Joe Ritchie: That’s a super helpful answer. Thank you. And then — and maybe just a quick follow-up to that. You’ve given us the projections on what you expect the heat pump market to do and your opportunity there. I’m just curious just on the core business, if you went back a decade on this on Viessmann business like what did Viessmann grow? How cyclical was it? And I’m really just trying to understand what the — as we see the progress and the acceleration in the heat pump market, how we should be thinking about their growth rate?
David Gitlin: Well, it’s such a unique phenomenon with the shift to heat pump. So, they’ve traditionally grown the market is a lot like the US where it’s an 80% replacement market. People need heating, heating fails, you replace it. The most amazing thing is given that 17 countries in Europe have either announced or banned fossil fuel heating. If you picture you’re in a European home, you take a wall-hung boiler off the wall of your bathroom or our utility room, you’re going to put in a heat pump and instead of spending a few K, you’re going to spend 10K. So, if you pictured no unit rate of growth and the only thing you had was mixing up they’d be growing double-digits. Now, you put on top of that all of their other venues that they have for growth between solar PV and battery that’s why they have consistently been growing over recent years in these mid-teens.
And if you look at our forecast, it continues to grow at least double-digit rates for the foreseeable future. And I could tell you that there’s many parts of our market. If you ask me what are they going to grow in 2025 it will be very difficult for me to answer that sitting here today. This is probably given the energy transition happening in Europe. I would say this is the most predictable sustained growth market in the world. We could give you very high confidence this is going to grow clearly double-digits in 2025, in 2026 because of the underlying dynamics of the mixing up that you’re seeing and the additional value add that they provide.
Joe Ritchie: Super helpful. I’ll leave it there.
Operator: The next question comes from Tommy Moll with Stephens. Your line is now open.
Tommy Moll: Good morning and thanks for taking my question.
David Gitlin: Hey Tommy.
Tommy Moll: Dave congrats on the deal and now I wanted to talk about resi North America if that’s all right.
David Gitlin: Yes.
Tommy Moll: Just kidding. Let’s stick on Viessmann here. I was interested in any more context you could share on their direct-to-installer model. How long ago did they pivot in that direction? Is that primarily only within Germany, or does it also apply outside of Germany? Just any context you can give us there would be appreciated.
David Gitlin: Sure. It started about 30 years ago with Martin Viessmann. Professor Dr. Martin Viessmann really had encouraged to see the value in going to this direct-to-installer model. And if you think about Europe in many cases both sell to distributors who sell to wholesalers who sell to installers who sell to the homeowner, both in Germany and many of its other countries, Viessmann Climate Solutions did establish this direct-to-installer model which has so many advantages in Germany and in Europe, not only the obvious that they — from a margin perspective, but even more importantly is that they end up with a lot of customer intimacy. And what’s also happening is that the demand for these heat pumps is so acute throughout Europe that their installers are struggling to just keep up with the underlying demand.
So Viessmann themselves have been in there with the homeowners not only helping with some of the replacements, but helping with the new installations. So it has created so much value just having that direct installation customer intimacy. And again, it is not a model that they have that’s unique to Germany they have it in many other countries as well. And I think one of the things that really attracted us many of the many things that attracted us to Viessmann, is they’re in all the best countries. When you look at the countries that are making the most rapid transition to heat pumps, and you look at the countries that have the highest demand, it is countries like Germany and Poland and Italy and France. So they’re really well positioned globally, but certainly within Europe.
Tommy Moll: That’s helpful. Thank you, David. And I want to follow-up just talking about the market opportunity that you described which if you think about the spend on a per household basis it’s a 20x multiplier potentially in a large and fast-growing market. But every other major player in the world is looking at the same market. So if you had to identify what is the core element of the Viessmann moat around this opportunity and how being part of Carrier potentially can help deepen that what would you point us to?
David Gitlin: I put point to the channel. Anyone can develop technology. The hardest thing is to access the channel. And that’s true in Europe it’s true in the United States. You need access because it’s not — these are highly installed highly configured systems. So you need highly trained installers that actually have access to the homeowner. And that’s what they have. Viessmann spend a lot of resources investing in training it’s extensive installation network. So first is they have access and they have the best access because of their very unique channel model. The second thing is they have the brand that not only in Germany, but it has that German technology. There’s a lot of pull for that Viessmann brand. Third is they have the technology.
I mentioned Viessmann Invisible. I mentioned that how they’ve designed their digital overlay and their interconnected system. So they put a lot of energy into natural refrigerants and hydrogen enriched boilers. So a lot of what they’ve done to build a moat is interconnecting channel brand technology holistic and ecosystem level offerings to really make them a very, very unique asset again not just in Germany, but across Europe.
