The North American HVAC components aftermarket will recover from
market erosion, with modest growth forecasted over the next five to
seven years. However, manufacturers still must confront long-term
strategic challenges posed by imported parts and declining replacement
rates.

New analysis from Frost & Sullivan’s Automotive & Transportation Group
(www.transportation.frost.com), finds that the North American HVAC
Components Aftermarket earned revenues of $920.3 million in 2005 and
estimates to reach $955.5 million in 2012

“This industry will witness small, incremental growth based on the
increase in system renewals rather than single part replacement and
the fact that manufacturers will be better positioned to pass on price
increases in the coming years,” observes Industry Analyst Stephen
Spivey. “As compressors and condensers are replaced at the same time
to reduce the risk of contamination, and as vehicles receive a new
accumulator or receiver-drier any time the system is opened, unit
shipment in seldom-replaced HVAC system parts, such as evaporators and
expansion valves will increase. Prices will increase because imports
have saturated the aftermarket and have already reduced prices to the
lowest level.”

Some distributors are offering incentives, such as price discounts or
better warranty terms, to installers who buy the complete heating or
air-conditioning system rather than a single part. For example, if the
installer buys the compressor, condenser, evaporator, and accumulator
or receiver-drier together, then the distributor will extend the full
manufacturer warranty to guarantee the parts. But the warranty may
expire after 90 days when the installer buys a single part.

Manufacturers are coping with a trend of declining replacement rates
for HVAC components in the North American aftermarket. The service
life of original equipment parts in use when the owner buys the
vehicle has increased as automakers seek to improve the quality of new
cars and trucks. This delays the entry of vehicles into the
aftermarket, resulting in a lower percentage of vehicles in-use
receiving a replacement part annually.

“The challenge of fewer vehicles entering the replacement parts
aftermarket has been compounded by recent offers from automakers of
no-cost financing for new vehicle purchases. With so many people
buying new cars and trucks, it has taken older vehicles in the prime
replacement period for new heating and air-conditioning systems off
the road,” comments Spivey.

The North American aftermarket has responded to competitive challenges
by moving production activities to countries where costs are low,
particularly to China. However, recent merger and acquisition activity
has helped leading suppliers like Proliance International Inc. to
streamline manufacturing and distribution operations and to increase
their buying power. Other manufacturers have shed unprofitable
accounts, increased prices, and implemented cost-reduction programs to
remove waste from the production process.