Can We Dodge the HVAC Shipment Cliff?

In March of 2020, when the world and industry were both panicking, a look at historical industry shipment data published by AHRI would have calmed many fears among those serving the HVAC replacement market. The data suggested 2020 would be a good year despite the pandemic. The data was right.  But now, the data is telling a different story. Gulp!

What Happened?

Until 2020, the record year in the history of the HVAC industry was 2005.  More than 8.6 million residential air conditioners and heat pumps were shipped that year.  Fifteen years later, they were due for replacement.  Sure, some last longer than 15 years and some die early deaths, but 15 years is a pretty good approximation.  The two main factors that could affect the 2020 replacement bonanza were weather and the economy.

When there’s an unusually hot summer, especially if it hits early in the year, replacements are accelerated.  Equipment that might last another year or two or three, gets an early funeral. That can impact replacements in the current year and in following years. 

Prepare today for the upcoming decline. Shelter your cash. Build your reserves. Get ready to get aggressive. Take share from your competitors.  

Conversely, when there’s a mild summer or the hot weather comes late, some replacements get deferred. This happened in 2019. Summer came late for much of the country. As a result, half a million replacements were deferred into 2020. Yet, one can only defer a replacement for so long.

At the start of 2020, no one knew if the weather was going to cooperate, and everyone was worried about the economy. We did know that the data suggested a surge in the replacement market. We knew there were half a million deferred units. We also knew that 15 years ago, 2005 saw a jump in shipments of more than 16% from 2004 and more than 26% from 2003. 

Record-breaking ’21?

Frankly, the wave of replacements set to impact 2020 was likely more than the industry could handle without COVID.  As it turned out, 2020 surpassed 2005 as the best year in the industry’s history. Even so, so many replacements were deferred that 2021 may match or beat 2020.  

In fact, for much of the year, the strength of 2021 surprised many, including me. I thought 2021 would show modest growth in replacement market shipments with better growth financially due to inflated prices.  Earlier in the year, I thought I missed badly. However, through September 2021 shipments are in a dead heat with 2020. 

So, why did the experts get it wrong in 2020?  It could be attributed to panic and a herd mentality. It’s hard to publicly proclaim optimism when everyone around you is pessimistic. I know. 

It is just as hard to be a pot banger when everyone else is pumping sunshine. But here I am. Starting in 2005, industry shipments nose-dived. From 2005 until the trough in 2009, industry shipments dropped 40%!  We went from a peak of 8.6 million units shipped to a trough of 5.2 million. The echo of this decline is staring the industry straight in the eye. It is coming. The replacement market side of the industry cannot avoid it. Fortunately, you can. 

When things get tough, most people quit thinking rationally. They let their emotions drive them. This will happen over the next few years. Count on it.  Expect your competitors to panic. Expect them to be scared and to act scared. Expect them to all but withdraw from the market. This is your chance.

Opportunity in Down Markets

The greatest opportunities lie in down markets for those with the inclinations and means to seize them. Years ago, I had the fortuitous timing to enter the heavy commercial end of the business at the very point where high-rise construction plunged 34% over two years. I made the determination that we would not participate in the downturn and rallied people to that notion. It was a difficult time. None of our competitors were as aggressive as we were. Accordingly, we grew.  It wasn’t spectacular growth, but it was growth. Meanwhile, the competition shrank. Our market share soared. We emerged from the contraction as the industry leader, positioned to ride that position into the future. This never would have happened if we followed the fearful crowd. And, we never would have made similar share gains in an up market.

The same thing happened to residential service and replacement contractors who followed our guidance during the 2005 to 2009 collapse.  Things were especially tense in 2008. Yet, bold contractors prospered. You can too.

Prepare today for the upcoming decline. Shelter your cash. Build your reserves. Get ready to get aggressive. Take share from your competitors.  

After 2009, the industry recorded increasing shipments every year through 2020. Take share over the next few years and you will reap the benefits for a decade to come.

When times are tough, you need every advantage you can get, such as accessing the Service Roundtable’s massive library of downloadable business and marketing templates, complementary membership in the industry’s largest buying group, and interactions with the best contractors in the industry.  For cutting edge information on the HVAC industry, join the Service Roundtable.  Learn more at www.ServiceRoundtable.com or call 877.262.3341.