Brightening finances has Canadian industry connecting with more sales

Canada’s aging vehicle fleet is posting positive prospects for the nation’s aftermarket amid a steadily improving economic climate.

With a vehicle population of 22.2 million, more than half of the country’s cars and light trucks have been on the road for at least nine years, “and that represents an aftermarket sweet spot,” says Marc Brazeau, president of the Automotive Industries Association (AIA) of Canada, which recently released its eagerly awaited 2012 Outlook Study.

“The members look forward to the study,” and the detailed biennial document “serves as a welcome planning tool,” Brazeau points out.

“Though recovering from an economic slump always takes time, being aware of the factors that influence growth potential, like those outlined in this study, can help members of the aftermarket stay on the right track,” he notes. “By examining the State of the Industry over the last two years and making calculated projections of future growth, this report paints an accurate picture of the industry that helps members in their business planning activities.”

Gearing up to enhance the current service capacity for pickups, crossovers and SUVs is being discussed around numerous company conference tables. “Next year, over 50 percent of the vehicles on the road will be light trucks,” Brazeau says. “Light trucks are traditionally more expensive to maintain and repair, and that too is an opportunity for the Canadian aftermarket.”

The Outlook Study reports that the industry is beginning to bounce back from the 2008 economic downturn, both in terms of customer spending and obtaining gainful employment. Overall joblessness rates have since decreased, which bodes well for the aftermarket in that vehicle ownership and usage correlate with a person’s ability to find a job.

In addition, the study indicates that a surge in new-car sales prior to 2008 “will define the distribution of Canadian vehicles in the older-age segments in the coming years to the benefit of the aftermarket industry.”

Canada’s aftermarket is estimated to be worth $19.4 billion. If current growth rates continue it is expected to increase by 3.5 percent annually, reaching $22.3 billion in 2015. The aftermarket employs 420,000 people at present, accounting for half of the employment throughout the nation’s collective automotive industry. (See related article on Canada's regulators aim to align with U.S. auto standards.)

Over the past decade, the average-miles-driven-per-year rate has been rising at an annual clip of 1 percent, netting a 2012 odometer tick of 13,000 miles for each vehicle. The U.S. annual average-per-driver mileage stands at 13,476 miles, according to the Federal Highway Administration.

But those Canadian miles tend to be a rougher ride.

Faster fleet turnover

As the world’s second-largest nation in area after Russia, Canada has the lowest population density on Earth. And although much of the populace is clustered within 100 miles of the U.S. border, long trips on rugged rural roadways are commonplace.

If your locality has ever experienced the encroachment of an Alberta Clipper weather system, such onslaughts illustrate what can happen under these types of brutal climate conditions. The fallout from Canada’s legendary big winter snowfalls and bitter cold temperatures delivers substantial vehicle abuse, including the punishment dished out by component-corroding road salt, rust and suspension-busting potholes.

“Vehicles are retired at a faster rate in Canada; the fleet turns over quicker,” Brazeau tells Aftermarket Business World. Motorists still being buffeted by diminished personal finances, however, remain reluctant to visit showroom floors for a replacement.

“There are a number of vehicles that have reached the prime aftermarket age, which brings opportunities for the aftermarket,” says Brazeau. “Ten years ago a vehicle was retired from usage when it reached 143,000 miles. Today it is 198,000 miles, which is a 55,000-mile increase.”

The average amount spent on maintaining and repairing a vehicle in Canada in 2011 was $874, with British Columbia ($993) and Alberta ($971) netting the highest per-vehicle sales tickets.

“The U.S. is living through some of the same challenges and opportunities,” Brazeau says, noting that American-based vendors venturing north of the border are in position to glean additional revenues.

Addressing imports

“Improved vehicle reliability, the ratio of do-it-yourself versus do-it-for-me repairs, and the growing number of imported vehicles in the Canadian market will have profound impacts on the industry moving forward,” according to Brazeau.

As in the U.S., Canada considers Ford, General Motors and Chrysler to be domestic nameplates. Overseas OEMs such as Toyota and Nissan are steadily increasing their market penetration.

“There’s a need for the aftermarket industry to adapt to the changing vehicle habits,” Brazeau says. “It will have an impact on the supply chain, which will have to adapt to providing more foreign parts to meet the growing fleet of foreign vehicles.”

The Outlook Study additionally observes that the in-house service departments of these upstart immigrants are adept at encouraging follow-up visits at the expense of other repairers.

“The OE car dealers who sell foreign vehicles have done a better job of retaining their customers after the warranty period,” says Brazeau, adding that “the quality of foreign vehicles has traditionally been above the standard of domestic vehicles.”

And Canada’s aftermarket businesses are increasingly intent on not being left behind in the dust.

“We see a shift – and will continue to see a shift – where aftermarket service providers are paying more attention and looking to attract more of these vehicle owners into their shops. They are ensuring that are stocking, and have access to, the correct foreign parts,” Brazeau says.

“In many cases the cost of repairing a foreign vehicle is higher than repairing a domestic vehicle,” he points out, “so that means that it is an opportunity for the independent aftermarket.”

“While the aftermarket industry has enjoyed somewhat of a resurgence over the past two years,” according to the Outlook Study, “ it is clear that this dynamic industry will continue to be affected by changes in vehicle technology, regional trends, consumer demographics and vehicle maintenance habits.”

The report goes on to urge that “aftermarket players must be prepared for these changes in order to maintain their competitive advantage and better serve their customers.”

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