Why a Price War in Our Industry will Hurt the Customer
“It is in the interest of every business owner to use a compliant practitioner when installing, repairing, or servicing an HVAC+R system. If you choose to go the non-compliant route, it will hit your pocket!”
Barney Richardson, Director of SARACCA
Established in 1961 SARACCA has seen steady growth in membership to become one of the most prolific Associations within the Heating Ventilation Air-Conditioning and Refrigeration (HVAC+R) industry. Global warming has made temperature control a central part of our daily lives and with the increased demand in HVAC+R, a large portion of the industry including SARACCA members, maintains global standards in compliance while offering customers an array of key skills.
Recently driven by small fly-by-night businesses, the industry has entered a price war between compliant and non-compliant companies which ultimately has cost the customer.
COVID-19 has not made our lives any easier, but the use of air-conditioning has. It continues to do so, positioning the global industry to grow by just under 4%*. By 2030 the HVAC market is projected to reach 367.5 billion US dollars. Locally our market has seen its fair share of growth. This growth in South Africa is under threat by customers choosing to use non-compliant gas practitioners. By cutting prices at the cost of compliance, non-compliant HVAC+R businesses have undermined the growth of the industry and hampered South Africa’s participation in the global growth rate.
The Cost of a Price War
A price war can be seen as a strategic move by local companies to ensure survival in a tough economy. Essential if practiced correctly and in line with the law, a price war could offer an ideal opportunity to realign prices. However, when the price war comes at the cost of compliance, the customer will bear the brunt and become the ultimate loser.
Ultimately the cheaper the quote the higher the risk of that company not being compliant.
SARACCA as a key player in the industry views the current price war as a major blow to the industry. While SARACCA members operate within the law and practice global standards non-compliant businesses have eroded the industry value by undercutting prices at the cost of compliance. What is the real-time cost of this price war? In this case, the cost sits between 25%-39% of the project value. In essence, once the installation has been completed by a non-compliant practitioner a Certificate of Compliance (CoC) cannot be issued. The customer would have to enlist the help of a compliant practitioner to rectify the installation and issue the CoC. In some instances, the cost has bypassed the initial budget by 40%.