HVAC Market Benefits From Building Boom

Rising competition is squeezing electric drive manufacturers' profit margins, especially with the rising demand for smaller and low-cost HVAC drives. The boom in the construction business has rippled into the heating, ventilation and air conditioning (HVAC) industry in Europe, which, in turn, has buoyed the electric drives market This is because HVAC accounts for nearly 10% of its total market revenue.

New analysis from Frost and Sullivan Electric Drives Market in the European HVAC Industry, finds that the market earned revenues of US $292.5 million in 2007 and estimates this to reach US $456.5 million in 2014. The HVAC industry's status as one of the major consumers of electrical energy among industries in Europe and the recent hike in energy costs have compelled electric drive manufacturers to develop energy-efficient systems.

The passing of standards and directives stressing energy conservation bolstered this development. However, the implementation of these directives has not been smooth in certain Eastern European countries due to their unstable political situations and lack of efficient systems. Their changing economies and varying construction industry trends have also deterred long-term investments in the market. Meanwhile, rising competition is squeezing electric drive manufacturers' profit margins, especially with the rising demand for smaller and low-cost HVAC drives.

Manufacturers have to develop clever business strategies to maintain their market share in this price-competitive environment. However, the falling prices have also had a positive fallout. "The declining prices of the drives have ensured that the payback period of the investment on these drives has shortened", says Frost and Sullivan Research Analyst Venkataraman Salavakkam.

"With shorter payback periods, users are able to justify the capital expenditure on these products". The growing awareness of the financial benefits of energy conservation is increasingly driving the replacement of power-hungry HVAC systems with energy-efficient systems, which incorporate variable frequency drives that increase efficiency levels.

To sustain this momentum, participants could also offer value-added services, as they can often sway purchase decisions in their favour in this highly competitive market. They can ensure customer loyalty by developing a strong, responsive and agile after-sales service network that will ensure that customers' after-sales requirements are met. This move will also bring in substantial service revenue. In fact, while the AC and servo drives segments are the biggest revenue generators, the DC segment mainly relies on maintenance and repair orders to sustain itself.

The sales of electric drives are likely to be buoyed by the products' ease of use. The improvements in technology have eliminated the need for operators to have excellent technical expertise or an understanding of the machines and processes. "The control panel of the drives is user friendly and embedded with a range of features", notes Venkataraman. "This ease of use has converted them to simple devices and has encouraged OEMs and mechanical contractors to use the drives in HVAC systems".

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