their ability to lower energy costs compared to traditional tank water heaters. Gas-fired tankless systems provide hot water only as it is needed, so there is no energy wasted keeping large volumes of water heated continuously in a storage tank. This makes gas-fired tankless models much more energy efficient.

Another major factor driving the growth for gas-fired tankless water heaters is flexibility. These systems allow for continuous, on-demand hot water from multiple draw points like showers, sinks, washing machines, etc. simultaneously. While traditional tanks have limited capacity, gas-fired tankless provides unlimited hot water. This makes them a practical choice for larger households or buildings with multiple fixtures. Gas units also recover more quickly than electric models to produce hot water. Their flexibility to meet fluctuating demand from multiple sources without running out of hot water has increased their adoption rate in residences as well as commercial spaces like hotels, spas, etc.

Insights by end-user : Rising renovation and construction activities

In terms of end-user, the residential segment is expected to contribute 42.9% estimated share of the market in 2025 owing to rising renovation and construction activities. Rising home renovation and new construction projects are the major drivers of demand within this segment. As more households look to cut down their energy bills and optimize water heating systems, tankless water heaters are gaining popularity as an alternative or add-on to traditional tank systems.

Renovations allow homeowners to replace aging water heaters with newer, more efficient tankless options. Similarly, tankless units are often the preferred choice in new residential construction due to their space-saving compact design and ability to provide hot water in large volumes. Recent trends like increasing home sizes and more bathrooms per house have also influenced the uptake of tankless water heaters to meet higher hot water requirements. Moreover, growing environmental awareness is encouraging the adoption of energy-efficient tankless models residential settings. The convenience of continuous hot water supply further enhances their appeal among homeowners. These factors together will continue propelling the residential segment in the tankless water heater market.

Regional Insights

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North America has established itself as the dominant regional market for tankless water heaters. The region is expected to account for over 35.9% of the market share in 2025, owing to higher acceptance rate and broad product availability. The U.S., in particular, dominates the North America market due to the presence of widespread distribution networks of key manufacturers. This ensures ease of access to all varieties and price points of tankless water heaters for consumers across the country. In addition, growing awareness about energy and cost savings associated with tankless systems have boosted their popularity as a replacement for conventional tank-type heaters over the last decade. Stringent building codes mandating high energy efficiency standards also favor the adoption of tankless heaters.

Asia Pacific, on the other hand, is the fastest growing regional market for tankless water heaters. Countries like China, Japan, and South Korea have traditionally led demand in the region. However, other emerging economies of India, Indonesia, and Vietnam are displaying the highest growth rates on the back of expanding middle-class population and construction activity and rising disposable income levels. While Japan has been a pioneer with widespread usage of tankless heaters for over 50 years due to limited living spaces, other Asian countries are now also embracing this space-saving technology.

Market Report Scope

Tankless Water Heater Industry News

• On February 23, 2024, Smith announced that it will unveil its latest innovations in heating technology at the 2024 NAHB International Builders' Show (IBS)
• In 2023, a Germany-based brand, clage, launched next-generation water heaters in India
• In 2022, Bradford White Water Heaters, a manufacturer of residential and commercial water heating and storage products, introduced KwickShot, a reliable and easily installed tankless electric water heater available in thermostatic and non-thermostatic models to meet a range of water temperature needs in a variety of everyday applications. This has enhanced the product portfolio of the company.
• In 2022, Rinnai, a manufacturer of tankless water heaters, launched the New RE Series Tankless Water Heater with Smart-Circ Intelligent Recirculation. The RE Series is compatible with the Wi-Fi module controller, to achieve scheduled recirculation or on-demand operations.

*Definition: A tankless water heater, also known as an instant or demand water heater, is a water heating system that heats water as it flows through pipes, rather than storing hot water in a reserve tank like a traditional water heater. Tankless water heaters heat water only as it is needed, saving water and energy without compromising on hot water supply. They provide endless hot water for multiple outlets simultaneously with energy-efficient technologies like condensing heat exchangers. Tankless heaters are suitable for homes, offices, hotels, and commercial spaces looking for continuous flow of hot water without storage tanks.

Market Segmentation

• Type Insights (Revenue, USD Bn, 2020 - 2032)
  • Gas-Fired Tankless
  • Electric Tankless
•  End-user Insights (Revenue, USD Bn, 2020 - 2032)
  • Residential
  • Commercial
  • Industrial
• Regional Insights (Revenue, USD Bn, 2020 - 2032)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • Israel
    • Rest of Middle East & Africa
• Key Players Insights
  • Rheem Manufacturing Company
  • Rinnai Corporation
  • O. Smith
  • Noritz America Corp.
  • Ariston Thermo Group
  • Kyungdong Navien Co. Ltd.
  • Stiebel Eltron GmbH & Co. KG
  • Bradford White Corp.
  • Haier Electronics Group Co Ltd.
  • Bajaj Electricals Ltd
  • Robert Bosch LLC
  • Navien Inc.
  • Eccotemp Systems, LLC
  • Chronomite Laboratories Inc.
  • Intellihot
  • Stiebel Eltron
  • Niagara Industries Inc.
  • Vordosch
  • Zanskar