In the AIA Canada’s latest Outlook Study —“Outlook 2020: A Resilient Industry” — authors highlight e-commerce growth as one of the largest shifts in the aftermarket through the pandemic.
The Automotive Industries Association of Canada, working with Ernst & Young LLC, provides latest comprehensive review of Canada’s automotive aftermarket, providing insights into aftermarket demand, emerging channels, employment, and challenges.
The 100-page Outlook Study details many of the forces affecting the aftermarket now and in the future. Canada’s aftermarket generated an estimated total of $38.8b in GDP in 2019, with more than $10B in product sales, based on estimates from 2017 and an annual growth rate of more than 2%.
Estimating aftermarket e-commerce sales in Canada to reach $4.9 billion in 2020, the report lays out a double-edged sword of sorts:
“Over the short to medium term, e-tailing may help aftermarket businesses cater to the DIY customer segment. Moreover, e-tailing provides a platform for engaging with customers and helping guide them along the path to purchases. An online presence also adds additional credibility and trust while enhancing businesses’ brand awareness. On the flip side, the growing popularity of e-commerce also increases competitive pricing pressures on traditional aftermarket businesses. With a growing number of consumers expected to use digital channels for greater value and price transparency, some aftermarket retailers and workshops may experience diminished profitability.”
The report is replete with details tables and graphs as well as strong executive overviews.
The report also calls attention to the economic impact of the pandemic. And while government programs have sought to soften the blow of these manifold impacts, Canadians at large seem to be looking at these supports with a long-term, careful attitude:
“Recent data have shown a nearly 14% reduction in household final consumption expenditure in the second quarter of 2020 relative to the first quarter. In the context of aftermarket demand, this means consumers may grow more value oriented – affordability may become a priority.”
And certainly, while this may easily be seen to affect all consumers and provide some downward pressure on pricing by existing channel customers, it may also drive customers to cross channels, from OES to IAM, in their hunt for greater value.
Interestingly, the study draws on the experience of China’s domestic market.
“Major aftermarket players in China are expected to consolidate cash-strapped garages and service centres in order to provide consumers with a seamless online-to-offline experience. Over the longer term, as technological innovation continues, the online service model may increase customer involvement in decisions regarding aftermarket products and services. Customers may be able to conveniently request multiple cost estimates online from different workshops and decide where to seek services based on quality, convenience, and price.”
Overall, the report paints a positive outlook for the industry but one that is not without its challenges.
Case in point is the oft-quoted impact of electric vehicles, with their reduced parts count and generally-accepted reduction in maintenance requirements:
“While the rise of EVs is expected to disrupt the traditional aftermarket value chain, significant impacts to aftermarket businesses will only be realized as ICEVs are scrapped and replaced by EVs. According to UBS, the decline in total aftermarket revenue attributable to EVs will most likely be limited to around 1% by 2025.”