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How Canada’s economy will impact…
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A sense of normalcy is returning to the Canadian market and the automotive sector stands to benefit, according to an industry observer.

Speaking at AIA Canada’s National Conference in April, Todd Campau gave an optimistic yet cautious outlook on the Canadian economy and its impact on the automotive aftermarket sector.

The aftermarket practice lead at S&P Global Mobility noted that Canada is gradually emerging from the challenges brought on by the pandemic.

“In general, Canada is starting to come out of a lot of the pandemic-era issues. It’s not back to normal. But we’re starting to see normal factors are beginning to drive the business again,” Campau said.

The supply chain is showing signs of recovery. While issues such as unemployment persist, Campau suggested that Canada might be slightly ahead of the U.S. in overcoming these economic hurdles.

“We’re starting to see inflation in Canada softening. We’re starting to see the GDP return part of normal. All in all, I think it’s good,” he added.

Canada has seen two interest rate cuts recently, dropping the lending rate to 4.5 per cent. The improving economic conditions have positive implications for the aftermarket sector but Campau warned that the labour market continues to be tight.

“But it seems like we’re getting back towards normal behaviour. And so I think that’s good for the aftermarket,” Campau said.

However, he acknowledged that inflation and high costs remain ongoing concerns. That said, these factors can benefit the aftermarket by delaying new vehicle purchases, leading consumers to repair their existing vehicles.

“If they’re delayed in vehicle purchases, people have to repair the vehicles in their driveway now,” Campau explained. “We are happy to help with that as the aftermarket.”

Turning to new vehicle sales in Canada, Campau observed a slow but steady progress toward pre-pandemic levels. “We’re not back to the pre-2020 models, but we are moving in the right direction,” he said.

Campau expressed confidence that Canada could surpass the two million unit sales threshold again in three to four years. In a follow-up after the conference, he was what would be key factors to driving new vehicle sales back to a point not seen since 2017.

“I think it is the confluence of all the factors: More of a return to normal market drivers, lowering exchange rates, reduction in inflation and interest rate costs reducing,” he told Auto Service World. “I think all of those factors combined will serve as the catalyst for the return toward two million sales, potentially additional acceptance of EVs too and some lower cost options coming to market.

Campau doesn’t think pent-up demand will be a driving force behind increased sales, “but rather a return to a more ‘friendly’ economic environment for new vehicle sales.”

Yet, this recovery is not without its challenges.

“It has been a little bit slow in coming. This is not unique to Canada. This is the story across the board,” Campau noted during the session, referring to similar trends in the U.S.

Campau emphasized the delicate balance of factors that influence the aftermarket.

“One of the things that I think I personally learned is that it’s such a confluence of factors that drive the aftermarket. And maybe uniquely so because we repair the vehicle for its whole life cycle,” he said.

The current trajectory is promising, but the situation remains fragile, Campau warned. “If we see big inflation, if we see big unemployment happening again, if costs stay high, this could get muted.”

Image credit: Depositphotos.com

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