Air conditioning is a great convenience, especially in some parts of the world. It’s also not cheap.
Between the cost of the average AC unit, the installation costs, and the long-term cost of using and maintaining the unit, there’s a reason AC is considered a luxury.
AC units cost a lot to manufacture, especially for larger units. The cost of the basic materials involved in the production has always been on a steady incline as well. Installing an air conditioner almost always requires professional services, which can add to the final price. Buying an AC is also a long-term investment, and most people expect long warranty periods and advanced customer service.
1. High Manufacturing Costs
An air conditioner is a complex device. Heating the air is always much simpler than removing heat from it.
This requires advanced systems controlled by electronic components. All of this takes a lot of money to produce and put together in a factory.
And that’s without factoring in things like making the air conditioner more energy-efficient, durable, or any other positive factors that customers are always on the lookout for.
Producing an air conditioner is expensive by default, but making a good one is even costlier.
It may be possible to repurpose some parts of a production facility for newer, more advanced models.
But that’s not always the case, and manufacturers may sometimes have to invest in entirely new factories when developing a new model.
2. Production Costs Don’t Scale Linearly
AC units come in various sizes. Production costs tend to scale on a curve.
The larger an air conditioner gets, the more expensive it becomes to manufacture. Increasing the size of an AC unit two times might result in manufacturing costs that are 3-4 times higher.
Companies also have to adapt to the popularity of different units on the market. Smaller air conditioners tend to sell better because they have a wider market coverage.
Larger units are more difficult to sell. This makes them a particularly risky investment for their manufacturers when combined with their higher production costs.
3. High Cost of Materials
Various expensive materials are involved in the production of an air conditioner. Galvanized sheet metal and structural steel are two of the main examples.
Manufacturers must also use high-grade plastics and various other materials that may be more difficult to source.
Some of those materials must be handled in ways that add even more to the price. Punch pressing machines are not cheap. If the company decides to outsource this part of its production, this can add even more to the price.
If you look at the historic trends for many of these materials, you’ll find that they have been steadily going up in price over the years. During some periods, the price increases have even outpaced inflation.
4. Manufacturers Have to Comply with Many Regulations
Air conditioner manufacturers frequently find themselves under the crosshairs of government regulators. They have to comply with different requirements related to protecting the environment.
New regulations keep coming out every year, making things more difficult for all companies on the market.
In some cases, changes in legislation might make some models unfit for the market. This can result in heavy losses for manufacturers and retailers, which in turn drives up the price of future models released by affected companies.
Governments sometimes try to promote buying AC units that are better for the environment. For example, units that meet certain criteria for energy efficiency may be eligible for a $300 tax credit.
This puts even more pressure on manufacturers to release models that comply with these regulations. Models that don’t meet these standards often get ignored by potential buyers.
5. Advanced Features Cost a Lot to Develop
It’s not just about how well an air conditioner can cool down the air. Buyers expect various extra features, and all of them take time to develop and implement.
Reduced levels, capturing dust and other particles, rapid cooling – all of these used to be exclusive features available only in high-end models. But today they’re the baseline for many buyers.
Smart features are another major contributing factor here. Having an AC unit that can connect to the Internet and receive input from your smartphone may seem straightforward, but it’s one of the most complicated aspects of the development of modern units.
6. Installation Requires Qualified Specialists
Buying an air conditioner is only one part of the equation. It must also be installed properly, which can cost a good deal of money itself.
AC installers must bring a good combination of construction skills and knowledge of electronics. They also have to work under difficult conditions most of the time.
Central AC systems are particularly expensive, with installation costs of around $5,000 in many cases.
Installing an AC unit yourself is often out of the question. Even when it’s not too risky due to factors like height, it could void the unit’s warranty.
Some companies may include the installation in the standard price. But that doesn’t mean it’s free – it only means that the AC unit costs more by default.
7. Warranty and Long-Term Service
Given the challenging installation process, nobody wants to buy an air conditioner that will have to be replaced in a couple of years. Most consumers expect a long warranty period and advanced customer service.
This is often factored into the base price by the manufacturer. Many companies on the AC market offer attractive features like lifetime warranty and even free maintenance for some aspects of their units.
But that’s another example of a hidden cost. The reason manufacturers can afford to offer these conditions in the first place is usually because they charge a high price for the air conditioner unit itself.
Air conditioners are expensive to manufacture, especially models with advanced modern features like smart controls and particle filtration.
They are also designed to last for many years, with corresponding services provided by the manufacturer.
All of this raises the price of the final product by a large margin. That’s why practically all buyers treat the purchase of an AC unit as a long-term investment, and they expect to get something matching in return.