In 2026, the Global Electric Vehicle (EV) Thermal Management Systems market is projected to grow into one of the major technological disciplines that comprise today's Automotive Supply Peer Group (ASPG). The purpose of this Thermal Management System technology has migrated from function-focused to system-oriented design. Originally an assortment of disjointed components and parts, EV thermal management systems are now being designed as networked platforms that deliver a single, cohesive architecture to control the efficiency, durability, and safety of your vehicle.
While cabin heating and cooling (HVAC) remains one of the most significant applications of thermal management systems in EVs today, EV thermal systems also manage the heat generated by super-high-power (SiC) electric motors and inverter packages, in addition to controlling the thermal environment of lithium-ion battery chemistries. Maintaining the cylinder head temperature of a lithium battery pack between 25° C and 45° C is vital in preventing premature battery degradation due to cellular failure and reducing the risk of thermal runaway, making thermal management systems the final measure of vehicle reliability.
Currently, the EV thermal market exhibits a rapid convergence of electronic and thermal engineering methodologies. Software Defined Thermal Management (SDTM) technologies leverage advanced, predictive algorithms driven by telematics, environmental (ambient) weather, and battery state to prepare the lithium batteries for high voltage rapid recharge just before reaching the vehicle's pre-determined fast charging location. The convergence of electronic and thermal engineering methodologies is creating an exponential proliferation in the value of all components contained within the vehicle because the value of each component is estimated to be 2-3 times greater for an electric vehicle (BEV) than a conventional (internal combustion engine) vehicle. The surge of global electric vehicle (EV) adoption toward saturation in developed nations is driving demand for advanced thermal management solutions by both consumers and the push of emissions regulations that mandate high efficiency by government agencies.
The rising demand for ultra-fast charging capabilities (10 per cent to 80 per cent in less than 15 minutes) is driving a surge in demand for high-performance battery systems. As new high-power charging sessions produce tremendous amounts of ohmic heating within the battery cells, they require the use of active liquid-cooling systems using large volumetric flow rates and optimised thermal interface materials. The development of new high-voltage 800V platforms will create a need for the specialisation of insulation and cooling for power electronics, thus resulting in a continued increase in the demand for high-pressure electric compressors and advanced refrigerant loops. Further evidence of the effects of consumer-driven demands for improved winter performance has created a demand for heat pump systems to be built now into the vehicles, creating double-digit growth in the adoption of electronic expansion valves and multi-way coolant manifolds in all major vehicle segments.
The most significant headwind facing the evolution and successful implementation of this market is the high cost and complexity of developing advanced thermal architectures that can be utilised. These advanced thermal architectures can add up to 5 per cent to the cost of the total vehicle. The use of multiple-cooling loops for battery cooling, cabin climate control, and powertrain cooling combined creates a significant physical constraint to package all these components into one system and increases the risk of fluid leaks. These barriers also create opportunities to develop integrated thermal modules that can consolidate multiple components into compact 3D-printed or die-cast manifold solutions. The adoption of natural refrigerant solutions such as R744 (CO2) and R290 (Propane) presents an additional growth opportunity for suppliers that can design high-pressure, explosion-proof components that comply with the latest environmental regulations in the European Union and North America.
Raw Material and Pricing Analysis
The amount that must be paid for thermal management systems will be determined mostly by the costs associated with high-grade aluminium and certain specialised chemicals. High-grade aluminium, which has many applications in heat exchangers and cooling plates, has a volatile price that fluctuates based on energy costs related to smelting. There has also been an increase in the use of specialised dielectric fluids and Phase Change Materials (PCMs) due to the growing popularity of more efficient thermal management systems. Due to the limited supply of these items, they carry a higher price than traditional fluids and materials. The supply of Synthetic Refrigerants (e.g., R1234yf) is controlled by a small number of global chemical manufacturers, resulting in stable prices, but at a higher level. Many suppliers are looking into using aluminium-to-polymer transitions for low-pressure lines in order to reduce material costs, while manufacturers of high-pressure components are still tied to commodity prices of metal.
Supply Chain Analysis
The Global Supply Chain is experiencing a trend toward "De-Globalisation" as it moves away from being centred in China and becomes instead Regionalised into the following production clusters: East Asia is still a major supplier of electric water pumps and sensors. At the same time, Tier-1 Suppliers are quickly ramping up production capabilities within Mexico and Eastern Europe to supply both North America and the European Union. This is primarily due to an increase in the need for compliance with logistics lead times of large components (i.e. radiators) and required levels of Domestic Content to qualify for Government Subsidies. The transport of pressurised refrigerant components and heavy cooling plates continues to create a complicated logistics situation. A Company's Strategic Dependence upon specialised rare-earth magnets for Brushless DC Pump Motors is another vulnerability in the supply chain that companies are attempting to alleviate with the development of alternate motor designs.
Government Regulations
Jurisdiction | Key Regulation / Agency | Market Impact Analysis |
|---|---|---|
United States | Section 301 / Inflation Reduction Act (IRA) | Imposes 25% tariffs on Chinese-made battery parts; mandates domestic sourcing of thermal components to qualify for $7,500 tax credits, forcing supply chain localization. |
European Union | Regulation (EU) 2024/573 (F-Gas) | Mandates a rapid phase-down of HFCs with GWP >150; drives non-discretionary demand for natural refrigerant (CO2/Propane) thermal systems in all new vehicles by 2030. |
China | NEV Industry Development Plan (2021-2035) | Mandates minimum energy efficiency standards for EVs, making high-efficiency heat pumps and integrated thermal modules a regulatory necessity for market access. |
Brazil | MOVER Program (2024) | Provides tax incentives for vehicles with high energy efficiency and low CO2 emissions; accelerates the adoption of localized thermal management systems for hybrid-flex vehicles. |
September 2025: Denso Corporation, in partnership with JERA Co., Inc., launched the world's first demonstration of high-efficiency hydrogen production at the Shin-Nagoya Thermal Power Station using Solid Oxide Electrolysis Cells (SOEC). The project utilises Denso’s proprietary heat-management technology to minimise thermal discharge, achieving the world's highest level of electrolysis efficiency. This move signals Denso's strategy to apply its automotive thermal expertise to the broader green energy infrastructure market.
January 2025: Hankook & Company Group officially completed the acquisition of Hanon Systems, becoming the majority shareholder with a 54.77% stake. This acquisition positions the Group as a global high-tech leader in the mobility sector, integrating tyres, batteries, and thermal management into a unified core portfolio to maximise synergies in R&D and supply chain management.
By System Type: Heat Pump Systems
The heat pump has moved from being a premium technology with limited use to being an important part of electric vehicle value. The heat pump can provide much better energy efficiency compared to the traditional electric resistance heaters (PTC). Electric resistance heaters produce heat directly using electrical energy and have a Coefficient of Performance (COP) usually close to 1.0. A heat pump, on the other hand, uses electricity to transport thermal energy from a cold source to a hot source and, under ideal conditions, can produce a COP as high as 4.0. Thus, for every unit of electricity consumed by the heat pump, it can deliver up to four units of heating energy. This is especially important during winter months when the cabin heating load of an electric vehicle can be as high as 40% of the total energy use of the battery.
In addition to their high energy efficiency, heat pumps have been gaining popularity due to the "Cold Weather Range Gap." This term describes the difference between the range that an electric vehicle can achieve in cold weather and the range that it would achieve in warm weather. As heat pumps advance, the newly developed fourth-generation heat pumps feature a secondary loop that captures waste heat produced by the electric motor, inverter, and battery pack during high-current fast charge operations. This added versatility further increases their energy efficiency.
The increasing complexity of the heat pump market has created a great demand for high-value solutions for multi-port refrigerant valves and high-pressure electric compressors. The fastest growth rate will go to vendors that can offer integrated heat pump modules that eliminate the need for OEMs to create separate components (i.e., the refrigerant and coolant interfaces).
By Vehicle Type: Commercial Vehicles
The commercial vehicle sector comprises transit buses, last-mile delivery vans, and Class 8 long-haul trucks and is, therefore, a rapidly growing thermal management sub-market. Unlike traditional passenger vehicles, which are typically only parked for 95% of their usable life, commercial EVs (CEVs), which include intermediate and long-haul trucks, are built for high-utilisation duty cycles. This means that the systems that provide thermal management in the CEV are required to support a continuous high-load operation and to support many high-power rapid-charging sessions (up to 12 hours) during a typical workday. In certain cases, the energy storage systems (ESS) for electric trucks will have peak capacity above 500kWh, which will generate significantly higher peak thermal loads than in most sedans.
In this sector, all customers are looking for “heavy-duty” active liquid-cooling products with high-capacity chillers and durable electric pumps, all of which must be built to last. In the case of refrigerated transport (the term generally refers to documented temperature-controlled environments for produce), the thermal management system for the vehicle must also connect to the cooling unit on the trailer, which requires a complex thermal architecture with multiple levels of cooling systems. Additionally, with the increasing adoption of hydrogen fuel cell commercial vehicles (HFCVs), temperature control must be precise to ensure effective operation, and HFCVs produce large volumes of waste heat that must be rejected by the cooling system. New commercial platforms that rely on advanced thermal regulation will be created as a result of the decarbonization mandates for fleets in the European Union and California, forcing the swift transformation of traditional to zero-emission commercial platforms.
The current state of the U.S. market is a result of the "Fortress" supply chain strategy that was ushered in by the updates to Section 301 tariffs and the Inflation Reduction Act for 2024 and 2025. Specifically, the 25% tariff on battery components that originate in China created an economic challenge for high-volume OEMs to source imported thermal plates and manifolds. In response to this challenge, investment in the so-called "Battery Belt" has surged as new manufacturers, such as Modine Manufacturing and Gentherm, seek to expand their capacity to manufacture locally.
The U.S. is the only country where large-format thermal systems are primarily being used in electric pickup trucks and SUVs. These vehicles typically have battery capacities of over 100 kilowatt hours (kWh) and require a very large cooling surface area and a very high-capacity HVAC unit in order to meet consumer expectations for rapid cabin cooling across the Sun Belt. The U.S. market currently has the highest rate of incorporation of predictive thermal management software, as long-distance towing, which is the primary application for trucks, creates an extreme level of thermal stress on the powertrain and necessitates real-time AI-driven adjustments to cooling to avoid component failure.
In Brazil, the EV thermal management demand is uniquely tied to the country’s leadership in biofuel technology and the new "MOVER" (Mobility and Innovation) program. The Brazilian government's focus is on "Hybrid-Flex" electrification, where an electric motor is paired with an internal combustion engine that runs on 100% ethanol. This creates a specific demand for "multi-source" thermal management systems that can manage the heat cycles of a high-temperature ICE alongside the low-temperature requirements of a lithium-ion battery. In early 2025, OEMs like Stellantis and Toyota announced significant investments in local Brazilian production for these hybrid platforms. This has created a localised demand for thermal components that can withstand the corrosive properties of ethanol combustion products while maintaining the high-efficiency cooling loops needed for the battery. Additionally, the tropical climate in Brazil drives a year-round demand for high-capacity cabin air conditioning, making efficient, low-energy HVAC systems a key differentiator for the local market.
Germany remains the global benchmark for high-performance EV thermal engineering, driven by the engineering-led cultures of Porsche, BMW, and Mercedes-Benz. The German market is currently leading the transition to "800V-standard" thermal architectures, which allow for ultra-fast charging but generate extreme heat. German Tier-1 suppliers like Mahle and Continental are focusing on "immersion cooling" technologies, where battery cells are directly submerged in non-conductive dielectric fluids for superior heat transfer. This is a response to the "Autobahn" driving profile, where sustained high speeds create thermal loads that traditional air or indirect liquid cooling cannot manage. Furthermore, Germany’s adherence to the updated EU F-Gas regulations has triggered a mass shift toward CO2 (R744) based heat pumps. While CO2 systems operate at pressures up to ten times higher than traditional refrigerants, they are significantly more efficient in cold climates, aligning with the German consumer’s requirement for high-performance winter driving.
Saudi Arabia is emerging as a high-potential market for specialised EV thermal management, driven by the Kingdom’s Vision 2030 and the establishment of the domestic EV brand, Ceer. The primary demand driver in this region is "Extreme Ambient Resistance." With summer temperatures regularly exceeding 50°C, a standard EV thermal system would experience immediate performance degradation. This has created a demand for "desert-spec" thermal modules that utilise oversized chillers and high-reflectivity thermal coatings for battery enclosures. The Saudi market is also focused on the localisation of the supply chain, with the Public Investment Fund (PIF) facilitating partnerships between Ceer and global technology leaders to build a thermal management manufacturing hub in the King Abdullah Economic City (KAEC). This regional production is intended to serve the broader Middle East and Africa (MEA) market, where cooling performance is the single most important factor in EV consumer adoption.
China continues to dominate the global market in terms of both production volume and the speed of technological adoption. The Chinese market is characterised by a "highly integrated" architectural philosophy, where automakers like BYD and NIO utilise "8-in-1" integrated electric drive systems that natively incorporate the thermal management manifold into the motor housing. This reduces weight and cost, making EVs more competitive with ICE vehicles. China is also the global leader in the production of electronic expansion valves (EEVs) and electric compressors, with a supply chain that is significantly more cost-optimised than those in the West. The demand in China is bifurcated: a high-volume segment focused on cost-effective air-to-water heat pumps for mass-market EVs, and a premium segment pushing the boundaries of "software-defined" thermal management that integrates with the vehicle's ADAS sensors to optimise cooling based on upcoming traffic and terrain.
List of Companies
Bosch
Denso Corporation
Mahle GmbH
Continental AG
Modine Manufacturing Company
Hanon Systems
Valeo
Behr Hella Service
Nidec Corporation
LG Electronics
The competitive landscape of the EV Thermal Management Systems Market is currently defined by an aggressive consolidation of capabilities. Tier-1 suppliers are no longer competing solely on component performance; they are competing on their ability to offer "Thermal Intelligence" as a service. The market is led by a "Big Four", Hanon Systems, Valeo, Mahle, and Denso, who collectively control a significant portion of the global OEM contracts. These companies have moved away from their traditional ICE cooling roots, reallocating R&D budgets to focus almost exclusively on electrification. Competitive differentiation is now achieved through proprietary software that optimises thermal loops and the development of compact, "plug-and-play" thermal modules that reduce vehicle assembly time.
Hanon Systems
Hanon Systems has recently undergone a major structural transformation to solidify its market leadership. As of January 2025, Hankook & Company Group became the majority shareholder (54.77% stake), completing a decade-long strategic acquisition process. This merger has integrated Hanon’s thermal expertise with Hankook’s global battery and tyre portfolio, creating a comprehensive "mobility solutions" provider. Hanon’s strategic positioning is centred on its "4th Generation Heat Pump," which is currently considered the industry benchmark for waste heat recovery efficiency. The company’s ability to offer a fully localised supply chain in North America, Europe, and Asia allows it to bypass the volatility of Section 301 tariffs and regional trade barriers. Hanon’s focus on "cost innovation" and the restructuring of its European operations in late 2024 has improved its margins, making it a preferred partner for volume OEMs like Ford and Hyundai.
Valeo
Valeo has positioned itself as the "Champion of Electrification" through its Power Division, which combines powertrain and thermal management into a single R&D ecosystem. Valeo’s strategy is built on "high-content-per-vehicle," with the company estimating that the value of thermal systems in a BEV is double that of an ICE vehicle. A key differentiator for Valeo is its "Smart Cocoon" technology, an AI-driven interior thermal system that uses infrared sensors to heat passengers directly rather than warming the entire cabin air, significantly reducing energy consumption. In September 2025, Valeo secured a multi-hundred-million-euro contract with a leading Chinese automaker for its "Dual Layer HVAC" system, which offers 25% energy savings in extreme cold. This win highlights Valeo’s success in the world’s most competitive EV market and its ability to innovate in "human-centric" thermal management.
Mahle GmbH
Mahle has aggressively pivoted its business model under the "MAHLE 2030+" strategy, focusing on thermal management as its primary growth driver. In April 2024, Mahle secured the largest single order in its history, totalling €1.5 billion for integrated thermal management modules from both a global OEM and a major Asian manufacturer. This success is attributed to Mahle’s "System-Level Analysis" capability, which optimises the interaction between the battery, drive system, and cabin cooling. Mahle’s "Bionic" cooling plate technology, which uses fluid channel designs inspired by natural structures to improve heat transfer by 10%, is a key technical differentiator. The company’s focus on modularity allows it to provide customised thermal solutions for different vehicle platforms with minimal engineering effort, making it highly competitive in the rapidly evolving boutique EV and commercial vehicle segments.