While the busy season is here, a potential economic slowdown can mitigate the impact of even the best HVAC sales and marketing strategies. Protecting your margins and staying on top of HVAC equipment price increases is just as important as ever. In this article, we explore the risk factors and strategies to mitigate those risks in your HVAC business.
Factors Contributing to HVAC Price Increase in 2023
1. Changes in SEER Regulations
The new regulations set by the Department of Energy (DOE) require higher SEER ratings and new test procedures for air conditioning systems. To comply with these regulations, HVAC manufacturers needed to invest in research and development, modify their production processes, and introduce new technologies. These adjustments increased manufacturing costs, which ultimately helped drive higher prices in the HVAC market in 2023.
2. Inflation
The rate of inflation experienced a notable surge in 2022, with an increase of 7-8%. Unfortunately, this trend is expected to continue moderately, affecting the cost of doing business across various sectors. As inflation continues to rise, businesses face higher costs for raw materials, transportation, and operations, which ultimately impacts the price of HVAC systems.
3. Supply Chain Disruption and Shortages
The COVID-19 pandemic resulted in factory closures, transportation delays, and reduced production capacity - and it has taken multiple years to recover. While the economy has recovered from many disruptions, geopolitical tensions, trade disputes, and natural disasters have continued to disrupt supply chains driving higher costs and limited inventory for your HVAC businesses.
The HVAC industry is dependent on raw materials like steel, copper, and aluminum. The shortages of key materials have impacted the production and availability of HVAC system components and have resulted in limited inventory and increased costs for manufacturers, distributors, and contractors.
4. Increased Cost of Fuel
Rising fuel costs have a direct impact on the manufacturing and transportation expenses associated with HVAC equipment. As fuel prices soar, manufacturers face higher costs for the energy needed in the production process. Transportation costs for shipping and delivery also escalate, influencing the final price of HVAC units. As a result, manufacturers and distributors are compelled to adjust their prices to accommodate these higher expenses, leading to an increase in HVAC prices for contractors and consumers.
Strategies for Mitigating the Negative Impact of Price Increases
Your team is already working hard to mitigate the impact of price increases. Here are some tips we’ve learned in conversations with dozens of leading firms:
1. Manage Costs through Operational Optimization
Cost management can become your secret weapon. Boosting efficiency will keep your expenses in check without compromising quality. Leveraging technology and software solutions such as Measurequick, Conduit Tech, and CRM platforms can assist contractors in making the most informed and advantageous investments.
2. Diversify the Supply Chain to Reduce Disruption Risk
Supplier diversification can hold the key to addressing supply chain challenges. By diversifying suppliers, contractors can bolster their resilience to disruptions and establish contingency plans. 62% of industrial companies experienced substantial changes in their supplier base over the past two years. Those who expanded their supplier network and diversified sourcing witnessed increased resilience in their supply chain.
3. Communicate Effectively with Clients about Pricing Changes
Your open and transparent communication with your clients will strengthen your bond with them. Explaining the long-term benefits of energy-efficient systems and cost savings will ease their concerns about potentially more expensive options. Emphasizing your expertise, exceptional customer service, and maintenance programs can help justify pricing adjustments and solidify client loyalty.
Conduit Tech: Empowering HVAC Businesses to Thrive Amid Price Increases
At Conduit Tech, we understand the challenges you face with HVAC price increases. Our advanced technology solutions empower you to navigate rising costs, differentiate services, and close challenging sales.
Reach out to Conduit Tech to help you overcome these hurdles and continue to thrive in the HVAC industry.
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