Last call for R-410A equipment? Maybe not

Second-quarter revenues were impressive for several major HVAC manufacturers. Compared with a year ago, Carrier’s second-quarter sales rose 12% to $6.7 billion; Trane’s revenues rose 13% to $5.3 billion; and Lennox’s core revenues rose 8% to $1.45 billion. Understandably, the CEOs of these companies were enthusiastic when they gave these numbers on their earnings conference calls.

Carrier CEO David Gitlin commented that Q2 was another strong quarter for the company and “Importantly, our North American (residential) business returned to year-over-year volume growth. Given strong orders and low inventory levels, we are now positioned for a strong second half of the year.” He added that looking ahead to 2025, Carrier is poised for “strong growth across a significant portion of its portfolio.”

For most OEMs, the 2025 portfolio will include a wide range of new HVAC equipment using an A2L refrigerant such as R-32 or R-454B. But for the rest of 2024, it looks like there will still be quite a bit of demand for R-410A equipment. That was anticipated, said Alok Maskara, Lennox CEO, who noted that the company had always expected to sell more R-410A units than R-454B this year.

“Quite frankly, we have to be careful about whether there will be a significant amount of pre-sales of R-410A products? And if there is demand, do manufacturers have the capacity and the ability to make additional R-410A products?” he said. “That’s the kind of uncertainty that worries us right now.”

Still, Lennox has not yet made a final call on R-410A products, Maskara said. “We are working with our distribution partners and dealers to really understand what their demand requirements are and to align our production with them…we want to remain flexible to give our dealers and distributors what they want. So for us, right now, our production is R-410A and we will continue to do so until the dealers want it, until the law allows us to do so.”

Like Lennox, Trane has also not started selling R-454B units for residential applications. Both companies say they will launch in the second half of 2024.

“In terms of presales, we don’t anticipate a lot of presales in our residential business at the end of the year. We’ll see how it goes, but we’re not anticipating that right now,” said David Regnery, Trane CEO. “You just have to work on an excessively large schedule to make sure you can sell all of your product during the year, and we’re really focused on helping our independent wholesale distributors move their inventory appropriately.”

Regnery added that because of the way Trane’s business is designed, the company is still able to produce both R-454B and R-410A products.

“We have different model lines, which has meant a little bit more upfront cost, but we believe it will be worth the investment because we will be supplying R-410A components in the (residential) area for some time to make sure we can service our product throughout its useful life,” Regnery said.

Regarding the mix of R-410A and R-454B equipment this year, Gitlin noted that R-454B volumes will be lower than Carrier had previously forecast.

“We thought it might be closer to 20%. I think it’ll be less than 10%, maybe closer to 5% this year,” Gitlin said. “I don’t think many of our distributors and dealers are in a hurry to get R-454B. We’ve got our first units. We’re starting with new residential construction because they’re not going to want mixed development. But we think next year it’s probably closer to 80% R-454B, maybe a little more, but probably only about 5% this year.”

Carrier hasn’t yet issued a final call for orders for residential R-410A, but Gitlin said the company has asked distributors to let them know how much R-410A equipment they want by the end of the year. He added that Carrier’s goal is to have the right product at the right price when it’s needed. “I’m confident that if we continue to do the right thing by our customers, we’ll continue to see tremendous growth,” he said.