From the Magazine: Navigating a turbulent year ahead

In the face of persistent challenges ahead, parts distributors can help ASPs maintain and grow their business

Reflecting on the macroeconomic environment in 2024 and the outlook for 2025, the mechanical automotive aftermarket in Canada faced significant challenges in 2024 and appears poised for continued turbulence as we head into 2025.

At the start of 2024, mechanical retail service locations were performing well. Inflationary pressures were weaning and consumer confidence remained relatively steady, as reflected in the Consumer Price Index (CPI).

However, by the second quarter, disinflationary trends began to emerge as the Bank of Canada maintained tight monetary policy to combat the lingering effects of high inflation. Historically, the automotive aftermarket demonstrates an inverse relationship with economic conditions: In prosperous times, new vehicle sales increase, reducing the average vehicle age and lease/finance turnovers, which dampens aftermarket service revenue growth. However, this cycle has been atypical.

The sustained period of tight monetary policy and higher interest rates, compared to the past decade, presented a mixed landscape. While OEM sales showed signs of recovery, consumers grappled with the dual challenges of elevated vehicle prices stemming from inflation and increased borrowing costs. As consumer confidence waned, many found it difficult to bear the costs of non-discretionary vehicle maintenance.

Publicly traded companies in the aftermarket sector mirrored these struggles. For example, Monro, Inc., one of the largest aftermarket service chains in the U.S., reported a 6.4 per cent year-over-year revenue decline in its second quarter filings. Although the U.S. economic environment differs from Canada’s, it serves as a benchmark while highlighting unique Canadian complexities, including currency fluctuations, a weakening dollar and taxation pressures.

Jobbers must move beyond traditional priorities like fast delivery and competitive pricing.

The ripple effects of these economic challenges were felt across the Canadian aftermarket supply chain, from warehouse distributors to jobbers and automotive service providers (ASPs). Looking ahead to 2025, political uncertainty in Canada will likely continue to influence the sector. Key concerns include how the Canadian government navigates the economic landscape, the implications of U.S. trade tariffs and the ongoing weakness of the Canadian dollar.

While the U.S. Federal Reserve appears to be pausing its tightening monetary policy, Canadian consumers remain under strain. Economic indicators suggest Canada may ease monetary conditions, which could widen the bond yield disparity with the U.S., further weakening the Canadian dollar. For a sector reliant on imports from the U.S., this currency weakness will exacerbate cost pressures as auto parts move through the supply chain, ultimately affecting consumer purchasing power.

Despite these challenges, the automotive aftermarket remains a diverse and resilient industry. For jobbers, the path forward lies in fostering stronger partnerships with ASPs. As simple as it may sound, the focus must shift toward enabling service centers to navigate pricing pressures while enhancing performance. Key areas for collaboration include:

• Performance coaching and training: Equip ASPs with the tools and knowledge to improve efficiency and profitability.
• Customer experience enhancement: Help ASPs differentiate themselves by delivering superior service and creating loyalty among vehicle owners.
• Exploring untapped segments: Guide ASPs in unlocking profitable opportunities in areas like auto-glass and ADAS services.

From my experience — spanning jobber operations to overseeing multi-faceted auto service chains across the country — the narrative with ASPs must evolve. Jobbers must help ASPs drive customer experience, encourage investment, and embrace innovation. This includes adapting to the technological demands of modern vehicles and their owners.

The future will see a reduction in the number of service shops as the industry continues to consolidate and adapt to rising costs in training, personnel and overhead. Jobbers must move beyond traditional priorities like fast delivery and competitive pricing. Instead, they need to focus on value-added services that strengthen their relationships with ASPs, ensuring long-term success for both parties in an evolving market.

This may sound thin, but changing the narrative from revenue parts growth to building trust and owning the advisory relationship with your core ASPs is critical.

While the Canadian mechanical automotive aftermarket faces considerable headwinds, there are opportunities for growth and resilience. By embracing collaboration, innovation, and a forward-looking approach, stakeholders across the supply chain can navigate the challenges ahead and thrive in a rapidly changing environment.

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 January 2025 issue of Jobber News