Heat Pump Makers Woo Contractors in Effort to Spur US Sales

(Bloomberg) -- When Miranda Sherman’s gas furnace suddenly died during a recent cold snap, she did what most Americans would do: She searched for “furnace won’t ignite” on Google, realized the machine was beyond repair and started calling contractors first thing in the morning.

Over the next few days, Sherman, a marketing executive in Beltsville, Maryland, took estimates from three local contractors. All three pitched her on a range of gas furnace replacements, costing between $9,000 and $12,000. But no one offered a heat pump, even though those devices have been around for decades, reduce homeowners’ utility bills, save carbon from being released into the atmosphere and now come with a federal cash incentive: a 30% tax credit, up to a $2,000 cap, in the recent Inflation Reduction Act.

So Sherman ended up buying an $8,300 Armstrong Air gas furnace. She’s happy with her decision, especially since she was able to claim a $400 rebate from her gas company. But had she been aware of the tax credit and that the new breed of heat pumps can work in very cold weather, she might have made a different choice.

“Knowing that now, I’m feeling a little bit of a sting,” she said. “But it wasn’t presented to me, and I didn’t think to go after it.”

Sherman’s story suggests there’s a better way of boosting heat pump sales, which many manufacturers are now trying: marketing to the contractors.

The Biden administration is doing what it can to get consumers to buy more heat pumps, offering not only the federal tax credit but also launching an accelerator to spur manufacturing and supporting state-run rebates that will be worth as much as $8,000 per household. But there aren’t nearly as many government incentives to win over contractors, who are in a position to directly influence consumers’ decisions on their HVAC systems.

Splashy marketing campaigns may increase consumer awareness of heat pumps, but that only goes so far because very few consumers want to replace their heating and cooling equipment until, like Sherman, they have to. 

“The HVAC products you have in your home, that’s not something people think about very much,” said Dave Calabrese, senior vice president of government affairs at Daikin US Corp, one of the largest global heat pump makers. “That’s why appliance makers make refrigerators stainless steel and washers and dryers in crazy colors. But HVAC? Nobody thinks about that.”

But when consumers are in buy-now mode, contractors are perfectly positioned to make the pitch — provided they’re educated themselves, said Gary Bedard, president of home comfort solutions at Lennox. “Homeowners aren’t going to have an enormous amount of knowledge,” he said. “But they’ll seek out knowledge, usually through their contractors. So we focus a lot of effort on educating contractors.”

Making contractors the messengers

Those kinds of efforts could pay off handsomely. In a recent study by Atomik Research, commissioned by HVAC equipment maker Midea, 87% of contractors said that, after learning more about heat pumps, they would be more likely to consider installing them in their own homes.

That’s one reason that Midea opened in February its first HVAC showroom and distribution center in Queens in New York City, providing a place for professionals and consumers to see the latest in heat pump technology up close, including the company’s new cold-climate model.

The company has made contractors aware of the showroom by posting about it on platforms like LinkedIn, talking about it at trade shows and industry events, and relying on word of mouth, said Wenqing Zhang, CEO of Ai-Midea Air Conditioning.

Meanwhile, LG Electronics USA is working with the University of Alaska Fairbanks to test its heat pumps and prove the devices work well in extremely cold weather — debunking a longstanding myth that many industry players say has hurt sales in places like New England. Another project has teamed up LG with the New York State Energy Research and Development Authority to test a heat pump device that provides hot water for radiant heating in big buildings.

Those types of partnerships offer a powerful proof of concept, bolstering the technology’s credibility “so it’s not just manufacturers saying, ‘We can do this,’” said Steve Scarbrough, senior vice president and general manager of LG’s air conditioning technologies division. “It’s getting rigorous, third-party documentation.”

Similarly, Mitsubishi Electric Trane HVAC US has created a suite of service and installation classes for its network of more than 5,000 program contractors, who have been trained to make the company’s heat pumps “their first offering,” said Mark Kuntz, the company’s chief executive. Included in those sessions are lessons on how to easily tell customers about the tax credit available in the climate bill, he said.

Daikin is opening an education center in California and has a giant training center in Houston for its contractors. Lennox meets with between 2,500 to 3,000 of its contractor customers at different locations across North America to “educate them on the current trends, product lines that are changing, and things that are happening with consumers,” said Bedard.

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Midea posts about heat pumps on social media, including Facebook, LinkedIn, and YouTube, in an effort to trigger discussions among contractors.

All those efforts can make a real difference on the way contractors view heat pumps and talk about them to their customers, said Barry Granger, owner of ATS Mechanical, an HVAC contractor in Cypress, Texas.

Granger has been a trained, certified Mitsubishi heat pump installer for 21 years, but he says plenty of his competitors simply aren’t interested. “They just want to do what’s quick and easy, take the path of least resistance, and work on what they know,” he said.

Making matters worse, veteran contractors tend to pass information down to the next generation of apprentices, which is how negative stereotypes of equipment like heat pumps can spread, Granger said.

Homeowners like heat pumps, too — once they know about them. In 2023, the devices outsold natural gas furnaces in the US for the second straight year, by a tally of 3.6 million to 3 million, according to data published Feb. 9 from the Air-Conditioning, Heating, and Refrigeration Institute. Still, only 13% of households in the US had a heat pump in 2020, the Energy Information Administration said.

“If you can explain it to homeowners properly, nine times out of 10 they’ll buy a heat pump,” Granger said. “But they’re not being guided. They’re just being told no.”

One of the biggest obstacles that contractors will face in selling a heat pump to consumers is the name itself. “Heat pump” doesn’t accurately reflect what the devices do, potentially confusing people in hot climates who think the boxes only generate heat.

“I wish we could’ve come up with a better name,” LG’s Scarbrough said. “I’ve challenged our folks domestically and abroad to try to find something that’s more relatable to the customer. People hear ‘heat pump’ and they don’t think about the cooling side.”

To Jayme Maultasch, a managing director at creative agency DNY, heat pumps may seem unexciting to the average consumer, but they come with “relatively sexy benefits,” like helping fight the climate crisis and making homes more efficient.

“I think everything can be marketed, but you need a human insight,” Maultasch said. “I could see a conversation around, ‘Your next furnace shouldn’t be a furnace,’ or, ‘Your next AC shouldn’t be an AC.’ The fact that it’s a heat pump may be the least interesting part of a heat pump.”

©2024 Bloomberg L.P.