BREAKING NEWS: Prices Steadily Soar in the HVAC Industry at a Staggering 12% Rateadmin
November 23, 2021
- The HVAC market witnesses yet another series of price increases, with manufacturers announcing price hikes going into 2022.
- Leading HVAC players are estimating 12% rise in wholesale prices, starting January 1st, 2022, due to increasing demand, supply chain disruption, and extended lead times.
Sacramento, CA – The global heating, ventilation, and air conditioning (HVAC) industry is going through a steep price increase. In 2021, due to several factors, leading HVAC equipment manufacturers announced wholesale price rises between 3% to 20%. With an estimated market volume of over 150 million units, the HVAC industry continues to grow at an overwhelming rate.
There are multiple reasons for this astounding price rise. Notably, most of the defining factors are a result of the ongoing COVID-19 pandemic. The global commodity market is witnessing a massive demand for health and lifestyle items.
Due to a gradual shift to the work-from-home lifestyle, consumers are investing in HVAC products. Consequently, there is a demand for air conditioners, purifiers, heaters, and other comfort equipment.
However, the HVAC market price rise isn’t fully dependent on the ‘demand’ side. The supply chain issues have been instrumental, causing a steady price hike.
Ongoing Factors Affecting Global HVAC Industry
The supply side in the HVAC industry is facing challenging times to meet the ever-increasing demand from consumers.
COVID-19 pandemic has led to lockdowns, impact logistics, and international flights, causing hurdles in the HVAC industry.
The following challenges are significant contributors to impacting global commodity markets.
- Supply chain and logistics disruption due to COVID-19 pandemic
- Increasing domestic and international freight costs
- Production backlogs and freight issues causing excessive lead times
- Consistent rise in raw material costs
- A sustained recovery in demand for PVF goods
These factors have given rise to extended lead times, material shortages, thereby causing a rise in commodity prices.
Delays in Manufacturing
Lockdowns in the beginning period of the COVID-19 pandemic led to the shutting down of manufacturing units.
The product backlog was high due to several HVAC equipment companies being inactive. Further, companies weren’t allowed to operate with whole staff due to health concerns.
Thus, delays in manufacturing led to a shortage of supply. HVAC distributors faced challenges in providing consistent sales to retailers, thereby affecting consumers.
Electrical Component Shortages
Copper, motors, and compressors are the major components facing shortages at this time. In addition, the HVAC industry is tackling a shortage of microchips.
Microchips are vital in high-efficiency HVAC systems and furnaces. Also, the lack of personnel in the transportation chain has impacted distributors, retailers, and manufacturers immensely.
Rising Prices Impacting HVAC Consumers
On average, the country is witnessing a rise in HVAC equipment between the 8-12% range. This rise applies to residential, commercial, and custom systems across several manufacturers.
In some cases, product customization, components, and raw material impact have caused the increment to surpass the 12% mark.
One cannot overlook the fact that production costs are at an all-time high. In addition, the demand from consumers is rising steadily. The final retail prices of common HVAC products like air conditioners and refrigerators will continue to rise.
The Ever-Growing Demand for HVAC Products
Comfort has become paramount in today’s age. In fact, with more people working from home, the requirement for HVAC items is apparent.
However, work-from-home isn’t the only contributor to increasing demand. Several factors require consumers to rely heavily on HVAC products.
- A steady rise in temperature due to global warming
- Emphasis on air filters and purifiers
- Increased durability of HVAC products
- More compact equipment
Unitary air conditioners will always be in high demand to combat rising temperatures. Similarly, consumers now understand the value of breathing clean air. Thus, purifiers are an essential commodity in most households.
Residential HVAC Industry Price Structure
Historically, the HVAC industry has witnessed high demand in the global market. Due to modern designs and manufacturing methods, residential systems attract more consumers.
Typically, the HVAC market sees a price increase of 3-4% on average. This price hike applies to the whole equipment and auxiliary parts. However, with the ongoing pandemic, the year 2021 proved to be record-breaking.
Clearing all the backlogs and bouncing gradually, the HVAC market witnessed a three-time increment in equipment pricing. Thus, the total cost increase in the HVAC industry was approximately 20%.
These rising costs translate to higher prices in HVAC system repairs. With increased emphasis on repairing and maintenance, there was a $1700 rise for base efficiency new equipment.
Also, the overall rise in the highest efficiency systems reached the $2600 mark.
The Road Ahead
With a compound annual growth rate (CAGR) of 6.5%, the HVAC industry benefits from efficient solutions and government incentives.
Choosing tax credit incentives, energy-efficient equipment, and competitive HVAC partners is a wise investment. Also, selecting a contractor involved in stockpiling HVAC equipment will reduce consumer inconvenience.
The price of HVAC components, repair, and maintenance will keep rising ahead. It is therefore beneficial to act as early as possible. US inflation is currently at a record 31 year high, with the consumer-price-index up 6.2% from a year ago. Due to the time value of money, today’s dollar is not going to go as far especially starting January 1st, 2022 when the new prices hikes go into effect.
Customers should take prompt decisions to replace or purchase HVAC systems. If possible, the consumers should buy or repair their HVAC systems in 2021 itself. The new price wave will undoubtedly hit the HVAC market starting from January 2022.