Why Does My New HVAC System Cost So Much?

By: Brian Schutt  |  September 13, 2023

In the last few years, homeowners have noticed a significant increase in the costs associated with heating and cooling. The area most impacted has been new HVAC units, causing many homeowners to have sticker shock when installing new air conditioners and furnaces. As the provider of these estimates, we can assure you the price increases aren’t being pocketed. Since we’ve answered this question hundreds of times in the last few years, we decided to publicly delve into the factors contributing to the pricing uptick, including the impact of tariffs, manufacturing slowdowns due to the COVID-19 pandemic, and labor shortages.

Tariffs and Trade Wars

Before the outbreak of COVID-19, the global market was already facing challenges with tariffs and ongoing trade wars. The U.S. imposed substantial tariffs on imported steel and aluminum, both essential materials for HVAC manufacturing.

Data Dive:
– The U.S. Department of Commerce announced a 25% tariff on steel imports and a 10% tariff on aluminum imports in 2018.
– This move affected many countries, but China, a significant player in the HVAC industry, was hit hardest.

The direct fallout? HVAC manufacturers faced higher raw material costs. Many HVAC companies had to adjust their pricing structures, inevitably passing on a portion of these costs to the consumer.

The COVID-19 Pandemic’s Grip on Manufacturing

The global nature of COVID-19 brought unique challenges in manufacturing. Entire industries halted, global supply chains were disrupted, and the HVAC industry was no exception.

Manufacturing Slowdowns:
– Due to strict lockdown measures, many manufacturing plants either shut down or operated at limited capacities.
– The disrupted supply chains meant a shortage of essential components, further delaying production.

Data Dive:
– A study from the Institute for Supply Management in 2020 indicated that nearly 75% of companies reported supply chain disruptions due to pandemic-related restrictions.

This manufacturing bottleneck resulted in less HVAC unit availability, driving prices up due to the classic economic principle of supply and demand.

Labor Shortages and Rising Wages

The HVAC industry, like many others, faced labor shortages even before the pandemic. With the onset of COVID-19, this shortage became more pronounced due to several factors:

Health Concerns:
– Older technicians, falling under the high-risk category, refrained from working, fearing exposure.
– Many workers were quarantined, either due to exposure or infection, further reducing the available workforce.

Training and Certification Delays:
– With training centers and institutions closed, the influx of new technicians into the industry slowed down.

Labor Data:
– According to the U.S. Bureau of Labor Statistics, there was already a need for an additional 15% of HVACR mechanics and installers from 2016 to 2026, indicating a growing labor demand.
– A survey by The Air Conditioning, Heating, and Refrigeration Institute (AHRI) and the Partnership for Air Conditioning, Heating, Refrigeration Accreditation (PAHRA) noted that 75% of employers found it challenging to find qualified technicians.

The inevitable consequence? Increased wages. To retain existing workers and attract new ones, companies offered higher pay rates. These wage hikes, combined with additional costs like personal protective equipment (PPE) and safety training, contributed further to the rising costs in the HVAC sector.

Looking Forward

Understanding these factors provides insight into the present scenario, but what about the future? Experts believe that as global economies rebound from the pandemic’s effects and as supply chains mend, there may be some stabilization in HVAC unit prices. However, some changes, especially around HVAC installation labor costs and potential future tariffs, might make it a longer road to normalization.

For homeowners and businesses, this underlines the importance of maintaining current HVAC systems to extend their lifespan and ensure efficiency. Regular check-ups, filter changes, and timely minor repairs can go a long way.

The combined impact of tariffs, manufacturing interruptions due to COVID-19, and labor shortages has undeniably played a pivotal role in escalating heating and cooling costs. While the industry adapts and navigates these challenges, consumers can best respond by staying informed, understanding the wider economic context, and focusing on preventive maintenance. As the world gears towards recovery, there’s hope for more stability and predictability in the HVAC realm.

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