High HVAC Prices Are Inviting New Competition
Several lower-cost systems are emerging to challenge the industry’s traditional model
The HVAC industry is being asked a question it hasn’t faced in a long time: Did equipment prices rise because they had to — or because they could?
A proposed class-action lawsuit filed in March puts that question front and center, alleging that some of the largest OEMs — companies that collectively control more than 90% of the U.S. market — coordinated price increases dating back to 2020. The complaint claims these manufacturers engaged in price fixing in order to push costs higher than market conditions alone would justify.
Those are serious allegations. And to be clear, they remain allegations. Courts draw a sharp line between legal “conscious parallelism” and illegal coordination. Regardless of how the case plays out, the lawsuit is tapping into something contractors already know: equipment got expensive, fast — and prices haven’t come back down.
Manufacturers have offered real explanations for rising costs, including supply chain disruptions, commodity inflation, new SEER2 and DOE regulations, as well as the AIM Act and A2L transition. These are all valid reasons, but the lawsuit argues that those factors don’t fully explain the scale of price increases. Either way, contractors are dealing with the consequences: higher quotes and more homeowners choosing to repair instead of replace.
But things are starting to get interesting. As demand for residential equipment has softened and prices remain high, new competitors are stepping in with a different approach — not just improving equipment, but rethinking the entire cost structure.
Take Merino Energy, a startup that introduced the Mono system — a through-the-wall heat pump that plugs into a standard outlet and installs in about an hour. The company is advertising a flat price of around $3,800 installed — a fraction of most traditional ducted systems. What’s even more interesting is where Merino came from. Its founders are alumni of two other startups — Quilt and Gradient — that are also working to fundamentally rethink how HVAC systems are designed, priced, and sold.
Gradient, for example, introduced a window-mounted heat pump several years ago — also for about $3,800 — that installs in under 30 minutes, runs on a standard 120V outlet, and avoids ductwork entirely — opening the door for renters and multifamily buildings. Quilt redesigned the ductless mini split with a sleek, tech-forward system, initially pricing it at a flat rate of about $6,500 per zone.
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Even a few established OEMs are moving in a similar direction. Midea now offers a packaged window heat pump that installs in under an hour, requires no electrical panel upgrades, and retails for about $3,000 through local distributors.
Merino sits somewhere in between — eliminating the outdoor unit and simplifying installation to reduce both labor and total project cost. Unlike a traditional PTAC, the Mono doesn’t extend fully through the wall; instead, it requires just two small vent openings behind the unit for intake and exhaust. According to the company, it can be installed on virtually any exterior wall without line sets, brazing, or refrigerant charging, and can heat and cool spaces up to 350 square feet.
None of these are direct, whole-home replacements for traditional ducted systems, but that’s the point. For decades, HVAC innovation has been largely incremental: higher efficiency ratings, improved compressors, new refrigerants. Important advances, but not necessarily ones that lower the total cost of ownership. These newer entrants are asking different questions entirely: what if HVAC didn’t require a full day (or more) of installation labor? What if it didn’t depend on custom ductwork or electrical upgrades? What if the upfront cost barrier was dramatically lower?
By simplifying installation — often the single biggest cost driver — they’re targeting the part of the equation OEMs have historically left untouched.
Just as important, these systems rethink how homes are conditioned. Rather than treating the house as a single, uniform space, they’re designed to heat or cool individual rooms or zones. That can significantly improve energy efficiency, allowing homeowners to target only the spaces they’re actively using and avoid the cost of conditioning an entire home. In that sense, these products aren’t just reducing installation complexity — they’re also delivering more personalized comfort.
No one knows how the lawsuit against the OEMs will ultimately play out. But one thing is already clear: equipment prices have reached a level where customers may be more open to alternatives — especially ones that are faster to install, less expensive, and better aligned with how people actually use their homes.
