Specialist
Sales manager at global electrical equipment manufacturing company
Agenda
- Heat pump demand analysis and 2023 SEER (seasonal energy efficiency ratio) standard updates
- Heat pump competitive landscape – Carrier (NYSE: CARR), Daikin (TYO: 6367), Trane (NYSE: TT) and Lennox (NYSE: LII) vs disruptors
- Upcoming regulations and 2023-27 outlook
- Heat pump product differentiation and future innovation
Questions
1.
Can you describe a heat pump for us and a typical use case vs tradition in HVAC [heating, ventilation and air conditioning] cooling solutions?
2.
What factors are driving increasing heat pump demand? Is it driven primarily by regulation and legislation?
3.
You mentioned a couple of regions where we’re seeing more increases than others. What regions are we seeing increased heat pump demand in? How sustainable is that 20%-plus CAGR that we’re seeing? What would have to happen for that to level off?
4.
You mentioned the Inflation Reduction Act. Could you expand on how it has impacted heat pump demand? What changes should we expect in the HVAC industry in the next 3-5 years because of the Inflation Reduction Act?
5.
Do you have any idea of the percentage of homes that qualify for the rebates? What distribution of homes would qualify to receive the USD 8,000-14,000 that’s offered by the Inflation Reduction Act?
6.
The Inflation Reduction Act offers up about an USD 8,000 tax rebate. Could you outline the cost differences between heat pumps and traditional HVAC units? Does the USD 8,000 tax rebate, if we’re going with the median household income, get heat pumps close to traditional HVAC units in terms of parity and cost parity?
7.
Could you outline the new SEER [seasonal energy efficiency ratio] ratings that are going into effect in January 2023? How will those ratings affect heat pump production?
8.
What percentage of HVAC units are likely to meet the new ratings? Is there any sense of the amount of new volumes that we’ll see driven by OEMs’ inability to make quality equipment to meet the new SEER ratings?
9.
Is there a traditional HVAC replacement cycle? Will the Inflation Reduction Act and SEER rating changes artificially drive or elongate a traditional replacement cycle? How should we consider the HVAC replacement cycle going into 2023?
10.
Is the production of heat pumps meeting demand? What is a standard lead time for a heat pump and does this vary at all across OEMs?
11.
How much of the residential market will have its HVAC needs fulfilled by heat pumps in 2023? What might that number look like in 2025 or 2030?
12.
Do you have any thoughts around the commercial market and heat pump penetration there?
13.
We’ve seen increases in heat pump orders across the HVAC industry. How much has heat pump demand spiked through 2022? How do you expect volumes to trend in 2023?
14.
Could you just go over the cost differences, obviously it’s a residential vs commercial market, but between innovating with the ductless heat pump and the traditional heat pump? What’s the cost difference there?
15.
Who are the notable ductless companies that you’re monitoring that are succeeding? Are they also struggling to meet demand with production because of high demand right now?
16.
You mentioned that there are about 28 companies in the US working in this ductless heat pump space. Is it segmented regionally or do we see OEMs with dominance nationally, and it’s just a segmented market? Do you expect to see some consolidation in this space?
17.
If we’re considering heat pump adoption in the US vs Europe, are there any key difference in adoption rates that we need to consider?
18.
What do you see as the main challenges to the increased uptake of heat pumps in the US, despite the tailwinds we discussed? Are there any headwinds that we should be monitoring, knowing that you expect demand to grow fairly significantly in the next couple of years?
19.
What are the key struggles that OEMs are dealing with in trying to get the new refrigerant?
20.
You noted that this new refrigerant will be 3-5% less efficient. What’s the impetus to change from the old refrigerant to the new one, knowing that it is less efficient?
21.
Will the HVAC rating landscape need to expand to accommodate increased demand for its services?
22.
How will OEMs such as Lennox, Carrier and Daikin have to shift their product mixes to account for heat pump demand? Can they offset falling traditional HVAC units with increased heat pump pricing? Do you see that as being valid in the next couple of years?
23.
Could you outline the major OEMs and how well-positioned they are to fulfil record heat pump demand? Are there any notable ones that are positioned better than others?
24.
You mentioned that Daikin is maybe one of the better-positioned companies. Could you outline the company’s presence in the HVAC industry and how it has penetrated the market?
25.
Why is it never a good thing in the industry to sell directly to homeowners? Do you think Daikin’s distribution strategy is sustainable if stores are competing against each other?
26.
Are there any notable companies primed to disrupt the traditional large OEMs in the HVAC space? Or do you think we’ll see the competitive landscape stay fairly static and true to how it is right now?
27.
Are there any major heat pump installers that we should monitor? How does the installation process differ between heat pumps and traditional HVAC units? Is it longer or more costly?
28.
Is there an opportunity to consolidate those contractors or mom-and-pop shops you mentioned? Is that an opportunity in the contracting industry specifically?
29.
Could you expand on the drivers behind the acceleration of consolidation? For how much longer do you think we’ll see continued consolidation in the industry?
30.
Could you outline the major product differences specifically for heat pumps? If we’re going to hone in specifically on Lennox, Trane, Daikin and Carrier, are there any major product differences that we should be paying attention to?
31.
What is the useful life of a heat pump? How does that compare to a traditional HVAC heating and cooling unit?
32.
What is the maintenance cost for servicing a heat pump, and how does that compare to a traditional HVAC unit? What are the aftermarket opportunities for heat pumps vs traditional units?
33.
Do contractors have to be retrained to repair heat pumps? Will this strain the already strained labour force?
34.
How does the market share break down in the residential and commercial markets across Carrier, Trane, Lennox and Daikin?
35.
How will a recession impact demand for HVAC equipment and repairs? How do OEMs traditionally fare during times of recession?
36.
Are supply chain constraints affecting the parts side of the business as well as the new build side, or is mostly in the new build side?
37.
You mentioned that the parts side of the business was higher-margin than the new build side. Could you give us an estimate of margin differences between parts and new builds?
38.
Are there any topics around heat pumps or the HVAC industry more generally that are worth noting or monitoring?
39.
Is there any other regulation or legislation that we should monitor, aside from the 2025 new refrigerant? How often do SEER ratings typically tend to change? Is this a once-every-10-15-years type of cycle, or do you think that we’ll see another ratings change as companies and buildings try to be more efficient in the future?
40.
Do you have any closing thoughts for us around the heat pump sector before we end the Interview?
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