New vehicle sales in Canada hit a low point in 2022, continuing a downward trend since the COVID-19 pandemic started.
And while the supply shortage is easing, it’s slow. Plus, there is doubt over whether pent-up demand will carry through as prices increase along with the cost of borrowing.
So if we’re still several years off from normal vehicle sales, what does that mean for the aftermarket in six years’ time? If there isn’t a healthy supply of new vehicles, will there be enough business to keep the industry healthy?
“Three years of depressed new vehicle sales from 2020 through 2022 (and probably for the next few years) have some aftermarket analysts concerned,” Lang Marketing observed in a recent Aiftermarket iReport. “They fear that beginning in 2026 fewer vehicles in the repair-age sweet-spot (cars and light trucks 6 to 10 years old) will reduce aftermarket volume.”
But as the title of its analysis — Fewer Sweet-Spot Vehicles No Problem — suggests, it’s not worried. Lang Marketing sees a number of key factors fuelling an increase in aftermarket volume, rather than a decrease, even as there will be a shrinking number of vehicles six to 10 years old in the car parc.
The aftermarket sweet spot is generally seen as the six- to 10-year-old window. Wear and tear from the amount of travelling done by these vehicles sets them up to be in and out of the aftermarket with regularity.
“However, these factors are in flux,” Lang noted. “Cars and light trucks are being driven fewer miles per year, rolling up odometer miles at a slower pace than in the past. Accordingly, accumulated mileage by vehicle age is changing.”
As a result, combined with the increasing durability of original equipment parts in new vehicles, the boundaries of the repair-age sweet spot will shift and move higher over the next few years.
However, there will indeed be a reduced number of vehicles in the traditional sweet spot going forward. In the three years before the pandemic (2017-2019), Canada was averaging about 1.97 million new vehicles sold. In the last three years, Canada has average 1.59 million, including a low of 1.49 in 2022, a figure not seen since 2009.
That means there were about 400,000 fewer vehicles per year on Canada’s roads during the pandemic That’s a loss of about 1.2 million vehicles that won’t be part of the aftermarket sweet spot in the coming years.
That’s why Lang sees a shift in the boundaries of the traditional sweet spot, reflecting changes in the age mix of vehicles and their annual miles and accumulated mileage.
And most sectors of the aftermarket will continue to flourish.
“While some aftermarket products, such as accessories, could suffer reductions in annual volume from the decline of new vehicle sales, replacement parts (and the purchased service required for diagnosis and installation) will benefit from a VIO in which older cars and light trucks are driven more yearly miles and accumulate higher mileage,” Lang said.