Residential market faces new challenges
"High competition levels are impacting the market due to its maturity, with a few companies dominating a significant share of the market," the report states. The residential HVAC market leaders are identified as Carrier Corp., Fedders, Goodman Manufacturing Co., Rheem Manufacturing Co. and State Industries.
Goodman and Carrier are described as first-tier competitors; they control a large portion of the market and are active in most segments of the residential HVAC industry. Companies such as Fedders, Rheem, Lennox International, The Trane Co. and State are described as second-tier competitors; they also control a significant portion of the market but have more control in specific segments.
"Many companies are now forced to compete not solely on cost, but also by differentiating themselves through other means," said Frost & Sullivan industry analyst David L. Bell. "More acquisitions can be expected, as companies move toward becoming total HVAC-based companies."
Primary drivers in this market are retrofitting older and inefficient models, as well as the demand for new residential construction. Hindering growth is market saturation, lack of technological innovation and high equipment costs.
Among the issues confronting the market are the Internet and the environment.
"The Internet is playing an increasingly important role in shaping the future of distribution in the residential HVAC industry," the report says. "Most of the larger manufacturers and many of the smaller ones now offer online information, catalogs and some online ordering for contractors and homeowners."
The Internet also provides more product knowledge. This allows contractors to be more informed regarding the differences between companies and product lines. The phaseout of CFCs and HCFCs, which deplete earth's ozone layer, has affected consumers with increased costs due to equipment replacement or conversion to alternative refrigerants.
"The U.S. residential HVAC market is going through a period of mergers and acquisitions in an effort to expand product offerings while also taking advantage of synergies in operations, distribution and manufacturing practices," the report concludes. "Many manufacturers are now adopting a 'global' strategy for competition in an effort to further expand sales."