Changing Weather Patterns Influence Demand for HVAC Equipment

Cyclical changes in weather conditions are playing a key role in deciding the demand for heating, ventilation, and air conditioning (HVAC) equipment in the United States. At present, the demand for residential air conditioning equipment is at an all-time high, with most of the states experiencing warm weather conditions, an outcome of consistent increase in temperature year after year across the country. As a result, electricity consumption is likely to escalate, placing a tremendous burden on power grids. Manufacturers that can provide innovative technologies at low costs and enable energy/electricity conservation can take advantage of this situation and dominate the market.

Market participants are developing environment-friendly and innovatively designed equipment that improves performance and energy efficiency. The growth of technologically advanced products such as ductless AC, radiant heating, geothermal systems, and insulated concrete formed (ICF) housing is driving replacement sales, which exceeds the number of installations in new construction. Additionally, ozone-depleting refrigerants have been banned due to heightened environmental concerns, paving the way for new, eco-friendly refrigerants. Installers should learn to use these new refrigerants and understand how they react with equipment and testing tools. This will enable them to meet the cooling/heating performance required by consumers.

Room air conditioners, in particular, are experiencing great demand due to their widespread availability, easy installation methods, low operational costs, and consumer familiarity. "Air conditioning is evolving into a sophisticated technology rather than simply making the air cold," says the analyst. "Manufacturers are increasingly offering total air-control systems, which allow consumers to cool the air to designated temperatures at specific times and filter it down to the micron level, then treat the incoming air with radiation. Bacteria, molds, and other harmful particles are potentially rendered harmless with such treatment."

The emergence of production facilities in Asia, especially China, where labor and manufacturing costs are extremely low, is posing a major threat to market participants in the United States. Once local demand is met, Asian manufacturers look toward the U.S. markets to maintain their pace of growth, thereby affecting the prospects of native U.S. companies. "The current steel tariff and its likely increase in the future are expected to attract more foreign manufacturing," says the analyst. Unlike the U.S. companies, Asian manufacturers have the additional advantage of a flexible legal framework, limiting the scope for litigation and thereby, eliminating various business restrictions, obstacles, and costs.

U.S. companies must devise new strategies and employ the cost-effective production methods to counter this growing threat from their Asian peers. They can opt for offshore manufacturing, enabling them to reduce costs and compete effectively against Asian brands sold in the U.S. "There is likely to be vigorous competition and some of the major companies are suffering from poor product choices in the past, creating opportunities for better-managed peers to gain market share," conclude the analyst.