Aftermarket businesses continue to bounce back from the effects of the economic shutdowns, but still harbour concerns over future effects, says the latest COVID-19 business impact survey by the Automotive Industries Association of Canada.
Overall, the outlook for aftermarket business in Canada had improved dramatically.
Decrease in revenue was immediate when the pandemic related closures started in March (77%) reaching its
peak in April (95%). Numbers stayed stable in May to August (84% to 73%) dropping down to a 66% in September
and 63% to October.
Meanwhile, businesses reporting increase in revenue has increased steadily from March (9%) to October (20%). September (22%) reported the highest gains by aftermarket businesses.
The majority of aftermarket businesses (82%) report that they are ‘very to slightly disrupted’, while no businesses (0%) are completely shutdown. A further breakdown of the disrupted numbers reveals that only 28% of businesses are ‘very disrupted’, whereas 54% of businesses are ‘slightly disrupted’. 18% of businesses report that they are ‘functioning normally’.
The most striking difference in the number of businesses who report being ‘very disrupted’. In survey #1 (April/May 2020) 61% of businesses were ‘very disrupted’. This number fell sharply in survey #2 (June 2020) by almost half (34%). Continuing in the same trend, only 28% of aftermarket businesses report being ‘very disrupted’ in survey #3 (September 2020).
Another major difference noticed between the time periods observed is the steady increase of businesses that are ‘functioning normally’ –growing from 4% in survey #1 to 8% in survey #2, and sitting at a healthy 18% in survey #3.
Accessing government relief
The third survey in the series conducted since April, had a special focus on the Canada Emergency Wage Subsidy (CEWS)–announced in March and extended and adjusted several times over the succeeding months–with some 57% of aftermarket businesses responding stating that they did take advantage of the relief program when introduced in March, while a further 13% stating that they would have but did not qualify. One in five respondents (20%) said they did not apply for the program.
There are a number of programs being offered beyond the wage subsidy and 50% of businesses indicate that they are still in need of financial help from the government and intend to apply again. The businesses who intend to apply also report being ‘slightly disrupted’ (55%), ‘very disrupted’ (32%) and ‘functioning normally’ (13%).
Aftermarket businesses that applied for CEWS also report applying for other financial relief measures such as Canada Emergency Business Account (57%), Canada Emergency Response Benefit (18%), Canada Emergency Rent Assistance Program (5%), and other non-government financial institutions (8%).
Only 21% of businesses applied solely for CEWS.
On 23rd September 2020, in the Speech from the Throne, the government announced the extension of the federal Canada Emergency Wage Subsidy (CEWS) into June 2021. The eligibility criteria was also amended to enable more small to medium businesses to qualify.
It is interesting to note that of those businesses (13%) that wanted to apply for CEWS in March 2020 but were unable to because they were not eligible as of the survey period Sept. 10 and 30, 46% were still unable to qualify for CEWS. A further 32% of respondents reported that they planned on applying going forward indicating that the new eligibility requirements are favourable to their business. On the other hand, 14% of businesses qualify for the next round of CEWS applications but no longer wish to apply even though they meet eligibility requirements.
While optimism continues, the outlook for return to normal is less optimistic than in the prior survey.
survey in June 2020. Only 35% of respondents expect to see a recovery, compared to 56% in the last survey. Similarly, 17% of businesses forecast that ‘things willget worse’, whereas only 12% had reported feeling that way in the previous survey.
This shift is understandable in the context of the fall pandemic surge with the prospect of tighter economic restrictions, albeit localized as health officials seek to get outbreaks under control.
Of a broad concern is the ongoing and worsening supply chain disruptions:
- 75% report delays in obtaining vehicle parts, etc.
- 63% report disruptions experienced by suppliers.
- 12% report they are unable to offer their products/services goods due to disrupted supply chains.
Altogether, these add up to an aftermarket that is reporting improved performance, but concerns about the future persist.
Key among this is the impact of the second wave (69%), but joined by economic fallout at the global, national, and provincial levels (61%), and the understandable concerns over managing stress (their own and staff), at 59%.
The full survey results can be downloaded at the AIA’s COVID-19 resource page.