From the Magazine: Navigating market shifts

The economic climate is having an impact on how Canadians spend money. Here’s how shops can manage the challenges

The mechanical automotive service market in Canada faced significant challenges in 2024 and appears poised for continued turbulence as we head into 2025.

As geopolitical, environmental and economic uncertainties continue to unfold, consumer sentiment and purchasing behaviours have become increasingly difficult to predict.

The mechanical aftermarket service sector is feeling the impact as the broader economic climate influences consumer spending habits. Over the past few quarters, a noticeable slowdown has taken hold.

Many consumers are tightening their discretionary spending due to the effects of higher interest rates, recent mortgage renewals and the lingering impact of COVID-driven inflation. From rising grocery prices to the increased cost of consumer goods, household budgets have become strained, directly affecting the demand for vehicle maintenance and repairs.

The evolution of industry challenges

Before this recent downturn, the industry was already grappling with inflationary cost pressures, labour shortages and shrinking profitability.

Rising input costs made it increasingly difficult for shops to pass on expenses to consumers, as pricing elasticity became more constrained. While economic activity was robust and car counts remained high, shop owners struggled with staffing shortages and fierce competition for skilled talent.

Now, as the post-COVID economic landscape shifts once again, a new set of challenges is emerging.

The impacts of disinflation and slowing demand

With the economy entering a period of disinflation and slowing consumer demand, the aftermarket service sector must prepare for a reduction in kilometres driven, lower car counts and, ultimately, declining revenue streams. As vehicle owners become more cautious with their spending, repair and maintenance services may no longer be a priority, forcing independent shops to rethink their approach.

A common concern among shop owners experiencing slowdowns is the perceived inability to invest in marketing and digital strategies. However, when service bays are not at full capacity, market share acquisition becomes essential. Now more than ever, investing in brand recognition and customer retention strategies is crucial for long-term sustainability.

Digital marketing, customer engagement programs, and targeted advertising can help shops capture new business and maintain visibility in a competitive landscape.

As geopolitical, environmental and economic uncertainties continue to unfold, consumer sentiment and purchasing behaviours have become increasingly difficult to predict.

Competing against dealerships

As interest rates begin to fall, dealerships are regaining their ability to offer attractive leasing and financing options.

Inventory levels are rebounding and dealer incentives, such as discounts and financing promotions, are returning. This shift directly challenges the mechanical aftermarket, as new vehicle sales gain momentum and potentially slow the increasing average age of vehicles in service.

Over the past few years, supply chain disruptions and affordability concerns kept many consumers in older vehicles, benefiting independent service providers. However, as dealerships fight to reclaim lost ground, aftermarket businesses must reinforce their value proposition.

Enhancing digital strategies and customer retention

To combat these market pressures, aftermarket automotive service providers must prioritize digital strategies, customer engagement and value-driven service offerings. Extending vehicle lifespans through preventive maintenance programs, educating consumers on cost-effective repair options and enhancing digital outreach can help retain customers who may be swayed by dealer promotions.

One looming concern is the potential tightening of credit conditions, which could lead to a more significant economic downturn. In such a scenario, consumers may delay both new car purchases and non-essential vehicle maintenance, further straining aftermarket businesses. This makes it even more critical for shops to proactively secure customer loyalty and ensure that their service offerings remain indispensable.

The road ahead

The mechanical aftermarket service sector must adapt to shifting economic conditions with resilience and strategic planning. By embracing digital innovation, strengthening customer relationships and positioning themselves as trusted partners in vehicle maintenance, independent shops can navigate this evolving landscape and emerge stronger despite industry headwinds.

The key to long-term success lies in agility, forward-thinking investments and a commitment to delivering value in an increasingly competitive marketplace.

Zakari Krieger is the Fix Network, Canadian vice president of Prime CarCare, responsible for the Canadian retail business, encompassing the Speedy Auto Service and Novus Auto Glass business lines

This article originally appeared in the April issue of CARS magazine