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issue: January 2005 APPLIANCE Magazine

53rd Annual Appliance Industry Forecasts
North America - HVAC Heats Up & Cools Off


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by Jill Russell, Associate Editor

As the housing industry heated up, so did the comfort conditioning industry. According to the Air-Conditioning and Refrigeration Institute (ARI), 2004 year will mark the third consecutive year in which record U.S. shipments of central air-conditioners and heat pumps will pass 7 million, with expectations to hit 7.3 million.

As of press time, year-to-date shipments through September 2004 of central air-conditioners had reached 4.7 million units. Shipments of heat pumps for the same period had reached 1.5 million units. While shipment numbers were soaring, concerns regarding governmental mandates were the focus of the industry. With a Jan. 26, 2006 deadline, the 13 seasonal energy efficiency rating (SEER) for residential central air-conditioners and heat pumps up to 65,000 BTU dominated much of the product development throughout 2004.

Working toward the new standards, Rheem Air Conditioning released 10 new products, won three industry awards, and introduced two new product lines with its Prestige® and Ultra® Series. “The company’s aggressive approach to product design in 2004 has positioned our team to launch many new exciting products in 2005,” Jack Sinkler, vice president of Marketing, told APPLIANCE. “Due to new 13 SEER energy-efficiency minimums in 2006, most of our new products in 2005 are connected to optimized product designs to meet the new standard.” Mr. Sinkler said the company plans to introduce a new line of air handlers and indoor coils in addition to working closely with customers to direct future programs and product offerings. “In 2005, we will continue to keep it simple: listen to our customers and deliver on our promises,” Mr. Sinkler said. “We would rather ‘under promise and over deliver’ than the reverse.”

Regulatory issues are not the only concern plaguing the comfort industry—the cost of material has also hit this segment hard. “The major challenge facing manufacturers in the appliance market is that costs have risen drastically for the first time in a decade,” said Tom Purcell, executive vice president of Appliance Sales for Fedders. Due to the increase, Mr. Purcell anticipates that a 10- to 15-percent price increase will be common in 2005, forcing some smaller manufacturers to drop their HVAC product lines. “Cool weather will separate the wheat from the chaff,” he said. “This will leave more business to those that are dedicated long term and committed to the business.”

The industry has already seen the beginning stages of price increases, as both American Standard and Carrier Corporation announced increases in late 2004. American Standard announced a 5-percent price increase effective Dec. 1, 2004 on all of its residential and light commercial products. Carrier announced a 3- to 9-percent price increase, depending on the product, on all of its residential and commercial lines in North America, including its Carrier, Bryant, and Payne brands.

In the face of higher material costs, increased standards, and overall price hikes, the industry is expecting 2005 to weather the storm. Rheem says it expects the industry to have another good year similar to that of 2004, forecasting shipments of more than 7 million units. “We anticipate normal shipments for the first 6 to 8 months,” Mr. Sinkler said. “Distributors will then begin depleting inventory of 10 and 12 SEER models in preparation for the 13-SEER legislative mandate.”

As with the cooling segment, the heating market is anticipated to end 2004 on a strong note. The Gas Appliance Manufacturers Association (GAMA) reported in an October 2004 release that U.S. shipments of both gas warm-air and oil warm-air furnaces were up approximately 14.6 percent over 2003. Residential electric water heaters were also up 3.3 percent, although residential gas water heaters were down 5.3 percent. The commercial segment remained strong, as electric water heaters experienced a 19.6-percent increase over the same period in 2003, and commercial gas water heaters were up 5.1 percent.

The residential water heater segment is also experiencing new standards that will affect 2005 shipments and new product designs. Originally set for January 2005, the second phase of the American National Standards Institute (ANSI) standard for flammable vapors ignition resistance (FVIR) for power-vented water heaters has been pushed back to January 2006. The new standard requires that 30-, 40-, and 50-gal power-vented water heaters be resistant to flammable vapors. The third and final phase of the regulation affects high-capacity 75- and 100-gal direct-vent water heaters and is also expected to be rescheduled from its original July 2005 deadline.

Rheem Water Heaters says it is not only working to provide solutions that fit the newly mandated standards, but on innovation as well. Recently experiencing a growth rate of approximately 20 percent in the tankless water heater segment, Rheem is working to introduce larger models for the residential and commercial markets to hopefully simulate the success seen in the residential market. The company recently released a tankless model capable of up to 199,999 BTU with a flow rate of 7.4 gal per min and is planning to introduce commercial models in July and August of 2005. Rheem says it is expecting the tankless segment to grow between 15 and 20 percent in 2005.

Besides a tankless product offering, Rheem has also been working to introduce new products in its solar category. “We want to be the leading manufacturer of hot water solutions, not just tank-type water heaters, and that means bringing the right technology and the right solutions to a particular application,” noted Alan Cape, wholesale market manager for Rheem.

53rd Annual Appliance Industry Forecast
 
North America
 
Europe
 
Latin America
 
Asia
 
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