New AIA study measures COVID-19 impact on aftermarket

COVID-19 has disrupted the Canadian economy, and, inevitably, the automotive aftermarket, a recent study shows.

Published every two years, the Automotive Industries Association (AIA) of Canada’s 2020 Outlook Study provides an in-depth examination of the state of the Canadian automotive aftermarket, and presents an analysis focused on forecasts and trends that will likely impact the industry in the future.

New this year, AIA Canada is updating the Outlook Study to reflect the new realities of the industry, including unforeseen disruptors like the COVID-19 pandemic, new technologies, emerging markets, and changing consumer preferences.

Key findings: COVID-19 as a disruptor

Although the aftermarket industry has remained resilient in even the toughest economical situations, the supply and demand for aftermarket products and services has changed.

With more people staying home, for example, vehicles are being used less, and as such, less kilometers are being driven. In fact, driving to and from workplace accounted for nearly 19% of total vehicle kilometres driven prior to the pandemic.

The spending habits of many Canadians have also changed, and because of that, the purchases of aftermarket products and services also stand to be reevaluated, as purchases are weighed against financial means.

According to the report, it is estimated that total kilometers driven in 2020 may slip to approximately 240 billion kilometers, down 30% relative to the year before. The reduction is expected to curtail demand for scheduled maintenance.

As a result of COVID-19 and new concepts, like physical distancing, many industries are adapting to the new normal, and listing their services online. As such, automotive consumers, too, are becoming more comfortable shopping online, from the safety and convenience of their own homes.

Fewer collisions resulting from lower vehicle density may also limit the revenue potential of the collision sector.

What does the future hold?

Although the current COVID-19 pandemic is also affecting vehicle sales, an analysis of historical data shows little fluctuations in the number of vehicles in operation during economic downturns. The total number of vehicles in operation are forecasted to reach 29.8 million in 2020.

Total revenue for core aftermarket businesses is estimated to have reached $32.2 billion in 2019. Analysis of financial performance data shows that aftermarket businesses in Canada with sales between $30,000 to $20 million averaged a profit margin of 5.2% in 2018.

Those interested in reading a copy of the full 2020 Outlook Study can click HERE.