Why a Price War in Our Industry will Hurt the Customer
Established in 1961 SARACCA has seen steady growth in membership to become one of the most prolific Association 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, maintain 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 practised 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 practise 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%.
“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
The Value of Compliance
HVAC+R companies that remain compliant will ultimately succeed in an industry governed by global standards. Customers serious about long term savings will see the benefit between choosing compliance over non-compliance. This has ultimately been the success story behind SARACCA. SARACCA has seen steady growth in membership numbers and continues to drive global standards and compliance levels amongst members.
The HVAC+R industry is heavily regulated in South Africa. A non-compliant installation, service or repair leaves a customer without the required certification. Homes cannot be conveyed to new owners, larger installations cannot claim from insurance policies in the event of damage, explosion, or theft. Only registered gas practitioners can issue certification for installation, service, or repair.
SARACCA encourages all HVAC+R companies to join the SARACCA family and benefit from the many support elements needed to improve compliance. SARACCA “family” members remain committed to compliance and offer the highest standards of work.