It is easy while watching the news or talking with neighbors to focus in on the headwinds that are affecting both the U.S. economy and the HVAC market. In fact, it is hard to avoid them.
While inflation is slowing down a bit, it is still at historic highs. Rising costs everywhere means the consumer has less disposable dollars in their pockets. Interest rates being so high means financing has gotten more expensive for homeowners. Every HVAC contractor knows what those factors mean — repair instead of replace.
And, of course, this is all going into an election year, where uncertainly will reign as our friends in Washington, D.C. will somehow find a way to be even less productive. And as well all know … businesses hate uncertainty.
But that does not necessarily mean all is lost for the HVAC contractor. There are plenty of signs to show that, in fact, there are good days ahead when talking about the heating and cooling industry.
Here are five reasons to be positive about the HVAC industry:
- Private Equity: Private equity money has been flowing into the HVAC industry for the last few years now. It has been great for a lot of contractors who certainly got rewarded for working hard and building great businesses.
The private equity folks are not in the business of losing money. They invest a lot of time, effort, and capital to make sure they get a solid return on their investment. Sure, they see a mostly fragmented business on the contractor and distributor side that they find advantageous to merge together. But they also know the growing importance of air conditioning in our society as a need instead of a want.
It is never a bad place to be on the side of private equity. It is like being on the same side of the Super Bowl with the major casinos. I like our chances.
- Perspective: Like with anything in life, how the HVAC industry is doing comes down to how you are viewing it. While the numbers might be decreasing from the last three record years, the amount of product being purchased is still quite strong.
If you had offered these numbers to the industry at the end of 2019, everyone would have certainly signed up for it. So in looking at this with a glass-half-full perspective, the industry is much better off than it was five years ago.
- Recent History: Since the Great Recession of 2008, the HVAC industry has been incredibly resilient. In the last 15 years, there have certainly been more than a few macro factors that made the leaders in the industry nervous about its immediate future. Tariffs, COVID, and supply chain issues have all been dealt with by the industry without missing a beat. Odds are that the industry can also handle inflation and a downturn in the economy.
- Inflation Reduction Act: This legislation from the federal government means HVAC equipment — specifically, heat pumps, which can see a tax credit of up to $2,000 — is going to be much more affordable for homeowners.
The U.S. government is trying to incentivize electrification, and this is something HVAC contractors should be taking advantage of this year. The federal government is also promoting the development of cold climate heat pumps, so this is for contractors in the north also.
- Indoor Air Quality: In addition to normal heating and cooling, there is a great need for IAQ, and the HVAC industry can deliver. One needs to look no further than the recent Canadian wildfires to realize this is a problem that needs to be addressed.
And it is not just a short-term issue based on what is happening in Canada. This got on the public’s radar during the COVID crisis, and it is not going away any time soon. Homeowners want to be sure the air that they breathe is not putting their family’s health at risk.
So will HVAC shipment numbers be on par with the last three years that saw record highs? Probably not. But it is looking like the HVAC industry will continue to be robust, and owners will be in a great position to make a lot of money.
Source: 5 Reasons to be Positive About the HVAC Industry | ACHR News