Managing Rising Prices and Supply Chain Issues Within the HVAC Industry

Our world of HVAC, regarding equipment and parts, is dealing with a three headed monster:

  • Lack of Availability
  • Manufacturer Price Increases
  • 1/1/23 Department of Energy Regulations on SEER and EER Ratings of 3 – 25 ton HVAC Systems

 

In many ways, what we’re experiencing is unprecedented. Tremendous demand, limited availability, raging inflation, a broken supply chain, and bleak short-term options to help fix the issues on a global scale. In the past, we’ve had some but not all providing a perfect storm scenario.

Availability:

This issue concerns the equipment itself, replacement parts, and components. Timelines for getting equipment have gotten longer (months instead of weeks or days) and show no improvement or reliability. Many parts that used to be able to be sourced are now not able to be found. HVAC is not the only area affected. Electrical and plumbing components are also having the same issues.

Manufacturer Price Increases:

The definition of inflation is “the general increase in prices and fall in the value of money.” This is usually gradual and over years. It has been currently happening within days and weeks with HVAC manufacturers. No one wants to be left holding the bag as every point in the lifecycle of a manufactured product is at risk. Electronic chip shortages, cargo container flow or lack thereof, government regulations, international complications, COVID-19 impacts, Russian aggression in Ukraine, and so on are real impacts.

We have manufacturers that have increased prices 30-40% year over year; some are increasing every month. Most will reserve the right to apply cost increases that occur between order and delivery, which has not happened in a generation. Many quotes state prices/quote is good for seven days!

Department of Energy SEER and EER Rating Regulations kicking in on January 1, 2023:

In a glaring example of our government not being focused on the right and most important things, the DOE has re-iterated its stance that HVAC equipment manufacturers stop selling equipment rated lower than the new regulated minimum for SEER and EER ratings effective 12/31/22. This mandate alone will add, on average, another 20% – 30% beginning 1/1/23.

Given the long lead times in general in the supply of equipment, many HVAC manufacturers have already switched to the new SEER and EER standards (and pricing) and stopped providing the current level of equipment already.

Key questions to ask of your HVAC Partner:

  • What are my options for solving the problem I am trying to solve?
  • What is the current lead time to get all the pieces of your project in hand?
  • What price changes during that lead time could be triggered?
  • Do you have the capacity to handle the job?

 

Decisiveness, planning, and the ability to execute with flexibility will be the path forward. Transparency from your vendors and partners is crucial. No one is trying to take advantage of anyone. This is a rare time where we are in it together, fighting to get done what needs to get done in a time of upheaval and uncertainty. Trust and cooperation become a much larger part of the equation when choosing partners and setting realistic expectations.

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