If any HVAC industry trend has continued in 2022, it’s significant pricing increases. Manufacturers seem to make one announcement after another informing their customers of rising costs. Some have announced increases as much as 38%, while it’s not unusual to see increases ranging from 3% to 20% higher than 2020 levels. HVAC professionals around the world continue to warn consumers to act now when replacing their systems before costs rise even more steeply.
Experts forecasted the rising costs early in the pandemic, as a new remote workforce made more use of HVAC services in their home offices. Increased demand started a cycle of HVAC-related inflation, which only since has been compounded by a perfect storm of shortages, supply chain issues, and regulatory reform. Combined, all of these forces have led to industry inflation at rates never before seen.
“Product procurement will come with price increases that will likely continue to trend upward as the year goes on,” Motili President Karl Pomeroy told Forbes. “I also expect supply chain issues to continue to impact product acquisition. I believe higher performance components, new fan systems, and increased unit chassis sizes will bring a need for an increase in commodities, such as copper and plastic for newer, bigger systems. That equates to higher acquisition costs.”
What trends are affecting HVAC pricing in 2022? The following factors have played a major role in HVAC costs and will continue to impact the rate of inflation in the future.
The Covid-19 pandemic led to increased demand for HVAC products and services on a couple of fronts. First, people spent far greater amounts of time in their homes in 2020 and 2021, leading to increased HVAC usage. This boost in usage led to more service demands. Many, however, also took the opportunity to make investments in their homes, including upgrading their HVAC equipment. Combined, these factors led to increased demand which in turn led to price increases starting in 2021 that continued in 2022 and beyond. As the weather warms up, seasonal price increases typical to the industry will only exacerbate the inflation.
Raw Materials Increases
Industries around the world are experiencing inflation because of increases in raw materials costs, and the HVAC sector is no exception. According to the U.S. Bureau of Labor Statistics, the cost of raw materials like steel and copper has increased significantly over the past year. Other raw materials that have seen increases include aluminum and lumber, both of which are used to manufacture systems and equipment. When the cost of raw materials increases, manufacturers must pass these costs on to consumers by increasing the price of equipment.
The global semiconductor shortage has also impacted the HVAC industry in 2022. HVAC systems with higher efficiencies – including variable speed HVAC, multi-speed central air, heat pumps, and mini-split HVAC systems – require semiconductor chips to function, and the shortage has caused issues with manufacturing new units. The lower supply – combined with the increased demand – further contributes to the overall HVAC inflation and pricing increases. This issue most greatly impacts the supply of highly efficient HVAC systems and their parts. The pricing increase will also affect the need to repair or replace PC boards within existing systems.
Anyone who hasn’t been living under a rock for several months is well aware of the skyrocketing costs of fuel, especially the diesel used to operate HVAC trucks and transportation vehicles. As with any business, those increased costs to service technicians will be passed along to the consumer with increased service costs. Likewise, the higher cost of fuel to deliver equipment from the manufacturer further contributes to HVAC inflation and the rising prices of new HVAC equipment. Because of the rising cost of fuel, some HVAC companies might even reduce the sizes of their service areas to help control their travel costs.
Environmentally friendlier regulatory changes have impacted HVAC industry pricing for decades. Recent and upcoming changes promise to extend the current HVAC inflation rate into the next year and beyond. Systems running on phased-out refrigerants such as R-22 will require expensive repair costs due to the coolant’s short supply. As demand increases for newer refrigerants like R-410A, their prices will continue to rise, as well. Plus, since R-410A is primarily imported from China, U.S. anti-dumping tariffs have caused its price to go up over time. Meanwhile, government-imposed efficiency standards for new HVAC equipment will again increase in early 2023. In the northern United States, systems will have to meet a 14-SEER rating, while the southern region will require a 15-SEER rating. The demand for these higher-efficiency systems will further prolong pricing increases in the HVAC industry.