Cost-cutting measures and easing interest rates are offering some financial relief for Canadians, according to the latest MNP Consumer Debt Index.

The index, which tracks perceptions of financial stability, has increased by four points from the previous quarter to reach 89, signalling growing optimism among Canadians regarding their personal finances.

On average, Canadians report having $155 more left over at the end of each month, with total monthly savings now averaging $937 — the highest figure in five years. Notably, the proportion of Canadians who say they are $200 or less away from insolvency has fallen to 42 per cent, the lowest since September 2018.

“While cost-saving behaviours and lower interest rates have positively impacted Canadians’ perceived financial well-being, a significant minority — close to four in 10 — still report being on the brink of insolvency, indicating they are struggling to make ends meet,” said Grant Bazian, president of MNP. “Still, financial pressure is easing, providing individuals with more flexibility to manage their debts and invest in their future.”

Impact of interest rates

Expectations around interest rates also appear to be improving. With the prospect of continued interest rate reductions, 24 per cent of Canadians — a three-point increase from last quarter — now feel better equipped to handle a one-percentage-point rate hike. Meanwhile, more Canadians are feeling optimistic about the future, with 31 per cent expecting their debt situation to improve within the next year, and fewer expecting it to worsen (12 per cent, a 4-point drop).

However, despite these positive trends, concerns remain. Almost half of Canadians (48 per cent) still express anxiety about their ability to repay debt, even in the face of declining interest rates. While slightly fewer Canadians say they would be in financial trouble if rates were to rise, more than half (54 per cent) remain worried about this possibility. Individuals sharing expenses, such as co-habitants (46 per cent) and bill-splitters (44 per cent), are among the most vulnerable to insolvency.

“Although inflation has eased and interest rates have fallen, many Canadians continue to feel the heavy burden of accumulated debt. Despite some relief, the difficult truth is that for those grappling with significant debt, cost-cutting measures alone may not provide the support they need,” Bazian said. “Seeking guidance from a Licensed Insolvency Trustee can be a vital step for those looking to regain control of their financial situation, and bankruptcy is not the only recourse.”

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Two federal bills key to the automtoive right to repair movement are set to become law in Canada, according to the Automotive Industries Association of Canada.

“AIA Canada is celebrating the passage of Bills C-244 and C-294, which are poised to become law imminently after being adopted by Parliament yesterday,” the group said in an announcement.

The two bills are not specific to automotive right to repair but do make amendments to the Copyright Act. Bill C-244 would allow end-users and third-party repairers to maintain, repair and diagnose products by bypassing digital protection measures but avoid breaking copyright laws. This, according to law firm Torys, would “bolster sustainable consumerism and facilitate accessibility in seeking aftermarket repair.”

This bill was introduced in October 2023. It was initially introduced as Bill C-272 in 2021 but was scrapped that same year due to a fall federal election despite passing first and second reading.

Bill C-294 focuses on allowing different technologies to work together without breaking copyright laws.  

“Both bills amend the Copyright Act and represent a historic step forward in the right to repair movement,” AIA Canada’s statement said.

Copyright and privacy expert Michael Geist has noted that Canada’s exemptions in the act previously didn’t go far enough to allow for a level playing field.

“Canadian anti-circumvention laws (also known as digital lock rules) are among the strictest in the world, creating unnecessary barriers to innovation and consumer rights,” he wrote soon after the introduction of Bill C-294 in 2022.

In mid-October, members of Canada’s auto care industry urged for the passage of both bills during testimony to the Standing Senate Committee on Banking, Commerce and the Economy, citing the importance for Canada’s automotive aftermarket.

As neither bill directly addresses automotive right to repair, the association continues to push for legislation directly tied to the issue.

“These two bills are a step in the right direction and are viewed as a necessary precursor to any right to repair legislation, however standalone legislation will still be needed to help reinforce a manufacturer’s requirement to allow access to diagnostic and repair information, which would address systemic issues around data ownership and ensure consumer choice,” AIA Canada noted.

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With a more complex supply chain due to more players and reduced reliance on China, the question was asked of supplier leaders if customers would be willing to pay more if it led to a stronger supply chain that was more reliable.

The question was tackled by Gino Amador, president of Snap-on Equipment, and Eric Sills, CEO of Standard Motor Products during the MEMA Aftermarket Suppliers Vision Conference. They emphasized the critical balance between cost and resilience, highlighting the lingering impacts of past supply chain crises and the evolving expectations of customers during the session The Race to Mexico … and Beyond.

“Nobody will pay for theoretical resilience. But everyone will pay for actual resilience when the other guy can’t show,” Amador asserted, capturing the practical reality of customer expectations.

He then impressed upon the industry to build strong resiliency measures by paraphrasing an old proverb: “The people that are resilient don’t pray for an easier time, they pray for stronger shoulders.”

Sills empathized with consumers, understanding why supply chain resilience is a hot topic.

“I think it’s because there continues to be a certain amount of PTSD still coming out of [how] the supply chain was in the last couple of years,” he said, referring to the pandemic that left the aftermarket with empty shelves at times.

This ongoing concern drives customers to seek assurances from suppliers about their ability to withstand future disruptions, Sills added.

Customers, he further noted, are increasingly wary of relying too heavily on China.

“They’re expecting us to reduce our reliance on China. We’ve been talking a lot about supply chain diversification, the ultimate source of supply, so on and so forth. And so it’s clearly top of mind for them,” he explained.

This presents an opportunity for suppliers to demonstrate their supply chain strategies.

“We do satisfy a lot of what you’re expecting,” Sills said.

However, Sills acknowledged the challenge of balancing resilience with cost competitiveness.

“As the shelves get replenished … they may be willing to pay a little bit more, but not a lot more,” he said.

Customers expect suppliers to remain competitive while mitigating risks associated with low-cost products from China.

“It’s an ongoing dialogue with all of our customers. And I think that there’s receptivity to it. But it’s still going up against the low-cost product and people will take some risks with that,” Sills said.

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Asahi Kasei Corp. announced it will construct its previously announced integrated lithium-ion battery (LIB) separator plant in Port Colborne, Ontario.

The new manufacturing facility will operate as Asahi Kasei Battery Separator Canada and is expected to create jobs in manufacturing and construction. The start of commercial production is currently slated for 2027.

“As demand for electric vehicles – and the lithium-ion batteries that power them – continues to rise, we are eager to bring the first Hipore wet-process lithium-ion separator manufacturing facility to Canada,” said Koshiro Kudo, president and representative director of Asahi Kasei, during the announcement. “Backed by the abundant renewable resources, skilled talent and strong local community support here in Port Colborne, we will be able to better serve our partners in the region as well as the broader North American automotive market from this facility.”

The Hipore wet-process separators to be produced at the Port Colborne facility are highly engineered and critical components of LIBs used in EVs and other energy storage applications.

On April 25, Asahi Kasei announced an initial investment of approximately CAD$1.56 billion to install around 700 million square meters of annual Hipore separator capacity at this new Canadian facility.

Asahi Kasei will receive support for the project from the provincial government of Ontario through its investment attraction agency, Invest Ontario, and will benefit from the federal government’s new Clean Technology Manufacturing Investment Tax Credit (ITC).

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In the face of inflationary pressures, Gen Z and younger Millennials are taking proactive steps to maintain financial stability, according to the 2024 Consumer Debt Report from the Credit Counselling Society (CCS).

The agency noted that these age groups are showing resilience by adapting their financial strategies amidst challenging economic conditions.

The survey, which involved participants from the Angus Reid Forum, revealed that 50 per cent of Canadians aged 18-54 have sold personal items or consider it a significant possibility due to financial pressures. Furthermore, 19 per cent of 18 to 34-year-olds have moved back with parents or relatives because of rising interest rates and inflation, with another 21 per cent seeing it as a likely option. Additionally, 20 per cent in this age bracket have taken on second jobs or side gigs, with 42 per cent contemplating the same move.

Alarmingly, 54 per cent of individuals between 18 and 34 years old have incurred more debt to stay financially afloat. Among Canadians who reported an improvement in their financial situation, 49 per cent attributed it to spending less on non-essential items. On the flip side, 85 per cent of those feeling financially worse off cited increased expenditure on essentials, with 47 per cent noting a rise in debt and 38 per cent mentioning emergency expenses as factors.

Peta Wales, president and CEO of CCS, highlighted the continuous decrease in Canadians’ confidence in their financial situation for the third consecutive year, emphasizing the hardships of taking on more debt or using savings to manage current expenses. Over the past year, Canadians have supplemented their income by accessing savings (56 per cent) and borrowing from credit cards (44 per cent).

The report also sheds light on the psychological impact of financial stress, with 36 per cent of Canadians feeling anxious about their financial situation, marking a consistent increase since 2020. The stigma around debt remains, with 70 per cent of low-income Canadians and 50 per cent of 18 to 34-year-olds with non-mortgage debt feeling embarrassed and hopeless.

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A North American automotive aftermarket supplier looking to bring manufacturing closer to home, say to Mexico, may only be able to enjoy the benefits of the move for so long.

Amid all the talk about nearshoring and friend-shoring, concerns are being flagged about whether the feat may be achievable given the changing demographics of many countries.

Paul McCarthy, president of the MEMA Aftermarket Suppliers Association, noted that of the 38 wealthy countries part of the Organisation for Economic Co-operation and Development, 37 of them have a birth rate below replacement level. Countries looking to take on greater manufacturing capacity may be challenged by finding talent to fill roles.

Instead, he suggested to attendees of this year’s MEMA Aftermarket Suppliers Global Summit in Florida, suppliers need to pay attention to the population changes taking place in different pockets of the world.

McCarthy pointed out that half of India’s population is currently under the age of 25. In 2050, one-quarter of the world’s population will be in Africa. Furthermore, 35 per cent of the global workforce of those aged 15-24 will be in Africa.

McCarthy also noted that South and East Asia are tops for young people entering the workforce now. But come 2050, Africa will be No. 1. That signals a change ahead in terms of where supply chains will be operating. The continent will have the workforce to support the supply chain as talent dwindles elsewhere.

“So do you think as we look forward to this, and your boards and CEOs, it’s going to be important to be an international aftermarket company?” he said. “It certainly is on both ends of both demand and supply and people and capability.”

So it’s time to think about change. As scary as it seems, the work needs to be put in to reap the rewards.

“But in a market economy change is also good change is a source of profits in a market economy,” McCarthy pointed out. “And competitive advantage is determined by your ability to adapt to change.”

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Canadians are increasingly focusing on financial stability amid rising inflation and economic uncertainty, a recent poll reported.

Debt repayment and savings topped the list of priorities, according to the latest CIBC Financial Priorities poll.

It found that 13 per cent of respondents consider paying down debt as their top priority for the year, a goal equally shared with saving as much as possible. Keeping up with bills in 2024 is another major concern, according to 12 per cent of Canadians.

Inflation, affecting 61 per cent of the population, along with rising interest rates (28 per cent), are the primary financial concerns this year. Despite these challenges, the majority of Canadians (67 per cent) believe the country is either heading into or is already in a recession. However, a significant portion (64 per cent) feels financially prepared for unforeseen events, and 60 per cent are confident in their financial stability to endure a recession.

The overall sentiment towards personal finances has remained relatively stable compared to last year. Two-thirds (64 per cent) of Canadians feel positive about their current financial situation. About a quarter (26 per cent) have incurred more debt in the past 12 months.

“With the increasing pressure on household budgets due to higher costs, it’s understandable that debt reduction is a key focus for Canadians,” said Carissa Lucreziano, vice president of CIBC Financial Planning and Advice.

The CIBC poll also highlighted various reasons for increased debt, including the higher cost of living (46 per cent), daily expenses exceeding monthly income (38 per cent), unexpected financial emergencies (17 per cent), increased borrowing costs (14 per cent), and loss of income (10 per cent).

If given a windfall of $5,000, 36 per cent of Canadians would add it to their savings.

Furthermore, the poll indicates that 70 per cent of Canadians find it challenging to plan due to the current uncertain environment. Job security is also a concern, with 42 per cent of employed respondents worried about their employment stability in the current economic climate.

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Households in Canada have accumulated an unprecedented amount of savings during the pandemic. But unlike the U.S., households here haven’t been drawing down on their savings at the same pace.

Thomas Feltmate, senior economist at TD Bank, noted that Canadians have been much more prudent with their money knowing that they’re facing rising prices all around them — especially as mortgage rates come up for renewal.

“And they’re basically just trying to keep some powder dry, some excess cash for when their mortgage ultimately rolls over and they’re faced with that headwind of a higher cost to service that debt,” he said at the Canadian Black Book Talk Auto 2023 conference.

Since Canadians are not drawing much from their savings, they’re not spending much in the automotive market.

“So I think we are starting to see some pullback on the consumer side of things. This is exactly what the Bank of Canada ultimately wants to see. We need to see weaker consumer spending over the next year or so such that we have further disinflationary pressure coming through,” Feltmate said.

This all comes back to high interest rates and the mortgage renewal shock that is set to play out in the near future.

“So by the end of [2023], we estimate that about 50 per cent of the outstanding stock of mortgages would have rolled over into this higher interest rate environment,” Feltmate reported. “But that still means over the next three years, we have another half of that the stock of mortgages still rolling over.”

Economists are especially focused on the 2025 and 2026 numbers. A lot of these renewals would have been pandemic buyers or those who last had their mortgage reset in 2020 or 2021 at a time when interest rates were at all-time lows.

So even the most optimistic scenario happens where the Bank of Canada has completely returned the interest rate to its typical 2.25 points by mid-2025, mortgage rates in 2025 and 2026 are probably still going to be in around 4-4.5 per cent, Feltmate said.

“And for homeowners or anyone that had their mortgage last reset in 2020 or 2021, when you could get a five-year fixed for 1.7 per cent, that’s going to be a meaningful repayment shock that these households are going to be faced with,” he added.

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Canadians will see a decrease in their take-home pay and employers will see a rise in payroll expenses as of January 1.

The changes are due to increases in Employment Insurance (EI) and changes to the Canada Pension Plan (CPP), according to the Canadian Federation of Independent Business (CFIB).

The latest adjustments include a second earnings limit to CPP and an increase in EI, leading to a higher payroll tax for employers by up to $366 per employee and up to $348 for workers. For 2024, total employer contributions for CPP and EI could reach as high as $5,524 per employee.

Corinne Pohlmann, executive vice president of advocacy at CFIB, expressed concern about the impact of these hikes on the labour market.

“This significant increase in labour costs puts employers in a challenging position, particularly as many are already navigating other financial pressures, such as the Canada Emergency Business Account repayment deadline,” she said.

Pohlmann added that business owners might have to reconsider their wage and hiring strategies for the year.

A recent CFIB survey indicated that more than three-quarters of small businesses (77 per cent) are urging the government to address rising prices and business costs. Additionally, 74 per cent of these businesses are seeking a reduction in the overall tax burden. The survey also found that more than half (57 per cent) of small businesses would increase employee compensation, including wages and benefits, if the overall tax burden were lowered.

CFIB is pushing for measures to mitigate the impact of these increases. It wants to see federal and governments to work together to offset the CPP hikes. CFIB also proposed a 50/50 split in EI premiums between employers and employees or the introduction of a refundable credit similar to the 2015-16 Small Business Job Credit, specifically aimed at aiding small businesses.

CFIB said these proposed measures would alleviate financial strain on both Canadian workers and employers.

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The unemployment rate is currently too low in Canada and affecting many areas of the employment sector, an economist told automotive professionals recently.

Thomas Feltmate, senior economist at TD Bank told attendees of the Canadian Black Book Talk Auto 2023 conference that the country needs to see an increase in the unemployment rate here before wages can come down. The unemployment rate in December was unchanged at 5.8 per cent from the previous month after rising a tenth of a percentage point, reported Statistics Canada.

With employers unable to find workers, wage demands for those who are working will continue to increase. Right now, wages have been increasing upwards of 5 per cent year-over-year.

Higher inflation is playing a role as well, Feltmate added.

“It’s kind of sticky at this point. It’s staying elevated,” he said, noting that in a normal environment where inflation is at 2 per cent, we would expect to see wage growth closer to the 3 per cent mark.

“So again, this is kind of working against what the Bank of Canada is ultimately trying to do,” Feltmate said.

He believes policymakers in Canada should be worried. Unions are playing catch up on wages as several — from auto workers to grocery store employees — have hit the picket lines for higher wages. The private sector has seen wages increase significantly over the last few years.

“Now as more unions, labour contracts are coming up for negotiation, we’re seeing them push much harder in terms of what the unions want to get in terms of wage growth,” Feltmate said. “And that’s significant for Canada because unionization accounts for about 30 per cent of the labour force here. So that’s keeping some of that stickiness on wage growth right now.”

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The hope is Canada will see interest rates start to fall later this year, an economist told a room full of automotive professionals.

Specifically, it won’t be until at least the second quarter of 2024, said Thomas Feltmate, senior economist at TD Bank at the Canadian Black Book Talk Auto 2023 conference.

But once those cuts start, they should be coming with regularity.

“And then once they do start to cut, we expect that the bank account will probably cut a bit faster than the [U.S.] Federal Reserve,” Feltmate predicted. “So ultimately, what this means is thinking about longer term interest rates, the differential that we’re seeing between the U.S. and Canada is likely to still remain somewhat elevated.”

The global economy has been more resilient than anticipated and it doesn’t appear a recession will hit much of the world, including Canada.

Not many thought that would be achievable to have inflation at multi-decade highs and central banks rapidly increase interest rates to tie down inflation and not go into a recession, Feltmate explained.

When it comes to Canada, he noted that some remain on the fence that a recession will happen here. Feltmate compared to the U.S. where many who believe a recession will happen there continue to firmly believe that’s still the case.

“Certainly, the takeaway here is that things have been stronger in North America than we had previously anticipated,” he said during an economic update at the event.

Canada went through several hurdles last year that impacted the economy and growth and yet a recession can still be avoided, Feltmate pointed out.

The wildfires of the spring and summer were one of those. “This would have impacted not only oil production in Alberta but probably had some knock-on effects to tourism and just general consumer spending patterns overall,” he said.

Then federal workers went on strike, impacting 150,000. Port strikes in B.C. affected the flow of goods as well.

“So there’s these kind of one-off factors that are still playing into the data,” he said.

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Nearly a third of Canadians are planning to cut their spending this year as economic concerns continue to sit top of mind.

A special report from the BMO Real Financial Progress Index revealed that 30 per cent of Canadians are going down this path. In response to these rising living expenses, 42 per cent of Canadians are reconsidering their financial New Year’s resolutions, with 17 per cent focusing on setting financial goals or establishing a budget for the upcoming year.

The report also found that nearly three in five (58 per cent) will pay for their holiday bills via credit cards. On average, they believe it will take three months to repay their holiday bills, with 24 per cent lacking confidence in their ability to pay off post-holiday bills promptly.

The main sources of financial anxiety include the fear of unexpected expenses (82 per cent), concerns about their overall financial situation (81 per cent), family-related expenses (65 per cent), and managing monthly bills (61 per cent).

A majority (68 per cent) have set financial goals, which include retirement planning (59 per cent), saving for a vacation (46 per cent), paying down debt (39 per cent), and saving for major purchases (36 per cent).

BMO Economics noted that Canadian real consumer spending remained largely unchanged in the spring and summer of 2023 and is likely to stay flat this winter, as households grapple with rising debt payments and ongoing economic concerns.

But there may be relief ahead. While interest rates were unchanged in December, markets are anticipating interest rate reductions from the Bank of Canada before the summer. A moderating inflation rate and strong wage growth are also contributing positively.

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The federal government laid out its plan to remove gas-powered vehicles from the vehicle fleet in Canada but some are raising red flags about the path to get there, including those in the automotive aftermarket.

Environment Minister Steven Guilbeault announced new regulations mandating the transition to battery-operated cars, trucks and SUVs by 2035. That means automakers have the next 11-plus years to phase out combustion engine cars, trucks and SUVs.

But there’s a requirement to gradually increase the proportion of electric models they offer for sale each year.

But not all are thrilled with the plan — at least not without additional support for the motoring public.

The Canadian Automobile Dealers Association raised concerns about EV affordability and charging infrastructure days before the announcement this week.

More government effort is needed to address vehicle affordability and the lack of charging infrastructure, the group said. President Tim Reuss noted that high interest rates and inflation are severely impacting consumers’ ability to buy new cars, pointing to increased dealer inventory.

Meanwhile, Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, called on the federal government to provide stronger consumer purchase incentives, a widespread public charging network and enhancements to the electricity grid to prepare Canadians for more EVs on the road.

The Automotive Industries Association of Canada released a statement noting that 100 per cent EV adoption can’t be achieved so long as the repair ecosystem isn’t supported to keep vehicles in proper working order.

Alana Baker, vice president of government relations and research at AIA Canada, noted that several automakers are retaining control of repair and service information, limiting choice for consumer repair options.

”This eliminates competition in the market and will drive up costs for drivers who are looking to service their vehicle at a competitive price, close to home,” her statement read.

Automakers are already raising red flags about the high cost of EV purchases — failure to address right to repair will bring added costs to Canadians as they’re forced to visit dealers for repair and service.

“The aftermarket cannot be an afterthought,” Baker said. “Ambitious targets to transition to EV sales must be accompanied by comprehensive right-to-repair legislation that will ensure third-party repair shops have timely access to essential vehicle data.”

Back to Guilbeault’s announcement, he insisted more EVs vehicles will be made available in Canada and at more affordable prices. Automakers will need to ensure their supply and demand fit the new mandate.

“There’s no mistaking it. We are at a tipping point,” he said.

The regulations outline that in 2026, one out of every five vehicles carmakers put on the Canadian market are battery electric or longer-range plug-in hybrids. In 2027, that will rise slightly to 23 per cent.

By 2028, the share of EVs 34 per cent of all vehicles sold need to be electric; 43 per cent in 2029; and 60 per cent in 2030 before hitting 100 per cent in 2035.

S&P Global Mobility reported that 10 per cent of new vehicle registrations in Canada were BEV, while 3 per cent were PHEV at the end of the third quarter in 2023.

According to the Canadian Press, 38,425 EVs were sold in the first nine months of 2020 and 132,783 were sold through the first three quarters of 2023.

“Two provinces are already above the 20 per cent threshold — Quebec and British Columbia,” Guilbeault said.

But no other province crosses even eight per cent.

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The Bank of Canada held interest rates steady in September but Canadians shouldn’t expect any cuts until we’re into 2024, a recent report suggested.

A quarterly report from professional services firm RSM Canada explained that the country’s economy is steadily cooling after months of higher inflation and there are no expectations of a recession for this year. However, a recession could happen in the second half of 2024, which means the earliest the central bank would cut interest rate cuts will be the second quarter of next year.

RSM lowered the probability of a recession over the next 12 months to 60 per cent from 75 per cent. It also noted that inflation has declined to 2.8 per cent, the lowest among G7 countries and within the bank’s target rage. That points to the idea that we’ve reached peak interest rates in Canada.

Meanwhile, the Canadian economy will remain steady in the last quarter of 2023, RSM said, with a slowdown continuing into the first half of next year.

“The Canadian economy has displayed remarkable resilience this year, defying expectations of a downturn. While we may muddle through the rest of the year with slower growth, Canada will likely avoid a recession this year.,” says Tu Nguyen, economist for RSM Canada.

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Economic growth is on the horizon after a flat second quarter, according to the Canadian Federation of Independent Business.

The group is expecting a modest rebound of 1.4 per cent in the third quarter of this year, its latest Main Street Quarterly found. It also doesn’t see a recession happening.

It also expects inflation to get as low as 2.4 per cent, excluding food and energy.

Statistics Canada put the consumer price index at 2.8 per cent for June, a drop from 3.4 per cent in May.

“Key macroeconomic indicators, such as GDP, retail sales and inflation, appear to be moderating. We forecast that Q3 inflation, both total and core, will be within or likely very close to the Bank of Canada’s inflation-control target range of 1 to 3 per cent,” said Simon Gaudreault, CFIB’s chief economist and vice president of research.

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Inflation and other economic factors are influencing the attitudes and actions of car buyers in Canada, according to a survey from Canadian Black Book.

Furthermore, higher prices have pushed shoppers to look at more options when buying a vehicle.

DesRosiers recently reported that the average transaction price is nearly $50,000 for a light vehicle.

From the Canadian Black Book survey, it found that purchase price is the most important consideration when buying a vehicle for 44 per cent of Canadians, according to the survey, which was carried out by Ipsos. It was far and away the leading reason — 12 per cent said brand preference was most important.

A little more than a quarter (28 per cent) of Canadians are looking to buy a new car in the next 12 months — and 47 per cent are unlikely. Four in 10 respondents said the cost of a new vehicle is too high.

About three in five (59 per cent) reported that increased prices will delay their vehicle purchase. Of those, nearly half (44 per cent) said they’ll delay at least a year, while 28% say 2 years. Families with kids are by far the group most likely to delay a car purchase, where 72% of those respondents indicated that they would.

Younger generations are most likely to buy a new vehicle, according to the survey. Two in five of those aged 18-34 intend to compared to 19 per cent of those 55 years and older.

The survey found that 40 per cent of Canadians intend to buy used cars due to price hikes and almost half (47 per cent) of the youngest car buyers are likely to buy used — this is a growing trend as 38 per cent were likely to in 2022.

Canadian Black Book noted that average vehicle price is up about 20 per cent. Even though only 15 per cent of Canadians knew that stat, they were aware of the rising costs associated with vehicles — a third (34 per cent) said they believed prices have jumped from 15-25 per cent. Still, 12 per cent of respondents said that they believed prices have not increased at all.

“Inflation has not left the auto industry alone as prices have seen unprecedented increases in the last year, and consumers are taking note,” says Daniel Ross, senior manager of industry insights and residual value strategy at Canadian Black Book.

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In Europe, they have no appetite for internal combustion engines. In fact, they don’t even want hybrids. So they’re electrifying and electrifying quickly, said an industry observer.

On the other hand, you have the United States which is very slow in comparison on the electrification adoption front. Though that may speed up as a recent proposal wants to see zero-emission vehicles — hybrids, plug-in hybrids and battery electrics — make up 67 per cent of new vehicle sales by 2032.

Guido Vildozo, senior manager of Americas light vehicles sales forecasting at S&P Global Mobility, called Canada a mix of both these routes.

“When it comes to Canada, we’re a hybrid of these two: Heavily regulated; we have a mandate,” he said during the AIA Canada National Conference. “And if you ask us, ‘Is the regulator joking about the 100 per cent ZEV rate by 2035?’ No, they’re not.”

Additionally, Canada has a goal of 60 per cent EV sales by 20230.

The feedback Vildozo has been getting is that regulators would rather have lower new vehicle sales volume than move on the deadline to have all new vehicles sold in Canada to not have a combustion engine by 2035.

“So they’re not joking,” he emphasized during the session Canadian Outlook and Driving to an Electric Vehicle Future.

However, Canadians are not united on the front. There’s a lot of fragmentation between the provinces. In Alberta, for example, where oil production is the backbone of the economy, electric vehicles don’t provide any benefit to the province as these vehicles don’t take fuel and won’t contribute to a fuel tax. So they’re putting a surcharge on annual registrations for those vehicles, Vildozo reported.

Last year, Saskatchewan introduced an annual $150 fee for electric vehicles to make up for lost gas tax revenues.

“So that’s where it starts to become a little bit like the U.S. where you may have multiple pieces of regulation within the country, and particularly as you start to think about Quebec, as well as British Columbia,” Vildozo said.

British Columbia wants to get to 90 per cent electrification by 2030, while Quebec wants to get to at least 80 per cent, he added.

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A 1,400-km corridor for electric vehicle charging stations is set to be built from Michigan and stretch into Quebec.

The joint binational alternative fuel corridor agreement was announced by federal Minister of Transport Omar Alghabra and U.S. Secretary of Transportation Pete Buttigieg. It will see EV charging stations every 80 kilometres along highways from Kalamazoo, Michigan to Quebec City.

Each station along the corridor — covering the I-94 through the Detroit-Windsor border tunnel, Highway 401 across southern Ontario, Highway 20 through Montreal and Highway 40 through to Quebec City — will be required to have at least one direct current (DC) fast charger along with combined charging system (CCS) ports.

There will be 61 stations between Detroit and Toronto and 154 between Toronto and Quebec City.

This new plan will expand travel capabilities for EV owners as well as reduce concerns around range anxiety.

“This first cross-border alternative fuel corridor will help drivers to travel across the border and charge or refuel worry-free,” Alghabra said in an announcement. “It contributes to bringing us another step closer to making our air cleaner while helping people save money on traditional fuels.”

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A new right to repair bill tabled in Quebec would make it the first province and one of a few jurisdictions in North America that protects the consumer’s right to choose where to have their vehicle repaired.

If passed, Bill 29, An Act to protect consumers from planned obsolescence and to promote the durability, repairability and maintenance of goods, would give Quebec vehicle owners protections by being able to choose the vehicle repair facility of their choice. It would also force manufacturers to repair certain goods at “a reasonable price” to avoid having the consumer discard them entirely.

The bill would also mandate consumers who purchase a vehicle be entitled to an inspection free of charge before the end of the lease.

It goes further on the consumer goods side. Quebec would have regulatory powers “to determine technical or manufacturing standards for goods, including standards for interoperability between goods and chargers.” It would mandate that all mobile phones have a universal charger.

Justice Minister Simon Jolin-Barrette introduced the bill.

“The bill fills a significant gap that has emerged in the industry in recent years with the arrival on our roads of a new generation of intelligent and electric vehicles,” said a statement from AIA Canada in response to the tabling of the bill.

It further noted that vehicle manufacturers are taking “advantage of the lack of a legislative framework adapted to the new reality of smart and electric vehicles to drastically restrict access to data produced by telemetry and telematics systems when driving these vehicles.”

The group went on to say that the current situation is “untenable” as most vehicles sold today are equipped with advanced systems.

AIA Canada said it will work with parliamentarians and suggest improvements where needed in the bill. It will look for and close potential loopholes. It also noted that the passage of the bill would make Quebec a leader in Canada as the first province to enshrine such consumer protections.

“With Bill 29, Québec will be a winner on all fronts: in addition to effectively fighting against planned obsolescence and encouraging the repair of automotive property, it will ensure a plurality of services and freedom of choice for Québec consumers as well as the promotion of healthy competition and competitive prices in the auto repair market,” said AIA Canada president J.F. Champagne.

It was in February last year when Brian Masse, an NDP member of Parliament representing Windsor West in Ontario, introduced right to repair legislation as a private member’s bill. It would ensure OEM-approved tools and parts are available to the automotive aftermarket. This would allow consumers the freedom to choose where their vehicles are repaired as all shops would have access to what they need to repair vehicles.

Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association (MEMA), has spoken at length on multiple ocassions recently about this being the best opportunity for the aftermarket — particularly in the U.S. — to get right to repair legislation passed.

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An industry expert doesn’t see a scenario where Canada enters a recession this year or any other year in the near future.

Guido Vildozo, senior manager of Americas light vehicles sales forecasting at S&P Global Mobility, told attendees of AIA Canada’s recent National Conference that there were fears of a recession late last year, but the country has progressed well enough to avoid it.

“We are no longer going into recession in Canada,” he stated.

However, growth won’t be very much. It will be below what the country has generally put out in the last few decades for the foreseeable future. He reported expectations of growth of 1.5-1.8 per cent for 2024 and 2025.

“The big takeaway here is, yes, the news is encouraging — mostly throughout the world, we’ve got a more positive tone coming into this — but please do keep in mind that this is below what we have seen over the last 30 years for Canada,” Vildozo said.

The gross domestic product has generally grown at about 2.2 per cent over the last three decades.

“So please keep that in mind. Yes, we are growing, we’ve avoided a recession. But we will have sticky inflation,” he observed. “And for some of you, sticky inflation may mean higher raises to your employees, if you want to keep them — as in what you’ve given them is not enough already.”

But don’t expect any relief on interest rates, Vildozo warned. Sticky inflation means that those numbers will remain elevated. While they may normalize, it won’t be the normal of the previous 50 years but closer to the last 10, pre-pandemic.

“Meaning we are going to encounter higher interest rates when we want to finance a vehicle,” he said, tying this issue into future vehicle sales.

Vildozo noted that high financing rates are taking knocking out about 60 per cent of vehicle volume sales globally.

As for vehicles in operation, expectations are there will be 90 million new units sold in 2025, which would be in line with 2019 — so it will take a few more years to get back to where numbers were before. And that’s down from 100 million initially projected before the COVID-19 pandemic. That won’t be reached until 2030.

“Great [news] if you have a slice of the pie in the aftermarket business because it means that there will be a lot of demand for your parts,” Vildozo said.

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Like any other input increase, when interest rates go up those costs must be passed on by the automotive aftermarket, advised an industry leader.

But while the automotive aftermarket can find ways to reduce the impacts of commodity cost increases, the rise in interest rates presents a different challenge, said Paul McCarthy, president and chief executive officer of MEMA Aftermarket Suppliers during a quarterly call with the media. Especially when there’s been a dramatic and rapid increase to those rates.

Canada’s last interest rate increase came in late January when the Bank of Canada raised it to 4.5 per cent. It has held rates firm since then. In the U.S., that number is 5 per cent. Both were near zero just a year ago.

The aftermarket, McCarthy reminded, has payment terms that he called “very unusual.” He observed that the industry’s longer payment terms are unique — his group has been unable to see something similar in other industries.

“And while reverse factoring in these extended terms, it was, frankly, a clever funding mechanism when money was free, as it was, for a number of years,” he said, referring to when borrowing costs were low. “These higher interest rates to address inflation has created a negative financial impact up and down the chain.”

So what’s the aftermarket to do as higher interest rates and longer payment terms create higher costs to suppliers? Treat them like any other cost factor, McCarthy advised.

“In the near term, its impact is no different from rises and other input or commodity costs, whether that’s transportation or steel,” he said,

But unlike transportation or steel costs, where companies can look at ways to reduce those costs, higher interest rates don’t present those same opportunities.

“We can’t redesign the part; we can’t ship materials to a different port. It’s just a cost that goes up,” McCarthy said. “So suppliers need to work with their channel partners to appropriately pass on this cost.”

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A number of automotive aftermarket professionals have posed the question: Why the rush to electrify vehicles?

It’s been asked to Auto Service World by readers in person or in the comment section of stories. It’s also been posed to Paul McCarthy, president of MEMA Aftermarket Suppliers, the newly formed group made up of several member associations of the Motor & Equipment Manufacturers Association.

He answered this question during the recent MEMA Global Summit in Miami. Long story short, it’s a combination of a number of ingredients — there are a lot of interested players, a lot of money is being invested, consumers are showing an interest and governments are backing the plan.

He pointed out that one out of every 10 cars bought in Europe is electric. In China, it’s one out of every five. In Canada, battery electrics made up 7 per cent of the share of new vehicle registrations, according to S&P Global Mobility. When including hybrids and plug-in hybrids — zero-emission vehicles, collectively — the share bumps up to 8.9 per cent.

“Now, obviously this outcome is very much driven by government actions,” McCarthy said, referring to purchase incentives and rebates offered at various government levels. “This is why this market is creating and why it’s growing this way — but it doesn’t change the reality.”

Indeed, S&P noted that for this country specifically, “these figures demonstrate a clear demand for electric and sustainable transportation in Canada.”

Automakers are responding. McCarthy reported that the North American market will see 135 models of electric vehicles between 2022 and 2025. “That is just a tremendous amount of investment,” he observed.

Globally, in the SUV market alone, there will be eventually be 500 electric models available to consumers. “So big bet being placed here,” McCarthy said.

Not to mention, money talks. Investors are putting their money behind companies that are showing development in electric vehicles. Hence why automakers are going in the direction they are.

“We’ve seen so much automaker investment in EVs partly because that’s what Wall Street says they want to see,” McCarthy explained.

There’s a direct correlation, he added. The chief executive officer of an automaker has an easy decision. The more money invested in EVs means the company’s stock price goes up. And that’s they job — they’re supposed to grow their market cap. And that drives their bonus. Naturally, that’s the route they take.

“So it’s become a little bit of an echo chamber,” McCarthy said.

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A new report suggests inflation could be cut in half by the end of this year.

Business consultancy firm RSM Canada’s The Real Economy, gauged the volatile economy and inflation for the year ahead.

It expects inflation will drop to 3 per cent by the end of 2023 — and even return to the Bank of Canada’s target of 2 per cent by the end of 2024.

Interest rate hikes, which have affected big-ticket consumer purchases like housing, are starting impact the economy. Though, “the increased cost of credit, though the effects of higher rates will take more time to register,” RSM’s announcement about its report said.

It also expects GDP growth to remain low this year and next as consumer confidence wanes, resulting in slowing retail sales thanks to persistent inflation.

On that note, GDP growth is expected to sit at about 1 per cent this year and rise to 2 per cent in 2024. That means Canada will likely avoid an economic recession, though there are headwinds like a housing contraction that can’t be ignored.

But while inflation looks to go down, what about interest rates? Not likely, RSM predicted, saying, rising interest rates are needed to cool inflation. It expects the Bank of Canada to raise the rate to 4.75 by mid-year and hold them there “to keep financial conditions tight.”

Recently, aftermarket observer John Price, suggested the era of low inflation and low interest rates may be at an end.

“But the fact is that we’ve been living in a Goldilocks globalization period,” he said of the last 30 years.

Without cheap capital, resources or labour, low inflation is challenged. “Therefore, inflation will struggle to remain at 2 per cent, unless somehow we empower the world with the kind of technology that raises their productivity,” Price added.

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John Price of Americas Market Intelligence speaks at the MEMA Global Summit in Florida in February

The Bank of Canada has stated that its goal is to get inflation in this country back down to a target of 2 per cent. Central banks around the world have similar goals, including the U.S.

But we will never get there, says an automotive aftermarket industry observer.

The Bank of Canada raised its key interest rate to 4.5 per cent at the end of January in an attempt to cool red-hot inflation. It has worked as inflation fell from a high of 8.1 per cent in the summer to 6.3 per cent in January.

Even though Bank of Canada governor Tiff Macklem called inflation “too high,” John Price, managing director of Americas Market Intelligence, warned that inflation and interest rates won’t go back to where consumers want.

But that doesn’t mean things won’t get better. He said we’re about halfway through the fight to bring inflation down to central banks’ targets of 2 per cent even though we won’t actually get there.

“But the point is this: That the light is at the end of the tunnel and the amount of further increments to the interest rates will be limited to probably no more than one more percentage point,” Price said during the recent MEMA Aftermarket Suppliers Global Summit in Miami.

Still, the realization of not having such low inflation will come as a shock to many people — most people around the world have been used to living with the expectation of 1 or 2 per cent inflation.

“But the fact is that we’ve been living in a Goldilocks globalization period,” he observed.

Price pointed out that 30 years ago, American, Canadian and Western European baby boomers in their 20s and 30s were making more than they were spending — they were saving money, in other words.

“And they put that money into the bank. It ended up in capital markets. It drove down the cost of capital,” he explained.

Now those people are retiring — half of them are 65 years old. They’re pulling out their savings to live their retirement years. As a result, no more cheap capital. Add in the fact that labour around the world is getting more expensive [and] it will be hard to get back to the way things were.

“So we don’t have cheap capital anymore. We don’t have cheap resources anymore. We don’t have cheap labour anymore. Therefore, inflation will struggle to remain at 2 per cent, unless somehow we empower the world with the kind of technology that raises their productivity. Some would say that’s possible, but I would say it’s going to take some time,” Price said.

“In the meantime, we’re going to get have to get used to higher interest rates and higher inflation.”

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Small businesses in Canada are calling on the federal government and payments industry to move faster on capping processing fees for credit card usage by consumers.

The Canadian Federation of Independent Business released results from a recent survey that found about three-quarters (74 per cent) of small businesses want to see processing rates from the likes of Visa and Mastercard capped at 1 per cent when using their services.

That means interchange rates for small businesses would need to be set at 0.7 per cent or less, which is half of the current average of 1.4 per cent.

CFIB noted that its research shows many small businesses (81 per cent) take a hit to their bottom lines to cover the costs of accepting credit cards. However, given consumer preference for using credit cards — which only grew during the COVID-19 pandemic and as online shopping increases —merchants feel they have no choice but accept credit cards to retain and grow business.

In a survey of automotive aftermarket businesses by Auto Service World, passing on credit card processing fees was the preference of a minority — 19 per cent said they would pass on fees to consumers, while 25 per cent said they would do so for business customers.

Several responded that the cost of processing fees is already built into what they charge to customers. “We have chosen not to add fees at this point. In my opinion, all businesses have already factored this in,” said one respondent.

Credit card processing fees are especially more difficult to handle for smaller businesses, according to CFIB president Dan Kelly.

“While a handful of large multinationals can get special deals, small firms aren’t able to negotiate lower interchange rates on their own,” he explained. “Ensuring that smaller merchants can access lower rates — including for e-commerce — is key to relieving some cost pressures, encouraging more small businesses to sell online and levelling the playing field with larger firms.”

The group has three recommendations as the spring budget approaches for the federal government:

• Lowering merchant fees to no more than 1 per cent of the total sale
• Ensuring fees for e-commerce are kept low to allow small firms to compete online
• Protecting low-cost Interac debit and the Code of Conduct

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A quarterly report from the Canadian Federation of Independent Business forecasts slow economic growth and receding inflation — all signs that the country may sidestep a recession.

The last quarter of 2022 is expected to see 1.2 per cent annualized growth with another 0.6 per cent annualized growth in the first quarter of this year, according to the CFIB’s the latest Main Street Quarterly.

The group also forecasts inflation, excluding food and energy, to fall back in Q1 2023 and sit at 5.7 per cent, and 5 per cent on a year-over-year basis, respectively.

So while the economy is slow, there isn’t a contraction so a recession should be avoidable, said Simon Gaudreault, chief economist and vice-president of research at CFIB.

“Moreover, while inflation is absolutely not back to normal yet, our analysis suggests it will continue significantly cooling over the current quarter, which should help the Bank of Canada as it decides whether or not to keep raising interest rates,” he added.

On the jobs front, the vacancy rate has declined but stayed high at the end of last year. CFIB reported the national private sector job vacancy rate declined slightly in the fourth quarter to 4.8 per cent and 665,500 jobs went unfilled.

“It’s too early to tell whether the labour market is at a turning point as we continue to hear from employers how tough it is to hire and retain workers these days,” said Andreea Bourgeois, director of economics at CFIB. “A small business experiencing vacancies means it doesn’t have the capacity to run smoothly, grow or expand due to lack of staff. When employers don’t have enough workers, they have to work more hours or give up sales or contracts because they can’t meet demand on their own.”

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The annual rate of inflation in Canada slowed to 6.3 per cent in December.

The rate peaked in the summer at 8.1 per cent and has been slowly decelerating since then. In November, the annual inflation rate was 6.8 per cent.

Helping reduce the inflation rate is the fact that gas prices have eased compared to much of last year. Grocery costs are still rising but at a slightly lower rate.

Statistics Canada reported that Canadians were still paying 11 per cent more on an annual basis for groceries in December, though that is a slight improvement from 11.4 per cent in November.

At the gas pump, Canadians paid 13.1 per cent less in December compared with November. The federal agency said the price of crude oil dropped as concerns of a slowing global economy grew.

If both grocery and gas are excluded, prices rose 5.3 per cent in December on an annual basis.

These findings are key to The Bank of Canada. It will be paying close attention to the latest inflation report as it ponders its next interest rate decision, set for Jan. 25.

Jeff Schuster, president of global forecasting at LMC Automotive, recently explained that slowing inflation would have an impact on how the central bank approaches an interest rate increase.

“But that could be some signalling that maybe we’re starting to get to the end of the significant increases,” he told attendees of TalkAuto, hosted by Canadian Black Book in November in Woodbridge, Ontario.

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New regulations proposed towards the end of last year mean that on-in-five of all passenger vehicles sold in Canada need to be electric by 2026.

Environment Minister Steven Guilbeault announced the proposal Dec. 21. Furthermore, the mandate will hit 60 per cent by 2030 — up from initial expectations of half. Five years later, all passenger vehicles sold in Canada must be electric.

Manufacturers or importers that don’t meet the baseline could see a phased-in penalty system under the Canadian Environmental Protection Act

For 20 per cent of new vehicles in Canada sold to be electric, some work needs to be done. While zero-emission vehicle sales are picking up, they made up 8.2 per cent of market share up to the third quarter of 2022. The year before, that number was at 5.3 per cent.

Not to mention increased infrastructure and rebates, a trio of automotive industry groups recently called for.

The feds did announce  it would invest in 50,000 more EV charging stations across the country, for almost 85,000 federally-funded chargers across Canada by 2027.

Under the regulations, which were formally published a few days ago, the government will track sales by issuing credits for vehicle sales.

Fully electric vehicles — cars and trucks —would get a larger credit than plug-in hybrids under the new government regulations. The government did acknowledge, however, that plug-in hybrids will likely remain in demand in rural and northern areas.

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Ann Wilson from MEMA talks about right to repair at an AASA media briefing at AAPEX.

With the midterms wrapped up south of the border, American automotive aftermarket leaders are focusing on the next two years as pivotal in getting right to repair legislation in place.

“2023 and 2024, I believe, are our years to get this done,” said Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association (MEMA), under which aftermarket suppliers are represented by the Automotive Aftermarket Suppliers Association (AASA).

“My concern is, if we don’t get it done in the next Congress, we’re going to miss our best chance. That doesn’t mean that we’ll never be able to address it. But we are going to miss our best chance.”

A right to repair bill was introduced in Canada earlier this year. Brian Masse, an NDP member of Parliament representing Windsor West in Ontario, introduced legislation as a private member’s bill.

In the U.S., Rep. Bobby Rush (D-IL), chairman of the House Energy and Commerce Subcommittee on Energy, introduced the Right to Equitable and Professional Auto Industry Repair (REPAIR) Act — one of three right to repair bills that would impact the automotive, agriculture and electronics industries.

Right to repair is “a global issue,” noted Paul McCarthy, president and CEO of AASA at the group’s Global Summit in Florida earlier this year.

He noted that other countries are looking to the U.S. to lead the way in establishing legislation that they can essentially use as a precedent.

“So we’re fighting for it here in the U.S., [but] just know we’re fighting for it on a global basis on behalf of our global industry,” he said. “They’re looking to us for that leadership.”

And legislation appears to be the way this issue will be settled. In fact, it’s the preferred option, according to Alana Baker, senior director of government relations with the Automotive Industries Association of Canada.

There are a few legal battles around right to repair going on in the U.S. right now, most notably in Massachusetts where automakers filed a lawsuit challenging the state’s right to repair law which followed state voters approving expanded right to repair laws. A decision around this has been delayed repeatedly this year. There’s also a voter referendum going on in Maine. Meanwhile, 27 different states have some kind of repair access legislation, generally centred around consumer products like cell phones and appliances.

“But the moment that conversation starts at the state level, we are there with our coalition partners to remind them that it also impacts that vehicle that sits in everyone’s garages, driveways, backyard, wherever else they have their vehicles parked,” Wilson said during a media conference at AAPEX 2022. “And I think that’s important because what we see is a growing awareness of elected officials at the state level, at the federal level, that this is an important consumer issue.”

All of this points to a groundswell of support for the right to repair movement. It’s top of peoples’ minds right now and it’s best to strike while the iron is hot to make sure auto is part of the discussion.

“If Congress moves a piece of legislation on [right to repair on other consumer products] and it doesn’t include autos, we’re going to have a harder time catching up with that issue,” Wilson advised. “So this is the time for us to act. This is the time for us to get this done.”

But it’s not all over if it doesn’t get passed soon enough. As Wilson pointed out, the U.S. bill is bi-partisan, which means it has the support of both sides of the political spectrum.

“I do think we have to keep this at the level of ‘Let’s talk about what this means for the single mom in 10 years who can’t get her car fixed with a family … who’s on a budget, trying to figure out how they keep that 12-, 13-year-old car going for school and work and everything like that,’” Wilson said. “And there is not an elected member of Congress, not one single one, who is going to not be worried about that.”

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Canada’s interest rates are now at a level not seen in nearly 15 years.

The Bank of Canada upped its key interest rate by half a percentage point Wednesday. Now at 4.25 per cent, it’s the highest it’s been since January 2008.

The Dec. 7 announcement marks the seventh straight increase since March.

However, there are indications that the central bank may put a hold on aggressive rate hikes.

In a news release, the Bank said it “will be considering whether the policy interest rate needs to rise further to bring supply and demand into balance and return inflation to target.”

That’s a different tone from past announcements where further increases were foreshadowed.

The central bank noted “growing evidence” of restrained demand on the economy thanks to higher interest rates.

“Consumption moderated in the third quarter, and housing market activity continues to decline,” its statement said.

The annual inflation rate sat at 6.9 per cetn in October. The Bank of Canada’s target is 2 per cent. The Canadian Press reported that economists have pointed out that the three-month annualized inflation rate has dipped below 4 per cent. That suggests inflation is headed in the right direction.

The next interest rate announcement is expected Jan. 25.

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Jeff Schuster from LMC Automtoive presents at TalkAuto 2022

If we aren’t already in a recession, we should enter one soon. And it should last throughout most of next year, according to an industry expert.

But it may bode well for vehicle sales.

However, Jeff Schuster, president of global forecasting at LMC Automotive, recently told attendees of TalkAuto, hosted by Canadian Black Book in November in Woodbridge, Ontario, that the recession shouldn’t be severe.

“We are looking for a recession next year,” he said. “And that recession has turned into more of a moderate recession, probably starting yet this quarter, but lasting through the majority of 2023 before things recover and we start to see positive GDP growth.”

He noted the Bank of Canada and other central banks around the world are trying to deal with inflation first and foremost. They’re not trying to ignite a recession but that’s a by-product of trying to cool inflation that has hit levels not seen in decades.

The fact that the bank went with a 50 basis point increase as opposed to 75 is a good sign. He said that could be a signal of good news but time will tell as future announcements are made

“But that could be some signalling that maybe we’re starting to get to the end of the significant increases,” Schuster said.

Yet, even though recessionary times are likely ahead, vehicle sales shouldn’t suffer. In fact, this could be a recession where vehicle volume actually increases.

“And that is hard to digest as a forecaster,” Schuster admitted. “But I think if you look at the obviously the progression of where things have come, we’re still well below demand from a supply standpoint.”

Elements of pent-up demand still exist, he added. “Even though consumers are dealing with rising interest rates, certainly vehicle prices that are elevated — managing the monthly payment is a challenge — but we may have shrunk that new vehicle market in general.”

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A new small business forecast is predicted a cooldown of the economy going into the end of the year.

A new report from the Canadian Federation of Independent Business (CFIB) found that total GDP grew by just 0.3 per cent in the third quarter of 2022. In Q4, a slight rebound of 1.9 per cent is expected. A “good” GDP growth rate is between 2.5 and 3.5 per cent.

It also noted that job vacancies are high but the rate has started to come down, albeit slightly to 4.9 per cent, down from 5 per cent. CFIB reported there are 660,000 jobs going unfulfilled for at least four months.

“Although this quarter’s drop in the vacancy rate is the first in many quarters, several other indicators are still showing historical labour market tightness, therefore it is too soon to conclude we have turned the corner,” said Laure-Anna Bomal, CFIB research analyst.

The report also found that businesses with at least one job vacancy were planning to increase wages by almost 4 per cent in the next 12 months. Those without vacancies were planning a hike of 2.5 per cent.

Small businesses are still feeling financial stress from the COVID-19 pandemic. That that took on debt owe an average of almost $144,000. CFIB reported that 65 per cent of small firms took on federal government loans, while 24 per cent used credit cards and 23 per cent used lines of credit to make it through the pandemic. On average, it noted, 40 per cent of small businesses have not yet repaid any of their pandemic-related debt.

“The recovery is still far from a done deal for too many small businesses,” said Simon Gaudreault, chief economist and vice president of research at CFIB.

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Interest rates in Canada are up half a percentage point following The Bank of Canada’s announcement last week.

It further warned that rates will need to rise further to clamp down on inflation that hasn’t been seen in decades.

This is the sixth straight increase to the key interest rate, which now sits at 3.75 per cent.

The rate came below some expectations of three-quarters of a per cent increase. The U.S. Federal Reserve is expected to raise rates by that mount this week. If so, experts warn that could weaken the Canadian dollar even more than it is right now and drive up inflation as anything that is imported from the U.S. to Canada would become expensive.

The bank said in a news release that it expects interest rates to increase again to clamp down on hot inflation.

“Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the governing council expects that the policy interest rate will need to rise further,” it said, noting that future rate hikes would be determined based on how it sees the economy responding to higher interest rates.

In its latest monetary policy report, the bank noted that even though inflation has eased in recent months, prices for food and services continue to rise sharply.

The country’s annual inflation rate dropped slightly in September to 6.9 per cent even as the cost of groceries continues to rise. According to Statistics Canada, grocery costs have been rising at the fastest pace since 1981 — prices were up 11.4 per cent in September compared with a year ago.

The Bank of Canada says it expects inflation to slow to 3 per cent by the end of 2023 before getting back to its 2 per cent target by the end of 2024.

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For the fifth month in a row, new vehicle sales set a new high in the United States.

Kelley Blue Book reported the average transaction price in August stayed above the $48,000 mark, coming in at $48,303. That’s a 0.5 per cent increase from July and an 11 per cent increase from August 2021.

It was also around August 2021 when inventory shortage started impacting dealerships. Kelly Blue Book reported that inventory levels were 43 per cent higher in 2022 than the year before.

“Still, with roughly 1.2 million units in inventory in the U.S., new-vehicle inventory remains significantly below levels seen in 2020 and 2019,” the announcement said.

Tight inventory means new vehicle sales remain constrained with an average of 1.1 million units sold per month this year. The first eight months of 2019, by comparison, averaged 1.4 million sales per month.

The announcement highlighted Hyundai, Land Rover, Honda and Kia as showing the most price strength as transactions were between 5 and 9 per cent over sticker prices in August.

“Prices are still high and climbing incrementally every month,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, in a statement. “New vehicle inventory levels have been rising through August, now reaching the highest level since June 2021. However, supply of popular segments – like subcompacts, hybrids and EVs – still remain very low. Automakers are focusing on building and selling high-margin vehicles. Essentially, the product mix is the primary factor keeping prices high.”

The average price paid for a new non-luxury vehicle in August was $44,559, an increase of $132 from July and a record for non-luxury vehicles.

The average luxury vehicle sold for $65,935 for a new vehicle, up $878 from the prior month.

Looking at electrics, the average consumer paid more than $66,000 for their EV, up 1.7 per cent compared to July and an increase of 15.6 per cent from a year ago.

The cost of an EV “remains well above the industry average, aligning more with luxury prices versus mainstream prices,” the report said.

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The Bank of Canada announced another big interest rate increase with warnings that the figure could go even higher.

The central bank raised its key interest rate by three-quarters of a percentage point to 3.25 per cent. And this likely won’t be the last time an increase happens as inflation continues to remain high.

“Given the outlook for inflation, the governing council still judges that the policy interest rate will need to rise further,” the bank’s announcement said.

How much higher? That’s to be determined as the bank said it will keep an eye on how its current move affects things.

“The notion that they feel they have to keep going higher tells you that they’re having trouble cooling the economy down enough to take down inflation,” TD chief economist Beata Caranci told The Canadian Press.

TD, which along with other major banks raised its prime lending rate to 5.45 per cent following the announcement, predicts that the national interest rate could hit 4 per cent.

“I think many economists are quite nervous at the speed at which they’re raising interest rates. It is one of the fastest rate hikes cycles we’ve had in history,” Caranci told CP.

Canadians will now suffer “payment shock” with higher lending rates.

“Some folks are falling back on credit in order to make ends meet,” Wes Cowan, a licensed insolvency trustee and senior vice-president at accounting firm MNP told CP. “People are facing higher prices for food and all sorts of essentials and some are relying on credit to get by.”

Following the announcement, the Canadian Federation of Independent Business (CFIB) warned that the fifth rate hike this year will only make life tougher for its members. Its latest inflation report found that 70 per cent of small business owners expect interest rate hikes to have a negative impact on their operations.

According to CFIB’s August Business Barometer data, about a third (32 per cent) of businesses said they’re going to raise prices by at least 6 per cent in the next year. However, that’s down from a peak of 39 per cent in June.

Furthermore, a June CFIB member survey found that about eight in 10 (79 per cent) of small business owners raised prices more than usual in the past year to compensate for rising costs.

The post Interest rate jumps. Where it could land? appeared first on Auto Service World.

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The Northwest Territories is looking to change the conversation around electric vehicles and fears around cold and lack of infrastructure.

A report from The Canadian Press explored the territorial government’s plans to develop a charging corridor that stretches from its border with Alberta to Yellowknife. This, it believes, will encourage more residents to buy EVs.

“There will soon be a time in which not having electric charging stations along the highway will be equivalent to not having gas stations,” Robert Sexton, director of energy with the territory’s Department of Infrastructure, told CP.

“Even though it does seem right now that there’s limited uptake of electric vehicles and some of the barriers seem sort of insurmountable, we have to plan to start doing this, because in five years’ time, it’ll be too late.”

A territory government forecasted that EVs could make up between 2.9 and 11.3 per cent of annual car and small truck sales in N.W.T in 2030.

Sexton told CP that it will likely take a few years before the charging corridor is complete. The territory recently awarded up to $480,000 to the Northwest Territories Power Corporation to install a Level 3 electric vehicle charger in Behchoko, located on the Yellowknife Highway, on the northwest tip of Great Slave Lake, approximately 110 km northwest of Yellowknife.

CP spoke to Patricia Wray in Hay River. They’ve owned a Tesla for three years. While they didn’t report issues with operating their vehicle in an area where temperatures can easily get to 40 degrees below, they did note it can take longer to charge the EV.

“People in the North need to understand these cars are marvellous in the winter,” she said, noting how the Tesla “hugs the road” when it’s snowy or icy.

That said, travelling long distances is more difficult without adequate charging infrastructure in the area.

“I’m just very, very happy to hear that charging infrastructure is now starting to be put in place,” Wray said.

The post How N.W.T. is trying to encourage more EVs appeared first on Auto Service World.

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EV Week in Canada in July spurred a number of new announcements for charging stations for electric vehicles by the federal government.

In Ontario, a $765,000 investment in Peak Power Inc. to install 117 EV chargers across the province was announced.

All chargers will be available to Ontarians by March 2023. Peak Power also contributed over $840,000, bringing the total project cost to more than $1.6 million.

A total investment of more than $2.5 million in the Manitoba Motor Dealers Association and Eco-West Canada was announced to go towards the installation of up to 400 EV chargers in Manitoba and Saskatchewan. The EV chargers will then be installed in public places, multi-unit residential buildings, on streets, at workplaces or at facilities for servicing light-duty vehicle fleets by the end of 2023.

In Prince Edward Island, a $2 million investment was announced to help support the installation of up to 250 EV chargers across the island.

The EV chargers will then be installed in public places, multi-unit residential buildings, on streets, at workplaces or at facilities for servicing light-duty vehicle fleets by December 2023. A federal investment of $55,000 for the installation of 20 Level 2 EV chargers in Halifax. Southwest Properties Limited contributed $55,000, bringing the total project cost to $110,000.

There will be 128 EV chargers installed in British Columbia from a combined investment of $1.7 million to two organizations. All EV stations will be available to British Columbians by the winter of 2022. The BC Ministry of Transportation and Infrastructure also contributed $2.4 million, bringing the total project cost to $3.6 million.

A $3.95 million investment in Shell Canada was announced to install 79 EV chargers across 37 Shell retail locations along critical corridors between Alberta, British Columbia, Ontario, Manitoba and Saskatchewan, with the majority being open 24 hours a day, seven days a week.

Hydro-Quebec will receive a $4.6 million investment to support the installation of up to 840 Level 2 EV chargers across Quebec. The EV chargers will then be installed in public places and on streets by March 2024.

The post Where the latest EV chargers will be installed appeared first on Auto Service World.

Medium- and heavy-duty trucks like the Ford E-Transit van will not be part of a ZEV purchase incentive program

The federal government is bringing in new Incentives for vehicles not considered light-duty.

The Medium- and Heavy-Duty Zero-Emission Vehicles (iMHZEV) Program started on July 11. It’s a four-year program with close to $550 million available. It is designed to help businesses and communities across the country make the switch to zero-emission vehicles.

It will provide purchase incentives worth approximately 50 per cent of the price difference between an electric vehicle and a traditional vehicle. These incentives will be applicable to purchase or lease commercial, medium- and heavy-duty zero-emission vehicles such as the Ford e-Transit cargo van, the Karsan e-Jest shuttle, the Lion8 vocational truck, the Volvo VNR-electric tractor truck, and more (see eligible vehicles). Incentives will be eligible to eligible to provinces and territories, municipal and local governments, organizations, and businesses and worth up to $200,000 per vehicle. They will be able to be combined with provincial or territorial incentives.

“Helping Canadian businesses and communities make the switch to a zero-emission vehicle is win-win-win: it keeps our air clean, helps people save money on fuel, all while positioning Canada as a leader on building and powering these vehicles. Today’s announcement is about making sure that Canadian businesses and leaders of our communities have the options they need to transform their fleets to zero-emission vehicles,” said Minister of Transport Omar Alghabra, who made the announcement as part of EV Week.

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The Bank of Canada raised its interest rate by a full percentage point. That’s the biggest single increase since August 1998.

It’s part of a strategy to bring inflation down to its target of 2 per cent after reaching a nearly 40-year high of 7.7 per cent in May.

Most experts anticipated a three-quarter percentage point increase. But going to a full point reflected “very unusual economic circumstances,” said Bank of Canada governor Tiff Macklem, according to The Canadian Press.

He added that not only is inflation “too high” but consumers are worried that these high numbers will stick around.

“We cannot let that happen. Restoring price stability — low, stable and predictable inflation — is paramount,” Macklem said.

He acknowledged that higher rates will indeed make Canadians lives more difficult when coupled with high inflation. However, increasing rates are necessary to ensure high inflation doesn’t become the norm as it can lead to even more pain for the economy.

The Bank of Canada noted that Canadian inflation is “largely the result of international factors,” but that “domestic demand pressures are becoming more prominent.”

In the U.S., inflation showed no signs of slowing down as rates hit 9.1 per cent in June.

Rising costs for gasoline, shelter and food were the main drivers. Energy prices have increased by 41.6 per cent in the past year. Food costs are up by 10.4 per cent. Shelter costs are up by 5.6 per cent.

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The belief that the automotive aftermarket can withstand recessions and economic challenges faced by the average consumer may be out of date, according to a new report.

The aftermarket has the reputation of being ‘recession resilient’ — when the economy is performing poorly the industry does well. The logic, generally speaking, is that people will avoid buying new vehicles and choose the lower-cost option of repairing their current vehicle instead.

“However, the aftermarket’s product mix has undergone significant changes over the past 25 years, and today it is less recession-resistant than ever,” said a recent Aftermarket iReport from Lang Marketing.

The recession resilient reputation mostly comes from the belief that the aftermarket’s primary source of business comes from products that are non-discretionary — items that are necessary for a vehicle’s operation.

“However, for a number of years, discretionary products, which are not necessary for vehicle operation, have expanded their aftermarket share,” Lang said in its report Recession Impact on the Aftermarket. “This will affect how the next recession (likely this year) will impact the car and light truck aftermarket.”

Indeed, Lang is predicting a recession in the near future as “one is long overdue.” Recessions generally happen every six to eight years and it’s believed one is coming, if not already here. It doesn’t consider the COVID-19 pandemic a recessionary time, meaning the last one was in the Great Recession from 2008 to 2009.

So with one expected, Lang looked at what the impact could be on the aftermarket.

During the Great Recession, it noted that car and light truck product volume in the aftermarket declined, along with the sales of new vehicles, which plunged 35 per cent. Miles driven also dropped, taking six years to reach pre-recession levels.

“The next recession will cut discretionary automotive product purchases (such as accessories) and could reduce overall aftermarket product growth by more than 80 per cent from its 2021 recovery pace following the impact of COVID-19,” Lang predicted.

“However, the aftermarket’s product mix has undergone significant changes over the past 25 years, and today it is less recession-resistant than ever.”

During the pandemic, accessories sales surged while other product lines saw lower sales volumes. In the U.S., stimulus cheques encouraged consumers to spend money. Without similar measures, accessories may not see the same sales volume. Coupled with an expected reduction of sales in other product lines, aftermarket sales overall could take a hit.

Lang sees three significant impacts on the aftermarket when the next recession hits.

The first would be in discretionary purchases. A sales reduction in this area will impact aftermarket sales overall. “The next Recession will cut the strong recovery recorded in 2021 by more than 80%, especially if it hits this year,” Lang said.

Secondly, new vehicle sales could be impacted even further. With supply chain issues already suppressing sales, a recession could keep sales even lower.

Finally, miles driven could take a hit as people look to save money by cutting out road trips and other travel.

“The aftermarket impact of the next recession will be intensified by supply chain issues (some of them directly related to the recession) that will play havoc with new vehicle production and various types of vehicle repair, as parts take much longer than usual to reach repair sites or are not available at all,” Lang said.

The post Is the aftermarket still recession resilient? appeared first on Auto Service World.

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The Bank of Canada issues another major increase to its key interest rate. It has some Canadians changing how they spend their money.

It was the second time in two months the central bank raised its rate by half a percentage point as it forecasts higher consumer prices to come this year. The rate now sits at 1.5 per cent.

It warned of further hikes as inflation continues to remain high.

“The risk of elevated inflation becoming entrenched has risen,” it said in an announcement.

The annual pace of inflation rose to 6.8 per cent in April. That’s the fastest year-over-year rise in more than 30 years. Prices for a broad range of goods from food to oil continued to jump.

“With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the governing council continues to judge that interest rates will need to rise further,” the Bank of Canada said.

Before the pandemic, the rate sat at 1.75 per cent.

BMO Financial Group reported just before the rate increase announcement that Canadians are feeling a decline in their financial confidence. BMO joined the other big banks in Canada in raising its prime rate by 50 basis points to 3.70 per cent following the central bank’s announcement.

The quarterly BMO Real Financial Progress Index found that almost a quarter (23 per cent) of Canadians see themselves as less financially secure compared to one year ago. Three months ago, that number was at 18 per cent. Consumers cited the rise in inflation and consumer costs as having a major impact.

With inflation at decades-old highs, BMO found that three-in-five (61 per cent) of Canadians said that inflation has had noticeable impact on their personal finances.

More than a third (34 per cent) said they’re driving less to offset the soaring costs of gas.

“The fastest and broadest inflation in three decades is forcing Canadian households not just to cut back on discretionary items, such as vacations, but also to alter purchases of necessities — in particular food,” added Sal Guatieri, senior economist at BMO.

The Credit Counselling Society noted “stress” among Canadians as they turn to credit to pay off higher bills.

“Among historically low borrowing rates, the last decade has given Canadians more experience with rate decreases than increases, so another 50-basis point jump will be a wake-up call for anyone who didn’t hear the alarm sound the first time,” said Mark Kalinowski, financial educator the society. “Rates were at historic lows for two years to help us get through the pandemic. Unfortunately, this reinforced our reliance on credit to make ends meet, which is now causing many Canadians a lot of stress.”

The post Interest rates hiked. How will this affect consumers? appeared first on Auto Service World.

Gas prices were the biggest driver of inflation in Canada last month.

Statistics Canada reported the inflation rate in March hit 6.7 per cent. That’s up from 5.7 per cent in February and the highest increase since January 1991 when inflation rose 6.9 per cent, the same time the GST was introduced.

Gasoline prices rose 39.8 per cent in March compared with the same month one year ago. Oil prices peaked last month, pushed higher by Russia’s invasion of Ukraine.

“The throttle’s eased off a little bit since then but fuel prices are still high,” Fred Bergman, senior policy analyst with the Atlantic Provinces Economic Council, told The Canadian Press.

Even without gas prices in the mix, inflation still would sit at 5.5 per cent. The country’s hot housing market, supply chain constraints and the war in Ukraine that has affected prices for oil and food have all played key roles in driving up inflation, StatsCan said.

“Prices have increased in a single month as much as we saw over the course of the entire first year of the pandemic,” said David Macdonald, senior economist with the Canadian Centre for Policy Alternatives, as quoted by CP.

“These are historically high increases in prices across the board.”

Grocery store prices rose 8.7 per cent year over year, marking the fastest annual rate since March 2009. Dairy and egg prices increased 8.5 per cent, the largest annual increase in both areas since February 1983.

BMO chief economist Douglas Porter warned that these increases combined with wages that are not keeping pace will lead to big problems.

“This is not sustainable to have a gap of more than three percentage points between inflation and wages,” he told CP.

“Either inflation has got to come down fast, or wages have got to rise up to meet if not exceed inflation in fairly short order, and I think it’s going to be a little bit of both.”

Increasing interest rates, designed to encourage saving and curb spending, could continue to rise. The Bank of Canada recently raised rates by 50 basis points to 1 per cent. It warned more hikes could come to ease inflation.

Image credit: Depositphotos.com

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A number of announcements for new EV charging stations were announced in February and March by the federal government and private companies.

In the middle of February, Natural Resources Canada announced a $595,000 investment in Yukon for the installation of 14 EV fast chargers in communities and remote areas. All chargers will be available to Yukoners by November 30, 2022. The Government of Yukon also contributed $970,000 bringing the total investment to more than $1.5 million.

About a week later, the Ivy Charging Network — a joint project between Hydro One Limited and Ontario Power Generation (OPG) — ONroute and their partners, Canadian Tire Corporation (CTC) and Ontario’s Ministry of Transportation announced the opening of six EV fast-charging stations along Highway 401 throughout the province. The locations are:

• Cambridge North
• Cambridge South
• Napanee
• Odessa
• West Lorne
• Dutton

The level three chargers support charging of all EV models.

Photo courtesy of CNW Group/FLO

Then as February drew to a close, the federal government announced a $2-million investment in EPCOR Utilities Inc. to help install up to 200 EV chargers in the rural counties around London, Ontario, and in the South Georgian Bay area within the coming year.

At the National Automobile Dealership Association (NADA) annual trade show on March 10, Flo, an EV charging network operator, announced it would install its level two chargers across Canada and the United States.

Over a 10-day span in early March, Natural Resources Canada announced EV charging stations specifically in Thunder Bay, Ontario, and throughout Ontario and Saskatchewan.

The agency first announced a $500,000 investment in the Thunder Bay Community Economic Development Inc. to help support the installation of up to 63 EV charging stations. These will be installed by March 2023.

Then it announced an investment in the Ivy Charging Network. The federal government will invest $315,000 and Hydro One and OPG will add more than $340,000 to the project that will see 63 level two EV chargers across the province.

Natural Resources Canada’s last March announcement came for Saskatchewan. A $2-million investment in the Saskatchewan Power Corporation was announced to help support the installation of up to 40 EV fast chargers across the province.

The post From Yukon to Ontario: Latest EV charging station announcements appeared first on Auto Service World.

The annual rate of inflation continues to hit heights not seen in more than 30 years.

After December came in at 4.8 per cent, Statistics Canada announced inflation in January was at 5.1 per cent.

The agency noted that was the fastest pace recorded since August 1991.

Gasoline prices were again behind much of the increase, along with housing and grocery.

The price of gas was up 31.7 per cent in January compared with the same time last year. In Toronto, for example, drivers woke up to record high prices again on Feb. 16 as gas crossed the $1.60 per litre mark. Some of the blame is being placed on increasing concerns over global oil supplies linked to the threat of Russian military action against Ukraine.

Remove gas prices from the equation and Statistics Canada noted that the annual rate of inflation would have been 4.3 per cent in January. That’s still up from December with the same calculations.

Two weeks from now, the Bank of Canada has a scheduled interest rate announcement. While it has kept its key policy rate at 0.25 per cent since the start of the COVID-19 pandemic in March 2020, it recently backtracked on talk to hold the rate at emergency levels.

According to The Canadian Press, the central bank is expected to raise rates as part of the March announcement. That could be the first of several hikes over the course of the year in a move to cool inflation.

The post Inflation continues upwards trajectory appeared first on Auto Service World.

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The Omicron variant of COVID-19 tied together with supply chain challenges has Canada’s business leaders far less hopeful about the next 12 months.

Only 43 per cent of respondents surveyed by the Canadian Professional Accountants of Canada in the fourth quarter of 2020 were optimistic going forward — down from 52 per cent in the third quarter.

The CPA Canada Business Monitor found a good size of movement was in the number who are cautiously neutral — that area grew 10 points to 38 per cent. But the biggest jump came from those who are either extremely or very concerned about the effect of COVID-19 on the economy — to 37 per cent in the last quarter of 2021 compared to 21 per cent in the third quarter.

Supply chain issues are at the top of the list of concerns for business leaders with 20 per cent saying so. It was followed by negative effects of COVID-19 (18 per cent), inflation’s rise (15 per cent), employee recruitment, retention and development (15 per cent) and a lack of skilled workers (8 per cent).

What will help? Nearly half (49 per cent) of respondents said they want the federal government to increase immigration levels for people in job categories that are in demand. They also want to see better support training for workers (47 per cent).

“For almost two years now, the pandemic and its economic fallout have put Canadians and our economy on an unprecedented and challenging course,” said Charles-Antoine St-Jean, president and CEO of CPA Canada. “Business ingenuity and major contributions from governments have helped us weather the storm but, with the spread of Omicron, the private and public sectors must continue to work together to manage the evolving situation.”

Furthermore, small businesses specifically saw their confidence tumble in January. The Canadian Federation of Independent Business (CFIB) Business Barometer revealed that its 12-month index fell to 54.3 points. The three-month index sits at 36.9.

Retail businesses are least optimistic. With a nine-point drop, their confidence sits at just 30.4 points.

“Small businesses have been experiencing supply chain challenges, from a shortage of products to increasing input costs, since the middle of 2021, but the issue is now gaining momentum,” observed Andreea Bourgeois, director of economics at CFIB. “This only adds to the uncertainty many small businesses are facing.”

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Increased immigration levels, investments in infrastructure and removal of protectionist policies in the U.S. are measures Canadian Manufacturers & Exporters (CME) is calling on from the federal government to ease supply chain issues.

The recommendations were made during Monday’s National Supply Chain Summit. It was put together by the federal government to address supply chain issues. A four-hour session was hosted by Transport Minister Omar Alghabra, who was joined by International Trade Minister Mary Ng, Industry Minister Francois-Philippe Champagne, Employment Minister Carla Qualtrough, Labour Minister Seamus O’Regan and Agriculture Minister Marie-Claude Bibeau.

CME President and CEO Dennis Darby was one of more than 30 representatives from the manufacturing, agriculture and business industries.

“Manufacturers have been feeling supply chain pressures for months now as a result of the COVID-19 pandemic,” Darby said. “Omicron, natural disasters in B.C. and the trucker vaccine mandate have all added to the crisis. We applaud the government for sitting down with industry to hammer out fixes to these problems.”

He asked the government to immediately:

• The government strike 60-day sector-specific tasks forces that will identify supply chain problems, their solutions, and get the government to commit to implementing the recommendations;
• Address all transportation bottlenecks and avoid policies that will aggravate them further;
• Speed up immigration into Canada to fill vacant jobs in manufacturing and other key sectors;
• Government assistance for manufacturers still struggling with the impacts of supply chain disruptions

Longer term, the group urged the government to accelerate investments in critical trade infrastructure, aggressively increase economic class immigration targets and work closely with the U.S. to remove protectionist policies that hurt integrated manufacturing supply chains.

It was announced by Transport Canada that the summit will be followed by a series of regional and industry sessions to continue the dialogue. Furthermore, a new Supply Chain Task Force will be created. It will consult with industry experts to make recommendations regarding short and long-term actions around Canada’s supply chain.

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Quebec wants only zero-emission vehicles (ZEVs) sold in the province by 2035.

The provincial government is proposing a change to the ZEV standard to that 100 per cent of auto sales in Quebec are of vehicles emitting no emissions.

The province’s ZEV standard that has been in place since 2018 calls for manufacturers to earn credits by selling or leasing ZEV in Quebec.  Credit requirements are based on the number of vehicles sold or leased. Up to 25 per cent of excess credits may be carried over to meet future credit requirements.

The proposal calls for the end of carryover credits by 2033.

The regulation changes are subject to a public consultation until March 12.

The draft regulation noted that the move would reduce “the government’s revenues from taxes on fuel and sales of goods and services associated with vehicles with an internal combustion engine.”

However, it would also have “a positive impact on enterprises marketing charging stations and on sales of electricity.”

The paper also pointed out that the main advantage of the proposal would be for consumers as they will benefit from energy savings and see the cost of acquiring such vehicles come down in price. “The draft regulation also results in major environmental gains in greenhouse gas and other pollutant emissions,” it added.

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The Omicron variant of COVID-19 could take billions of dollars out of Ontario’s economy alone, according to a media report.

Ontario’s chief medical officer of health Dr. Kieran Moore predicted 20-30 per cent of the province’s workers could be off sick thanks to the rapidly spreading variant. If that ends up being the case, economists told The Toronto Star that economic repercussions could indeed be high.

“It’s certainly in the billions,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives.

But the impact of people staying home because they or a loved one is sick could hit different sectors in different ways. For example, a professional services firm delaying a report by a week may not have huge economic impacts.

A manufacturer having to shut down production due to an outbreak or lack of workers, a jobber store unable to fulfill orders due to lack of staff or an automotive repair shop unable to service vehicles due to sick technicians could have bigger and more immediate impacts.

A spokesperson for the Retail Council of Canada told The Star that members are reporting employee absenteeism up to 20 per cent since Omicron took hold in the province.

“There are knock-on effects. I think, ultimately, we won’t know for years what the full economic impact of this pandemic will be,” Pedro Antunes, chief economist at the Conference Board of Canada, told The Star. “There’s no question there’s going to be a significant impact. The amount depends on how long this lasts.”

He estimated that if Ontarians worked 10 per cent fewer hours in January than usual, the cost to the provincial economy would be about $4 billion.

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The annual pace of inflation jumped to 4.8 per cent in December, according to Statistics Canada. That’s a pace that hasn’t been seen since September 1991.

Prices for groceries went up 8.7 per cent year-over-year, the highest jump in a decade. Along with housing costs climbing 9.3 per cent, the two categories were behind the growth of the consumer price index.

Gasoline prices, which can have an effect on the automotive aftermarket, were up 33.3 per cent year-over-year last month. Statistics Canada noted that if gas prices were removed from the equation, the consumer price index would have been up by 4 per cent compared to last December.

In an interview with The Canadian Press, BMO chief economist Doug Porter warned inflation rates could continue to rise in the coming months.

“I’m not at all relieved or relaxed on the inflation outlook,” he said. “I am quite concerned that we could have more of an inflation issue than I think is commonly believed among economists.”

South of the border, the United States is also dealing with inflation levels not seen in almost 40 years. The consumer price index climbed 7 per cent  in 2021, the largest 12-month increase since June 1982, according to data from the Labor Department.

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No rosy picture is being painted about the future of Canada’s economy. Supply chain challenges have dimmed economic prospects, according to RSM Canada.

The business consulting firm issued its quarterly report on the country’s economic situation and how it impacts middle-market businesses. It zeroed in on the supply chain and what a lack of good could mean for long-term growth.

It noted that disruptions caused by port closures, factory shutdowns, product halts and labour shortages will likely delay the return of full production until mid-2022.

The report also found that the average price to ship a container from the Asia Pacific region — which accounts for 68 per cent of all monthly shipping volume to North America — increased by 63 per cent in the March-July period. If coming from Europe, that cost went up by 79 per cent.

Pixabay/Pexels

“The global supply chain is already in a very fragile place and further disruption is going to delay the return of full production within the Canadian economy until the middle of 2022,” said Joe Brusuelas, chief economist with RSM US LLP. “This would create conditions for further price volatility, at least until hesitations over the delta variant eases and businesses should be prepared for prices to potentially increase further.”

He added that businesses should prepare for more disruptions going forward, especially with the holidays coming up. “Finding alternative domestic suppliers and adopting dynamic pricing strategies will present firms embedded in the real economy with the best approaches to contend with rising prices and the shifting composition of supply and demand,” he added.

Labour shortages, meanwhile, will also be a problem when it comes to recovery prospects. RSM predicted that the issue will become more acute over the coming year. Job vacancies, it reported, jumped from 550,000 to 730,000 in the second quarter.

RSM suggested that getting more women in the workforce could alleviate some pressures. It also pointed to Quebec’s child-care program as having a positive effect – particularly on labour participation rates of women. This success could suggest that a national program would be in the best interests of the Trudeau government.

“In addition to these supply chain challenges, the re-elected Liberal government will need to address declining participation rates and the ongoing labour shortage, which will likely remain a key issue for the economy in the short-to-medium term,” noted Alex Kotsopoulos partner in projects and economics with RSM Canada. “The government will need to ensure that new spending programs address some of the main items that could move the needle on enhancing Canada’s productivity.”

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As many remote employees have discovered over the course of the COVID-19 pandemic, the lines between work time and home life have been blurred.

In what is said to be an effort to protect workers and ensure bosses can’t make employees work past their scheduled daily hours, the Ontario government will introduce a ‘right to disconnect’ bill.

Announced by Labour Minister Monte McNaughton, the bill would require Ontario companies with 25 employees or more to develop policies around disconnecting from work. This would protect mental health and allow workers to have time to spend with their families.

Such policies would set expectations around response time for emails and set out-of-office replies when not working.

The concept is not new in Canada, according to Howard Levitt, an employment lawyer and senior partner of LSCS Law. In an article for the Financial Post back in May when discussions around this type of legislation first came up at a federal level, he noted Quebec attempted to bring in similar legislation in 2018. It was never approved.

“The concept is ludicrous,” he wrote at the time. “Such a law would be costly, impossible to put into practice, and have extremely deleterious effects on most businesses. And it could not be implemented without overhauling the entire labour law regime.”

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He noted that federal and provincial labour laws already give plenty of protections to employees around working hours and rest periods.

“Throughout Canada, working hours are capped for most employees. Periods of rest and leave are guaranteed,” he wrote. “But our laws also recognize that each industry has its own unique requirements to remain operational and competitive.”

In an interview with Canadian Underwriter, Robin Daddar, Toronto-based vice president and senior consultant of fleet, safety, health and environment and risk control services, at professional services firm Aon Canada, said it’s best to have both sides agree to what reasonable work expectations are beforehand and stick to them.

Expecting employees to finish tasks outside of traditional workday hours is “not something that can be pushed down your throat by regulations,” he said, citing an example of expecting employees to respond to after-hours work emails or communication. “It’s got to be an understanding between the company and you [about] the kind of work you’re doing.”

In the age of working from home, flexibility is a reasonable ask — but it’s a two-way street. For example, an employee asking to go out in the middle of the day for grocery shopping or to run an errand can be reasonably expected to answer an email during their off-hours.

“It’s reasonable as long as you agree to it in advance,” Daddar pointed out.

Daddar suggested signing a contract outlining reasonable expectations between the employer and employee. It’s reasonable for the employee to ask about work hours and expectations, he added.

“How many [hours]? When do you need me? How often? And am I going to be called after-hours? When is it reasonable for me to answer? Or what is reasonable for me to be compensated for that kind of additional work?” he said.

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Hydro Ottawa is providing funding to eligible applicants for electric vehicle charging stations in Ottawa.

The funding initiative will cover up to 50 per cent of project costs for the purchase and installation of EV charging stations.

Eligible locations are:

• Multi-unit residential buildings;
• Light-duty fleets;
• Workplaces;
• On-street parking; and
• Public places such as retail, restaurants, service stations, medical offices and more.

The funding is not available to private residences, even if a business is registered at the location, the public utility said in an announcement.

Various levels of funding are available for Level 2 and Level 3 chargers. Funding is limited based on the type of charger. Total funding must be less than $100,000 per application.

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Used car sales is a strong indicator for a financially stable and successful automotive aftermarket as it will keep service and repair shops busy, says an industry expert.

With a shortage of semiconductors and chips for new vehicles resulting in reduced supply and increased prices, consumers have been moving to the used vehicle market. As a result, there are more used vehicles on the roads. And that’s good news for the automotive aftermarket.

Jeff Jorge, principal and market leader for mobility, supply chain and manufacturing, as well as firm leader for international services at global advisory firm Baker Tilly, called it a “silver lining” for the industry.

While the cost of used vehicles has soared — according to Canada Black Book, the average price is $27,800, compared to about $24,000 one year ago — Jorge said prices will back down. “But even if it does cool a bit, all of this favours independent aftermarket,” he said.

Aaron Burden/Pexels

“There will be a need for continued repair. So I think the fact that used cars and demand for used cars has risen … I think bodes really well for our sector.”

Furthermore, during the pandemic vehicle repair overall just did fine. Despite massive levels of job losses, many people were still employed. They weren’t travelling as much as they used to, or at all. So despite an early drop-off, it seemed people finally took care of that nagging issue with their vehicle as they had more time on their hands.

“Maybe they had that car project they wanted to work on. We saw from March (2020) to February (2021) a 20% drop in consumption of automotive aftermarket products, and then a surge to a surplus, or an increase, of 20% above the line right before the pandemic began,” Jorge noted. “So the market self-corrected, and it stayed relatively healthy throughout.”

Keep in mind, he added, the global COVID-19 pandemic has changed people’s lives. That means whatever means used to predict behaviours in previous times likely don’t apply anymore. “Let’s use conventional wisdom to recognize that all bets are off because we are behaving as a civilization in ways that we never had before.”

The post What makes this industry expert hopeful about the aftermarket appeared first on Auto Service World.

With an election just weeks away, topics like ensuring access to vehicle data and industry investments will be top of mind for aftermarket professionals when speaking with candidates.

“The theme of right to repair now, as part of this election, we hope is going to be a bigger conversation,” said J.F. Champagne, president of the Automotive Industries Association of Canada. “And so this is why between now and Sept. 20, our goal is to make sure that all the candidates that are running for office know that we too support ‘right to repair.’ Not just for consumer goods — like your cell phone — but also for automotive. So that’s going to be the effort.”

With Bill C-11 dying because of the election call, movement on right to repair — from cellphones to vehicles — will need to restart. That means placing a renewed focus on ensuring a legislative solution on ensuring aftermarket access to data is figured out.

“We need comprehensive legislation on right to repair for Canadians,” Champagne told AutoServiceWorld. “This also extends to vehicles. [Electric vehicles] need to be covered by a legislative right to repair.”

Diane Freeman, executive director of the Automotive Aftermarket Retailers of Ontario, agreed.

“We just want to be able to repair the vehicle. When the vehicle comes in for repair, if we can’t access the codes and the information on that vehicle, then we can’t do the repair,” she said in an interview. “So it doesn’t make sense for the consumer.”

Kelly Sikkema/Unsplash

Indeed, consumers — the voters — can be left frustrated by the lack of options for vehicle repairs. “Not every place has a dealership close by, so you have to kind of rely on the aftermarket. And I think that’s where right to repair comes in,” Freeman told AutoServiceWorld.

And it would be in a politician’s best interest to back the push. Champagne cited data that showed 94% of Canadians agreed that consumers should be able to get their car serviced at any repair or service shop. Furthermore, 83% of Canadians said that automotive manufacturers should be required by law to share data with independent repairs and mechanics to fix vehicles.

“So whether you’re Conservative, Liberal, NDP, it doesn’t matter. The people voting for you strongly support the concept that we need to have legislation in this country that will ensure right to repair,” Champagne said. “Without it, those increasingly electric and connected vehicles will not provide consumer choice.”

Another area Freeman would like to see investment in is training. “The biggest problem is, it’s not mandated [that] a technician has to upgrade their training.”

Freeman would like to see a government-mandated number attached to required training hours so that consumers know they’re getting serviced by adequately trained professionals. Especially with the mandate for electric vehicles, plenty of training will be needed.

“It’s going to be ongoing because every time you turn around and look at any vehicle now, everything pertaining to the car is all electronic,” Freeman added.

The future will require more technicians as well. Freeman would like to see better investments in attracting more people to the trade.

“Not at the high school level, but even before that — at the grade school level. It’s certainly different nowadays than it was even 10 years ago. It’s more diagnostic, it’s more computerized. We need to try and draw the young minds into our industry.”

The post What’s on the aftermarket’s wish list for the upcoming election? appeared first on Auto Service World.

A key piece of legislation with automotive aftermarket implications died once the upcoming federal election was called.

Liberal Leader Justin Trudeau met with Gov. Gen. Mary Simon on Aug. 15 to approve his request to dissolve Parliament and trigger the start of an election cycle.

But in doing so, as is what happens when the writ drops, bills that are before the House of Commons and the Senate are instantly killed.

For the aftermarket, that means Bill C-11, which would amend the Consumer Privacy Protection Act and the Personal Information and Data Protection Tribunal Act to include the Digital Charter Implementation Act, has been scrapped.

Bill C-11 was to include legislation around ‘right to repair,’ which would then open the door to vehicle data access for the aftermarket.

“This was our hope that Bill C-11 … was going to provide us with some level of certainty that we’re going to continue to have access to vehicle information,” said J.F. Champagne, president of the Automotive Industries Association of Canada. “With the call of the federal election, Bill C-11 is no more.”

Element5 Digital/Pexels

And this isn’t the first time it’s happened either, pointed out Diane Freeman, executive director of the Automotive Aftermarket Retailers of Ontario.

“Certainly, it’s going to have an effect on the industry because now we have to start all over again and get to the government, whichever government ends up in power, and sit down with them and educate them and get it back on the table,” she told AutoServiceWorld. “So that’s definitely going to take time.”

But it’s not a total disappointment and not all hope is lost. Champagne pointed to the fact that the aftermarket has “moved the dial” when it comes to having bigger conversations around right to repair.

That makes him more “hopeful about what’s ahead of us,” Champagne said in an interview with AutoSeviceWorld. “We obviously cannot control the agenda of governments. But we all need to make sure that they continue to hear and understand the points. And on that front, we’ve moved a long way.”

Indeed, this is an issue that is not going away, Freeman observed. “Even though we have an election coming up, we’re still going to be working towards getting the information to the government and having the government look at passing a bill that allows the aftermarket to get the information and access to repair the vehicle.”

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This story first appeared in the March issue of Jobber News. Click here to access the digital magazine.

A quick Google image search of the term “millennials” reveals a series of photos that all have one thing in common. Besides the stereotypical shots that depict of a cluster of people who are devoted to their cell phones and have an affinity of working at random cafés on their laptops sipping overpriced iced lattes, all of these stock images show a generation of young people who appear to be no older than a high school senior.

The world has its fair share of stereotypes about the millennial—lazy, entitled, and selfish, to name a few—and therein lies the first one, which may be surprising for some—millennials aren’t actually that young anymore. In fact, the term millennial applies to anybody born between 1981 to 1996, which means that the oldest millennials are now 40 years of age. Anybody born after 1996 falls into the Generation Y category.

According to leading global investment firm MSCI, as of 2020, approximately 1.8 billion people worldwide or 23 per cent of the global population can be considered as belonging to the millennial group. There are now more millennials than any other adult cohort on the planet, and in fact, worldwide, there are a quarter more millennials than in the preceding generation, which are those born from the mid-1960s to the late 1970s (better known as Generation X, or the baby boomers). In a recent session held at the 2021 Virtually Vision conference, Sara Fraser, creative director at Haas Performance Consulting, and also a millennial herself, provided an in-depth analysis of some of the misconceptions that automotive professionals have about selling and marketing to a millennial audience, who currently dominate 43 per cent of the world’s active workforce.

Birth year aside, millennials have attributes that set them apart from other demographics, and these include social and economic factors. For example, as MSCI points out, as of last year, more than half of the world’s millennials possess upper secondary education and more than one quarter hold a university or college degree. All of these factors influence spending habits and purchasing decisions.

What millennials want from an automotive shop

As the largest cohort of people on earth, millennials have the potential to both disrupt the automotive aftermarket and drive its future forward. According to a recent study conducted by Duff and Phelps, despite being an eco-conscious generation of people, 75 per cent of millennials (out of a survey of 2,150) currently own or lease a car. Of that group, another 83 per cent said that they expect to purchase or lease another car in the next five years.

In the U.S. and Canada, 77 per cent of millennials currently lease or own a vehicle and on a global level, 87 per cent of respondents in the U.S. and Canada agreed that having a vehicle is a necessity. This comes as good news for the automotive aftermarket, as it means that these consumers will eventually seek out service and repairs or general maintenance at some point. When it comes to business relationships, above all else, Fraser says, millennials are a compassionate, open-minded group who, if treated correctly, will likely be a customer for life.

A responsive website

At a time of technological disruption and mass digital takeover, millennials have the upper hand. As the first users of technology, starting with the launch of the internet in 1983, by the time social media rose to popularity, millennials were old pros at communicating online. Currently, on the business-to-business side of aftermarket distribution channels, parts wholesalers are already relying on e-commerce systems and online B2B portals to serve their clients, including millennials, who are some of the biggest users of e-commerce. The first order of business for most millennials who are considering a company to do business with, Fraser says, is to look the company up online and check out their reviews to see what kinds of experiences other consumers have had. Millennials can shop anywhere they want, and they’re known for doing extensive research prior to making a final decision.

“If there’s not many reviews, it means the shop isn’t liked enough to be talked about,” Fraser said. “I don’t expect to see only five-star reviews because you cannot please every single customer. What I’m looking for when I see a bad review isn’t necessarily what the person said, but I’m looking for how you as a shop responded to that review.” Good and bad reviews are a normal occurrence for every industry, but Fraser says business owners should take the time to respond to all reviews in a polite and timely manner. “It’s not just the customer that you’re writing the response to—you are writing this response to potential new customers, too,” Fraser added. “Ask your customers for reviews, but also have your employees review the business. That’s huge to a potential customer; it shows your employees are happy and that you take care of your people.”

Options to book online

Another major attractive draw for millennials is the option to book appointments or purchase parts, products, or services online. “A lot of millennials have anxiety about being on the phone, because you might ask me questions that I might not know the answer to,” Fraser said. “If I don’t know the answer, that makes me feel stupid, so I want a way that I can communicate on my own terms.”

Calling without notice, or not respecting a consumer’s method of communication, for example, claiming that you offer text or email services but still resort to calling the customer, is a sure way to irritate potential millennial clients, Fraser noted. “Many people do not answer calls from phone numbers they don’t know, but if you email me first and schedule a time for that appointment by phone, I’m more likely to answer.” Relaying information over the phone also opens up the possibility for critical information to be lost or forgotten. “Sending me an email explaining my vehicle diagnosis allows me to go back and revisit that information again and again so that I fully understand,” Fraser noted.

Create an app

Another great option to capture a wider millennial clientele is to create an app. “Millennials use apps for a million different things, whether it’s to manage a flight or hotel reservation, collect points while grocery shopping, or even book a hair appointment,” Fraser said. “If you’re having a discount or a special, an app is a great way to alert your customers instantly. If you have a loyalty program, or a VIP program at your store, an app is also a good place for customers to collect and track their points. If, for example, you offer a “buy five, get one free” deal, with an app, customers can see when they are getting close to their goal and are more likely to come into the store, or purchase something online.

Start offering subscription-based services

Much like apps, subscription-based services are another attractive feature for young shoppers. “Millennials have a lot of subscriptions, from food subscriptions to clothing subscriptions, they all come out of our account every month,” Fraser explained. From an automotive standpoint, a subscription-based service could look something like creating a custom monthly package that includes a suite of regular maintenance services (think oil changes, filter changes, etc.) for one set fee, or bundling a product package each month that aligns with a different theme. “When I sign up for a subscription-based service, I’m already expecting to pay for it ahead of time, so the chances of me coming in to see you are more likely, and I’ll stay on top of it,” Fraser explained. “You can also make this a VIP membership for your elite customers, which makes them feel important and it’s a good way to earn their loyalty.”

Quick Facts

• Online comparison shopping increased 12 per cent since 2014, with 95 per cent of online automotive aftermarket consumers now comparing products and prices before they buy, which makes having a user-friendly website that much more important.
• A majority (63 per cent) use online coupons and 52 per cent are more likely to shop with a retailer if they receive email offers with discounts (an app is a great way to alert customers to new deals and promotions).
• Sixty-three per cent like to receive email or text delivery alerts with the approximate time of delivery, up from 47% in 2014—offering customers the option for email or text alerts, rather than just a phone call, can boost customer satisfaction.
• Forty per cent of millennials prefer walking into an actual retailer to purchase parts and products, versus older generations (35 per cent).
• Forty-seven per cent of millennials will share their experience with a retailer on social media, and cross-promote the business (customer service is key for this reason).

*UPS and comScore via V12 Data

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This article first appeared in the January/February issue of Jobber News. It has been updated to reflect current global COVID-19 statistics. To access the digital issue, click here.

At the onset of the COVID-19 pandemic, the automotive aftermarket was deemed essential by many governments, including all in North America.

To date, the world has recorded nearly 118,000,000 cases of COVID-19, with the United States reporting the highest number of cases in the world, at more than 29,00,000 alongside nearly 528,000 deaths as of  today (Mar. 10). Canada has also recently seen an increase of active COVID-19 cases, and to date has reported just over 899.000 cases and close to 22,000 deaths, according to a report by Johns Hopkins University’s Coronavirus Research Center.

One year after the initial first wave of transmission, the aftermarket continues to operate with adjusted operating guidelines, even as a second wave of the virus continues to plague the global economy. The recent ongoing rollout of the Pfizer and Moderna vaccines offer a glimmer of hope, but according to Dr. Parker Hudson MD MPH FACP, Director, Dell Med COVID Testing & Tracing, the road to a global economic recovery still has a long way to go.

“Physical distancing and masking are here for the foreseeable future in public places, pending further vaccine roll outs, more data on asymptomatic infections/transmissibility after vaccination, and evolution of variants,” Dr. Hudson said. “Between April and June, we will see much larger and more impactful vaccination coverage for adults if AstraZeneca and Johnson & Johnson/Janssen’s vaccines are approved.”

Despite the arrival of a vaccine, in the automotive aftermarket, the progression towards a global recovery is flanked by uncertainties, including the pandemic itself and how it could potentially continue to mutate over time.

A breakdown of the supply chain

Heavily dependent on supply and demand, a critical part of the aftermarket’s path to a global recovery relies on the supply chain, which has been seriously disrupted due to the COVID-19 pandemic.

“This has been one of the biggest supply chain disruptions that we’ve seen in generations and it’s been extraordinarily hard to get materials and estimate what’s needed,” said Paul McCarthy, president, the Automotive Aftermarket Suppliers Association (AASA). “Quite frankly, it’s amazing what the suppliers have been able to do through it all. There’s this odd supply and demand shift because there’s been so much uncertainty.”

As a result of increased supply chain risk, the aftermarket has seen a spike in near-shoring, which is the process of moving business operations to a nearby country, rather than one that is more distant. Prior to the pandemic, for example, many parts and products were shipped in from China. Many companies in Canada and the U.S. are looking to reduce the number of products sourced from China, as well as ways to diversify their supply chain management. “I think this has helped the overall competitiveness of North America as an automotive and aftermarket production base,” McCarthy said.

Last year, AASA conducted a landmark study which aimed to understand what kind of footprint production will have on the aftermarket. “It’s really not a simple answer or a single answer; it really varies so much by product and company category,” McCarthy said. “For a generation, we’ve had a simple answer: ‘what do you do with your supply chain?’ and the answer is that you move it to China, because it’s a lower cost. Clearly, it’s a much more complicated story now,” McCarthy said.

Different patterns of demand

According to McCarthy, the aftermarket saw different patterns of demand by category in 2020 that varied over time, such as miles driven, which, though it started off weak in the first quarter of 2020, has since made a significant comeback.

With most of the world following a stay-at-home order, consumers had extra spend and extra time on their hands. Suddenly, various markets with developed e-commerce channels were aggressively competing for consumer dollars.

“The interesting thing about the aftermarket is that if the consumer is able to spend, the aftermarket does well, because we’re extraordinarily resilient,” McCarthy said. “There’s still a lot of uncertainty over whether or not consumers will be able to spend and how that will play out in different markets. The aftermarket is all about consumer convenience, and the professional side really offers that in an extraordinary way.”

Despite disruptions to the supply chain in 2020, the aftermarket still outperformed multiple sectors, McCarthy says. In order for a global economic recovery to take shape, continued consumer economic health is by far the leading factor in making that happen.

“I think that a recovery looks like having a bit more certainty,” McCarthy said. “We go back to dealing with our general business issues, working deeper with our channel partners to do things better instead of worrying about surprises, and having that greater certainty.”

There have been many changes in the aftermarket, and while some of them are strictly related to the pandemic, others have been more persistent. A sharp decline in miles driven, for example, is one trend currently taking place, with more people working from home as commuting has decreased.

“When we look at what’s coming out of this pandemic globally, we’re seeing some structural shifts that may lead to a bigger market size and opportunity for the aftermarket,” McCarthy said. “What we’re seeing out of the pandemic is this structural shift, a dedensification; what we’re finding is a shift towards individual transportation, and a global recovery likely looks like an overall increase in automobility, and when that increases, the aftermarket tends to do better,” McCarthy said.

The role of the consumer

Consumers will play a major role in positioning the aftermarket’s global comeback in a post-pandemic world and keeping the customer in the aftermarket is key.

“If we were going to have a pandemic, we were probably pretty lucky for the timing with our industry because the industry saw this trend towards omni-channel and e-tailing and consumers wanting information,” McCarthy said. “Pre-pandemic, we were already having a huge number of decisions being influenced by the internet and the online information. If this had been five years ago, we would have been in trouble.”

While people have been buying parts and products online for years, McCarthy is convinced that it’s all a part of a larger trend. “People talk about a technology revolution, but we really see it more as a consumer convenience revolution,” he explained. “Technology is just an enabler of that. The majority of consumers still choose to go to professionals for their service and that area hasn’t been as disrupted by the internet but overtime, we’re going to have to make this easier for consumers, and that goes back to how they obtain and feel trust about the repair and maintenance being done to their vehicle. That is what we’re going to be transformed by.”

The Automotive Industries Association of Canada, in partnership with the Auto Care Association and Automotive Aftermarket Suppliers Association (AASA) in the U.S., has recently launched Your Car, Your Data, Your Choice—a campaign designed to spread awareness about the importance of consumers being able to control access to the data coming from their vehicles. Also known as the Right to Repair Act, AIA is adamant that wireless vehicle data needs to be transparent and shared with the consumer, if the aftermarket wishes to remain competitive as global supply chains go digital.

The aftermarket is very much still a relationship business, and the vast majority of consumers still prefer bringing their vehicle to a professional when maintenance is due. However, as time progresses and a revolution of consumer convenience (influenced largely by the internet) develops, the aftermarket in turn must make the value proposition for the customer easier, or risk losing their share of the market. Rather than treating technology as a threat, McCarthy urges those in the aftermarket to see its presence as a unique opportunity. Right now, McCarthy says that the aftermarket is currently supporting a unique balancing act between existing long-term demand and new innovative trends.

“The companies who balance the new and seek returns on the old will be the ones who do very well,” McCarthy said. “It doesn’t mean that existing players are at risk, but it does mean that companies that do not respond to the consumer imperative or work across the value chain to get satisfied customers will.” McCarthy says that in order for the consumer to remain in the aftermarket, rather than flock to the dealerships, both the independent side and the automaker side need to ensure that the entire vehicle life cycle needs to stay safe and affordable.

According to McCarthy, the market is holding “fairly steady” right now, and is doing better than anyone might have anticipated, everything considered.

“2020 clearly outperformed expectations in terms of what we saw back in the spring and I think that everybody is cautiously optimistic for 2021,” McCarthy said. “The nature of the aftermarket is an amazingly stable, attractive market compared to most other retail sectors. Assuming that consumers can spend, and as we re-open the economy, that growth is what we should expect to see,” he concluded.

The post Why understanding the consumer convenience revolution is critical to the aftermarket’s global recovery appeared first on Auto Service World.

Industry executives participating in the Virtual AAPEX Experience struck a positive note when asked to comment on the future of the automotive aftermarket on Tuesday.

In a session called “What to Expect on the Road Ahead,” aftermarket leaders shared a consistent message: that the automotive aftermarket continues to be resilient despite crisis.

“Compared to new vehicles, compared to most other retail sectors, the aftermarket sees much more stable demand. We are essential and we’re a great market to be in, rain or shine,” said Paul McCarthy, president, Automotive Aftermarket Suppliers Association (AASA).

“The aftermarket is forecasted to grow 11.7% in 2021 and is on its way to a market size of $341 billion in 2023,” said Bill Hanvey, president and CEO of the Auto Care Association.

The two leaders also discussed their respective association roles on several issues, including contributing to diversity, attracting talent to the industry and fighting for a fair and level playing field.

The keynote session also included an esteemed panel of industry executives who shared their views on the outlook for the aftermarket in this time of uncertainty.

Greg Johnson, CEO, O’Reilly Auto Parts, noted that in his 39 years, he has seen the industry remain very consistent and resilient throughout various economic changes. “I remain very optimistic,” he said. “The result of the softer car sales will help us; most people will continue to maintain their vehicles as opposed to buying new vehicles and I also see miles driven improving.”

From the manufacturer/supplier side, Duncan Gillis, CEO, BBB Industries, expects to see growth in aftermarket replacement parts. He said, “We are very bullish about 2021 … we’re fortunate that our industry is not like a lot of others. We are relatively recession resilient, and we need to take advantage of that. We’re in a great position, let’s go drive some business.”

When asked if the aftermarket will see permanent changes as the result of COVID-19, Sue Godschalk, president, Federated Auto Parts, noted that the e-commerce segment has largely outperformed the rest of the aftermarket recently as consumers are opting for more online delivery due to brick-and-mortar closures and to limit exposure to the virus. “I believe online ordering will continue to increase … I also think we’ll see more automation in the manufacturing and distribution centers and warehouses and I believe it’s going to continue to be hard to find workers,” said Godschalk.

Eric Sills, CEO of Standard Motor Products, said, “We’re a very stable industry, so even something as dramatic and unprecedented as this pandemic, I don’t think it’s going to cause any step wise permanent changes to our overall market and how business is done … There’s going to be some trends that either accelerate or decelerate, but no hard left turns as a result of this.”

Tom Greco, president and CEO of Advance Auto Parts, identified trends in the aftermarket that may have a mid-term impact for the foreseeable future, including that more people are repairing and maintaining their vehicles and more DIY, as well as the decline in people using mass transportation. “People will continue to order online and vehicle ownership is increasing in importance with people having more time to work on their cars,” said Greco.

Industry executives also weighed in on the growth in omnichannel and e-tailing and how the pandemic has challenged their leadership skills.

www.aapexshow.com

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Soon enough, automotive parts could be made of wood.

On Oct. 16th, Canada’s Minister of Natural Resources announced $1.2 million to GreenNano Technologies Inc., a company based in Toronto, to scale up production of a new lightweight wood-fibre–based composite material to create automotive parts using an innovative process.

“Using forest products in the automotive sector is a great example of the high-tech future of forestry,” said the Honourable Marco Mendicino
Minister of Immigration, Refugees and Citizenship

How will it work?

The project will combine wood pulp with polymers to create a special strong and lightweight thermoplastic with more uniform and improved properties compared to other products.

The new product, if successfully applied in the automotive sector, could have a number of consumer and commercial applications, including aerospace parts, pharmaceuticals, solar panels and cosmetics.

These proposed prototypes have been made in partnership with Ford Canada and Centre for Biocomposites and Biomaterials Processing (CBBP), University of Toronto.

A prototype of a door cladding created with wood fibres.

Producing light-weight automotive parts

GreenNano is also collaborating with Ford Canada’s Power Engineering Research and Development Centre, located in Windsor, Ontario, to test the new material in the production of lightweight car parts.

Funding for this project is provided through the Investments in Forest Industry Transformation program, which encourages the Canadian forest sector to adopt and implement unique technologies and processes to diversify into new product streams and into emerging markets.

By investing in innovative forest sector technologies, the forest sector can provide greener solutions that will help tackle climate change and transition to a low-carbon economy.

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The pandemic has cost many Canadians their jobs. In the automotive world, new car dealerships were particularly hard hit in April, with employment down by more than 60,000 or 38% from 2019.

DesRosiers Automotive Consultants reports the high profile motor vehicle manufacturing industry witnessed employment fall an average of 20.5% in the first half of 2020, and as much as 30.7% in May.

The aftermarket too did not escape with automotive repair and maintenance shops down 24.5% in April (losing over 27,000 jobs) while auto parts and accessories stores fell 19.4%.

“April and May look to have been the nadir of the downturn” said Andrew King, managing partner at DesRosiers.

June definitely marked a step forward terms of employment with the industry gaining back over 69,000 positions over May but remaining well below 2019 levels.

Statistics Canada reported last week that unemployment fell 0.7% in August to 10.2%, which is a marked improvement compared to a record level 13.7% set in May 2020.

The Canadian unemployment rate was as high as 13.7% in May, which is an all-time record. The number of people employed in Canada is now within 1.1 million of the pre-Covid-19 February level. StatsCan stresses it is important to remember that during the last recession (2008-2009), it took almost nine years for unemployment to return to its pre-recession rate.

www.desrosiers.ca

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Canadian optimism has remained steady during COVID-19, with most Canadians uncertain about an economic recovery, according to a report from McKinsey & Company.

Canadian consumers are uncertain about the economy and the duration of the COVID-19 crisis. Though more consumers have been increasing spending in recent weeks, Canadians still plan to cut back on spending across most categories.

Stay-at-home orders have prompted many Canadians to adopt new digital and low-touch activities, including curbside pickup, videoconferencing, remote learning, and grocery delivery, some of which they intend to continue using post-COVID-19.

Consumers have been leaving their homes mainly to shop and meet with family, and they expect to continue doing so in coming weeks. When deciding where to shop in-store, Canadians consider physical distancing measures to be the most important decision criterion. Most Canadians continue to believe that the impact of COVID-19 on their routines will last well beyond two months.

www.mckinsey.com

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Canadian manufacturers signalled a rebound in production volumes and new work in July, led by improving customer demand as more parts of the economy reopen after stoppages during the coronavirus 2019 (COVID-19) pandemic.

At 52.9 in July, up from 47.8 in June, the headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered above the 50.0 no-change threshold for the first time in five months. The latest PMI reading was the highest since January 2019 and signalled a partial rebound in business conditions from the low point seen during April (index at 33.0).

July data indicated the fastest increase in output levels since September 2018. Anecdotal evidence attributed the expansion to a phased restart of production schedules and a return to growth for incoming new business.

Total new orders increased for the first time since February, but the pace of expansion was only modest. Survey respondents commented on a tentative recovery in sales as customers returned to work and restarted purchasing. However, underlying demand remained weak, especially in overseas markets. Latest data indicated a downturn in new export orders, which continued the trend seen since March.

Higher levels of production supported a modest rise in payroll numbers during July. The increase in employment was the first recorded by the survey since February. However, another marked reduction in backlogs of work suggested that excess capacity persisted across the manufacturing sector at the start of the third quarter.

Manufacturers remained cautious about their inventory levels in July amid ongoing efforts to improve cash flow and realign stocks with the subdued demand environment. As a result, both pre-production inventories and stocks of finished goods were depleted in July.

Input buying returned to growth in the Canadian manufacturing sector, which end a seven-month period of decline. Manufacturers were once again faced with lengthening delivery times from suppliers in July, which was mostly linked to stock shortages and transport delays across international borders.

Higher transportation costs and reports of supplier surcharges related to COVID-19 resulted in rising input prices in July. Some manufacturers also noted that exchange rate depreciation against the US dollar had pushed up raw material prices. Latest data indicated a solid overall increase in average cost burdens, although the rate of inflation eased slightly since June. Manufacturers had some difficulties passing on higher costs to clients, with factory gate prices unchanged on average during July.

Meanwhile, manufacturers in Canada remained optimistic overall about their prospects for higher production volumes in the next 12 months, which contrasted with the record low sentiment seen in April. However, business expectations moderated since June and some manufacturers commented on concerns about the global economic outlook due to the prospect of a second wave of the pandemic.

The post Manufacturing recovery gains momentum in July appeared first on Auto Service World.

Each month, our Used Vehicle Retention Index tracks the retained value of two- to six-year-old vehicles in the Canadian marketplace, beginning in January of 2005. The Index compares how a used vehicle today stacks up to its original MSRP.

Big ticket items are increasing in price as consumer confidence continues to rise, according to Canadian Black Book.

August has continued the relatively stable wholesale price trends from July. This past week, Canadian Black Book’s analyst team noted that the Truck/SUV/Crossover segments saw increases in wholesale prices of 0.28%. Car segments did not fare quite as well and declined in value by a very slim 0.04% for the week.

The Conference Board of Canada reported at the end of July that the Index of Consumer Confidence moved up by up 2.8 points in the month to 82.5. The direction of the index is positive, but it is much less than the double-digit increases seen in May and June. Black Book says consumer confidence is critical for the purchase of large ticket items (consumer durable goods) such as new or used cars.

“It is our team’s expectation that wholesale values will struggle going into the fall and early winter until a more lasting public health and economic recovery arrives,” Canadian Black Book stated in its most recent market analysis.

Last week also marked the announcement of Statistics Canada’s monthly labour force survey. As expected, there was good news in the numbers. The unemployment rate fell by 1.4%, from 12.3% to 10.9%. The new rate for July is nearly double the rate compared to January, illustrating the impact of the COVID-19 pandemic.

“The current downward trend in the unemployment numbers is very encouraging,” analysts at Canadian Black Book said. “In fact, many economists were predicting double-digit rates would be the rule for the year however, somewhat ahead of schedule the economy is already inching its way towards single digits. Employment in July increased by some 419,000 jobs, an increase of 2.4%. This was not as large a boost as the 953,000 or 5.8% increase for June but remains a very strong result.”

This past week, Scotiabank in their monthly Global Economics Auto News Flash reported that, in their opinion, a “solid rebound” is underway here in Canada.

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Those working to bring mandatory certification of collision shops in Ontario say there are promising signs on the horizon… and similar regulations for mechanical shops might not be far behind.

The Automotive Industries Association of Canada has been meeting with officials within the provincial government to explain why certifying collision shops would be in the best interest of consumers.

While discussions have stalled somewhat in recent months, they’re expected to heat up again this fall, with a decision on the matter possibly coming as early as next year.

“There has been a lot of activity over the last two years. Covid-19 hit and put us on the back-burner. But it looks like it is coming back,” said Steve Leal, president and CEO of Fix Network World and an AIA director. “I think it is one of the top priorities of the Ontario government and we’re hoping that in the fourth quarter we’ll be able to continue progressing the issue, and get it over the finish line.”

Speaking on “Curbside Chat” an AIA web presentation hosted by association chairman Susan Hitchon, Leal said the issue is on a lot of people’s radar.

“How it will look in the end is still to be determined. Once they agree, there will still be a lot of work to do, but at least we’ll be on our way,” he said. “I believe it could be implemented in 2021.”

Hitchon told her web audience that a recent AIA survey showed clear indication that association members would support regulations or mandatory certification that raise automotive repair shop competence.

AIA president J.F. Champagne told CARS magazine that targeting mandatory certification in Ontario made sense given the provincial government’s stated priority of making auto insurance more affordable in that province.

“The Ford government has been clear about finding ways to reduce insurance costs for Ontarians,” he said. “We are pointing out that personal injuries are no longer the largest cost contributing to high insurance premiums. It has been matched by the cost of vehicle damage. In fact, damage to vehicles is the fastest growing part of the equation.”

He said one of the best ways of controlling the fast-rising cost of repairs is by making sure shops are able to fix vehicles correctly the first time. The government has been very receptive, he said.

“It will be up to the government to work with stakeholders and industry to develop the best model,” he said. “Ultimately, it will be a form of identifying best practices and auditing them in a way that allows a shop to receive confirmation that they do, in fact, meet minimum standards for training, tooling and business practices.”

It wouldn’t be a precedent in Ontario, where other industries, like electrical contracting and real estate, already require government certification. AIA believes other provinces are also ready to consider mandatory certification. In fact, some have already made moves in that direction.

“There are signals that they are requiring shops to comply with some set of standards that includes training, tooling and things like this,” he said. “We are seeing movement in this direction in the other provinces, and it is only a matter of time, I believe, before we see an open call for certification.”

Although there could be costs to shops, it would be nominal compared to the routine business expense associated with keeping up with vehicle technology, Champagne said.

“We often say to people that, yes, there will be a minimal cost for the certification and the audit process, but for some shops that have fallen behind on technology, the greater investment by far is in upgrading their tools and skills,” he said. “For some shops that might be a very large price to bear but we have to provide reassurances to the consumer that we have the skills to fix the cars of today and tomorrow.”

He said the campaign is really about ensuring a minimal threshold of entry for the people who want to fix cars.

“I believe service providers want a level playing field. That’s the message we’re hearing,” he said. “They want a system that’s fair and recognizes the excellence of shops that make the proper investments.”

Mandatory certification could also play a role in ensuring that mechanical shops have the proper credentials to meet vehicle security protocols. He believes certification could be a positive outcome for repair shops because cars are highly connected and very challenging to diagnose.

“How will we ensure that mechanical shops are properly equipped, trained, and credentialed to access sensitive data in a secure way? Certification provides a pathway,” he said.

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Statistics Canada is reporting that real gross domestic product in Canada dropped 11.6% in April, following a 7.5% decline in March.

April marked the first full month of measures put in place to slow the spread of Covid-19.

The transportation and warehousing sector was down for the fifth time in six months, dropping 23.1% in April, as border closures and travel restrictions continued affecting the sector.

The output of motor vehicle and motor vehicle parts and accessories merchant wholesalers were down by half in April and contributed most to the overall decline in the sector, as the shuttering of North America’s automotive assembly plants reduced the need for cross-border movement of parts and products.

All 20 industrial sectors of the Canadian economy were down, producing the largest monthly decline since the series started in 1961. The economy was 18.2% below its February level, the month before the COVID-19 measures began.

Preliminary information indicates an approximate 3.0% increase in real GDP for May.

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Business expectations continue to rise from the lows recorded in April 2020.

The latest data in IHS Markit Canada’s Manufacturing Purchasing Managers’ Index provided signs of a turnaround in momentum across the Canadian manufacturing sector.

The seasonally adjusted PMI registered 47.8 in June, up from 40.6 in May, and well above the survey-record low seen during April (33.0). That said, the latest reading remained below the neutral 50.0 threshold.

Production volumes dropped to the weakest extent since the downturn began in March.

Around 30% of the survey panel reported a fall in output during June, while approximately 27% signalled an expansion. Manufacturers reporting a decline in production overwhelmingly attributed it to weaker underlying demand conditions.

Where growth was recorded, panel members mostly cited a phased restart of factory operations and reopening among clients after stoppages due to the COVID-19 pandemic.

Mirroring the trend for output, the latest data signalled the slowest fall in new work since the start of the downturn in March. Manufacturers reporting lower sales mostly commented on cautious spending by clients and worsening global economic conditions in the wake of the COVID-19 pandemic. Export sales continued to decrease at a faster pace than total new orders in June.

A lack of pressure on business capacity and concerns about the outlook for customer demand continued to hold back staff hiring in June. Latest data indicated a fall in employment for the fourth month running, but the rate of decline was the least marked over this period.

Some manufacturers noted that they had begun to add to their payrolls in response to more stable demand conditions, but this was more than offset by those signalling continued job cuts in June.

Looking ahead, around 42% of the survey panel anticipate a rise in production volumes over the next 12 months, while 16% forecast a reduction. As a result, the index measuring business expectations for the year ahead remained in positive territory, and reached its highest level since February. Manufacturers typically commented on an expected boost to client demand and production schedules associated with a gradual easing of COVID-19 measures.

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Treasury Board president Jean-Yves Duclos said federal officials will push back against any new protectionist effort by Donald Trump to impose tariffs on steel and aluminum, making the case that Canadian aluminum is no threat to the American market.

Duclos was responding to a report from Bloomberg saying the Trump administration is planning to impose a 10 per cent tariff on aluminum imports from Canada.

Duclos would not say whether the government is aware of a new round of tariffs impending, but said the threat of protectionism still exists and the risk becomes bigger in the wake of the COVID-19 pandemic.

“We all are aware of the protectionist attitudes and actions of the last few years in the context of our relationship with the United States,” Duclos said during a midday briefing Tuesday.

He said the Canadian government had worked hard to secure a new North American free trade agreement – and end the previous round of tariffs against imports of aluminum and steel from Canada – but warned of the need to remain vigilant.

“We need, as Canadians, to be mindful of the fact that protectionism still exists and in fact runs the risk of being even bigger and being an even greater threat as we emerge from the COVID health and economic crisis,” Duclos said.

“This being said, we use every opportunity to make our neighbours and our friends and trade partners understand that it is to the joint benefit of everyone to keep the flow of goods and services open and strong, because we all gain from that.”

The last time the Americans imposed such tariffs, the federal government imposed reciprocal tariffs on a slew of U.S. products crossing into Canada before both sides backed down.

Duclos said the Canadian government has fulfilled its end of the trade detente by ensuring Canada isn’t a conduit to the U.S. for cheaper overseas metal.

Canada’s ambassador to the U.S., Kirsten Hillman, delivered a similar message Tuesday.

“We firmly believe that Canadian aluminum exports to the U.S. aren’t hurting the U.S. market in any way,” she said during a virtual event, adding the two countries have been having “constant dialogues” on the issue.

“We’re emphasizing with our American friends the fact that we have this deep, mutually supportive industry and that far from being harmful to the American aluminum sector, our aluminum exports are indeed a great help and benefit.”

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Total U.S. automotive aftermarket sales are forecast to decrease 8.8 percent in 2020 as a result of the impact of the Covid-19 pandemic and related factors, according to the “2020 Joint Channel Forecast Model” produced jointly by the Automotive Aftermarket Suppliers Association (AASA) and the Auto Care Association.

The 2020 Joint Channel Forecast Model also predicts that total light duty aftermarket sales will grow from $281 billion in 2020 to $314 billion in 2021.

“Despite the ongoing COVID-19 pandemic, the Joint Channel Forecast shows that the continued strength and resilience of the automotive aftermarket will lead to a brighter 2021,” said Paul McCarthy, AASA president and COO.

He said that despite a year of immense challenges and uncertainty, the foundation of the industry’s key drivers remains strong.

“Miles driven continue to rise as global economies reopen, new technologies continue to emerge, and the desire to be with friends and family will propel further car usage,” he said. “We are still facing a lot of challenges, but this forecast confirms the essential attractiveness of the aftermarket. The aftermarket supplier community is continuing to work hard to try and support our customers and our essential industry, which, despite the crisis, remains a vibrant contributor to our economy.”

Auto Care Association president and CEO Bill Hanvey acknowledged that the aftermarket has had a difficult first-half of 2020.

“As industry businesses assess the impact and look to navigate the road ahead, there are a few certainties that provide a silver lining,” he said. “DIY and e-commerce are growing during the pandemic, and early indicators show that that the average age of vehicles on the road will continue to rise as consumers hold on to their aging vehicles during economic uncertainty.”

Hanvey said previous crises have proven the aftermarket’s ability to bounce back from downturns and in many cases, take advantage of new opportunities through technology.

The market sizing and forecast is conducted on behalf of AASA and the Auto Care Association by IHS Markit. The forecast is based on the U.S. Census Bureau’s Economic Census, IMR Inc., and proprietary economic analysis and forecasting models from IHS Markit.

www.aftermarketsuppliers.org

www.autocare.org

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Retail sales at automotive parts, accessories, and tire stores fell 4.2% in the first quarter of 2020, according to DesRosiers Automotive Consultants.

The 10.4% drop in business in March was mitigated by positive sales numbers in January and February.

Overall, however, the impact of the Covid-19 pandemic was relatively mild on auto part sales, compared to the impact on the sale of new and used vehicles.

According to consultants at DesRosiers, used car dealerships took the biggest hit in Q1, with retail sales falling 11.5% thanks to a 33.9% decline in March.

Retail sales at new car dealers started strong in January and February with increases of 4.7% and 7.1%. March brought about a 35.0% decrease with total sales falling from $11.19 billion to $7.28, resulting in a first quarter decline of 10.4% for 2020.

Retail sales at gasoline stations fell 4.8% in the first quarter with a 23.3% March decrease wiping away increases in January and February.

www.desrosiers.ca

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About 70% of mechanical shops surveyed by the Automotive Service Association (ASA) in May believe business will improve over the next 60 days.

Less than 10% believe it will continue to slow down.

That’s in stark contrast to the collision sector, where less than half of the shops surveyed were optimistic about the next 60 days, and fully 30% said they expect business to slow down.

ASA released the survey results yesterday in a Virtual Industry Professional (VIP) forum that featured an update on political doings in the U.S., and best ways to take advantage of government support programs.

Among other findings of the ASA survey,

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PMI at second-lowest level since survey began in October 2010

Rate of decline in manufacturing output eases from April’s survey record

Steep drop in employment reported during May

May data were collected 12-22 May 2020.

Canadian manufacturers signalled another sharp deterioration in overall business conditions during May, which survey respondents again almost exclusively attributed to the impact of the coronavirus disease 2019 (COVID-19) pandemic.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) registered 40.6 in May, up from 33.0 in April but still well below the neutral 50.0 threshold. The latest declines in output, new orders and employment were all less severe than in April, but still the second-fastest since the survey began nearly ten years’ ago.

Production volumes have now decreased for three months running. On each occasion the rate of contraction has been faster than at any other time since the start of the survey in October 2010. Manufacturers widely noted that output had been scaled back in response to a rapid drop in customer demand. Some firms also noted that adjustments to plant operations to ensure social distancing measures had restricted operating capacity.

Where output growth was reported, this was linked to a gradual reopening of manufacturing supply chains and, for some firms, increased sales of healthcare-related products.

Mirroring the trend for production volumes, the latest survey pointed to a slightly slower pace of decline in new business than the survey record seen during April. Anecdotal evidence mostly cited worsening global economic conditions and subsequent cutbacks to spending among clients, especially those in the energy sector. New export sales followed a similar trajectory in May, with orders falling sharply but at a slower rate than seen during April.

Despite some reports that social distancing measures had constrained production schedules, the latest survey highlighted an overall lack of pressure on operating capacity followingaslumpincustomerdemand.Thiswassignalled by another sharp fall in backlogs of work across the manufacturing sector during May. Moreover, employment numbers continued to decrease at much a faster pace than at any time prior to the COVID-19 pandemic. Around 40% of the survey panel reported a decline in staffing levels, while only 9% signalled an increase.

May data indicated severe stress on manufacturing supply chains, with business closures, low stocks and international shipping delays all contributing to a sharp downturn in vendor performance. At the same time, purchasing prices increased at the fastest pace since February, which was often attributed to exchange rate depreciation against the US dollar.

Business expectations across the Canadian manufacturing sector picked up from April’s series record low. However, the degree of optimism was only modest in May, with survey respondents widely commenting on concerns that the COVID-19 pandemic would have a long-lasting impact on business operations.

Commenting on the PMI data, Tim Moore, Economics Director at IHS Markit said:

“May data highlights that the Canadian manufacturing sector remains on a steep downward trajectory, despite the speed of decline moderating from April’s survey record. A severe drop in demand from both domestic and export markets amid the COVID-19 pandemic resulted in sharp cutbacks to production volumes. While some survey respondents commented on a gradual reopening of manufacturing supply chains, business operations were still adversely impacted by longer lead times for critical inputs and low stocks among suppliers. At the same time, exchange rate depreciation against the US dollar also fed through to higher purchasing prices in May.

“The latest survey pointed to widespread job cuts across the manufacturing sector. Around four times as many survey respondents reported a fall in employment as those indicating an increase in May, which was mostly attributed to concerns about the long-term impact of the COVID-19 pandemic on manufacturing workloads.”

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The vast majority of aftermarket businesses in Canada have suffered business disruption as a result of the coronavirus pandemic, according to a survey conducted by the Automotive Industries Association of Canada.

Fully 94% of respondents to the survey reported some degree of business disruption in March and April. A third described the disruption as ‘slight,’ while 61% said the public health emergency has been ‘very disruptive.’

Two per cent of respondents reported a complete shutdown of business operations.

Only 4% said they were functioning normally.

The survey was open from April 20 to May 8, targeted at aftermarket business owners and employees across the 13 provinces and regions of Canada.

Half of those who said their businesses had been very disrupted reported a drop in revenue of 50% or more.

“There are still high levels of uncertainty among parts manufacturers, wholesalers, and mechanical and collision shops on business continuity and outlook,” the report found.

“The impact of reduced businesses has been swift and significant with over half the respondents having to lay off staff (61%).”

There was a degree of optimism, however, over the question of how long the impacts on business will last. Forty-two percent of respondents expect recovery to begin very soon. Thirty per cent expect we have not yet seen the worst days. Only a small percentage (6%) believe that business will return to pre-COVID conditions while some businesses (9%) have raised doubts if they will even be in operation.

“The business outlook is highly uncertain,” the report concludes.

www.aiacanada.com

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By Allan Janssen

The coronavirus pandemic could accelerate a fledgling trend of near-sourcing by automotive component suppliers, according to well-placed panelists at the Automotive Aftermarket Suppliers Association’s recent Vision conference.

The conference, held online over two days in April, featured a panel discussion that predicted the repatriation of auto part manufacturing, raised questions about intellectual property protection, and emphasized the value of face-to-face relationships.

The panelists, moderated by Jeff Jorge, a principal at Baker Tilly Virchow Krause, LLP, were Howard Laster, executive director and general manager of North American aftermarket for Continental; Selwyn Joffe, president, chairman, and CEO of Motorcar Parts of America; and Jay Burkhart, president of the Trico Group.

“With everything that’s happened over the last couple of years, including the current virus situation, I believe there’s going to be more focus on North America-sourced products serving the North American aftermarket,” Burkhart said. “Everyone’s looking for silver linings these days. I think that’s going to be one of them.”

Supply chain efficiencies

He said in order to service the increasingly sophisticated vehicles that will be hitting the aftermarket in the coming years, supply chains will have to be shorter, nimbler, more transparent, and more reliable.

“With the recent tariffs and now this problem, I just have to believe that more and more of the product that is consumed in the North American aftermarket is going to be made somewhere closer to where it is consumed,” he said. “I think that’s part of the lesson of what has happened in the last couple of years.”

The panelists were agreed in their concern about over-reliance on China as the default manufacturing hub for the automotive aftermarket. In fact, Joffe acknowledged that a number of concerns, including freight availability, tariffs, inflation, and supply chain disruptions, have for years now led his company to minimize its exposure to China.

“There are a lot of variables related to China,” he said. “We, like everyone, source from all over the world, looking for the most efficient manufacturing and highest quality product. And today it’s not just a Chinese market, it’s a global marketplace.”

Intellectual property

With the growing sophistication of automotive technology, Joffe said the protection of intellectual property is a particularly serious matter.

“There is a significant concern that as you share your intellectual property with contract manufacturers or component suppliers that you run the risk of not being the only one to have that proprietary information,” he said. “I would call upon the demand channel to be very sensitive because I think that if the supply chain is not handled very carefully, it will get significantly weaker for North American companies.”

High-technology products

Laster agreed, saying that as the complexity of these parts becomes greater, the supply needs to be closer in proximity to the customer.

“When you talk about the coming technologies, you’re talking about software. You’re talking about ADAS. You’re talking about technology that goes far beyond ADAS. When it comes to these technologies, intellectual property become very dicey,” he said. “I think the temperature of what we’re used to in the traditional aftermarket will change and how you’ll supply that and where you’re getting it and how comfortable you are with the liability of it all.”

Joffe maintained, however, that not all product lines will be able to withstand the increased cost of near-sourcing.

“In the pure hard parts arena, where you have a diversity of parts, you’re going to have to weigh out proximity versus labour costs,” he said. “Depending on the competitive environment relative to the labour portion – how much labour goes into the product – it becomes trickier.”

Indeed, manufacturers have been forced to focus on lowering prices for many years, and it may be time to resist that demand from customers, the panelists agreed.

Pricing and profit

“All North American suppliers have been so conditioned that we have to go to China to stay alive because our customers are beating us up for lower and lower prices,” Burkhart said. “There was a little bit of inflation finally in the industry last year with the tariff issue. Some of the categories moved up ever so slightly in price but the bottom didn’t fall out of demand.”

He suggested there might be some room for further inflation to secure a shorter supply chain.

“Maybe there is some pennies difference in the total price that would allow more local sourcing,” he said. “If you listen to earnings calls, there are an awful lot of questions from investors about ‘where do you get your product from’, and ‘how reliable is your supply base.’”

“I think the aftermarket desperately needs some inflation,” agreed Joffe. “There has been a tough pricing environment for a lot of years. I think inflation across the board is healthy for everybody. Consumers have been getting a disproportionately fabulous deal. So I think there is a little bit of room for movement.”

Pipeline transparency

Burkhart said another benefit of near-sourcing is improved transparency in the supply chain.

“When you’re far away from the core governance of the company – whether it’s China or elsewhere – I think at times like this it is incredibly challenging,” he said. “You start to lose visibility in terms of what is happening on the ground. You can see product coming out. You can see the product arriving. But you’re not really sure what’s going on there on the ground, and that’s a big problem right now.”

He acknowledged, however, that manufacturing capacity could be an issue in the near-term.

“We don’t even have the capacity here right now, but I still think directionally, the current virus is going to add to the momentum of more locally made or sourced product,” he said. “A lot of the things we see happening right now should be adding momentum to the fact that more products should be made closer to home.”

Jorge said the dialogue was meant to be a springboard of ideas during a difficult time for the industry.

“We have a common challenge right now as a human race. It’s also an opportunity to come together as a sector to figure out how we become stronger, how we become unified – even more than we were before,” he said. “To quote Winston Churchill, to never let a good crisis go to waste, we’re going to help empower, equip and embolden each other.”

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If the sale of auto parts and service during the Great Recession of 2009 is any predictor of what will happen during the current market downturn, independent shops should expect to fare better than dealerships.

According to a new report by Illinois-based automotive research firm IMR Inc., when consumers are faced with economic challenges, they tend to favour aftermarket repair shops over dealerships if they can’t do the work themselves.

“Generally, as we saw between 2008 and 2009, during an economic downturn, they tend to repair their vehicles as a DIYer,” said Bill Thompson, CEO of IMR Inc. “Where they cannot, they’ll choose one of various aftermarket outlets for service.”

IMR’s report, designed to glean insights from the way purchasing behaviour changed during the last major economic downturn, found that do-it-for-me activity declined in the lead-up to 2009, removing service events from the DIFM market. But dealerships were hit harder.

Independent repair shops saw a 6.5% increase in DIFM activity, while dealerships suffered an 8.2% drop.

The report also found that the independent repair sector’s share of non-warranty work by vehicle age changed very little during the Great Recession. But, over the years, independents have lost share to dealerships amongst vehicles older than three years.

Interesting, IMR Inc. found that in the 10 years since the Great Recession, dealerships have managed to capture more non-warranty work on aging vehicles, compared to independent shops which have lost ground.

Predictably, IMR found that online parts purchases increased up in 2009 over 2007 and 2008 levels, but that is not seen as tied to the downturn. Indeed, it has climbed in the years since to a much higher percentage of parts purchases.

The report looked at auto repair ‘events’ rather than dollars spent, and focused on practical repairs that kept vehicles moving, rather than the purchase of auto accessories.

Thompson said the report should offer data that will be valuable to companies making structural changes during the current economic downturn.

“No matter where you sit in the automotive industry, consumers purchasing parts and services drives our collective businesses and having some insight into their behavior is essential,” he concluded.

www.automotiveresearch.com

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The average estimated CO2 emission rate for all model year 2018 vehicles in the U.S. fell by 4 grams per mile to 353 g/mi – the lowest ever measured.

The U.S.-based Environmental Protection Agency (EPA) released its latest findings on greenhouse gas emissions in its latest trend report.

The 2019 EPA Automotive Trends Report, designed to grade the automakers’ performance in meeting emissions targets, found that fuel economy increased by 0.2 miles per gallon over 2017 levels to 25.1 mpg – a record high.

Focusing on real-world emissions data (as opposed to lab tests), the agency found that since 2004 CO2 emissions have decreased 23%, or 108 g/mi, and fuel economy has increased 30%, or 5.8 mpg.

Since 2004, CO2 emissions and fuel economy have improved in 12 out of 14 years and have repeatedly achieved new records.

Preliminary data suggests further improvements will be shown when model year 2019 is examined. Average estimated real-world CO2 emissions are projected to fall 6 g/mi to 346 g/mi and fuel economy is projected to increase 0.4 mpg to 25.5 mpg.

Excluding Tesla, which produces only electric vehicles, Honda had the lowest CO2 emissions and highest fuel economy in model year 2018 and also achieved the largest five-year improvements in CO2 emissions and fuel economy.

Between model years 2013 and 2018, Honda reduced CO2 emissions by 31 g/mi and increased fuel economy by 2.8 mpg.

Subaru and Mazda tied for the third lowest CO2 emissions and third highest fuel economy in model year 2018. BMW had the second largest five-year improvement in CO2 emissions, reducing emissions by 27 g/mi, and Subaru had the third largest improvement, at 26 g/mi. BMW also increased fuel economy by 1.7 mpg, while Subaru increased by 2.2 mpg.

Two manufacturers actually increased CO2 emissions and reduced average fuel economy over the five-year span. Volkswagen had the largest increase in CO2 emissions, at 11 g/mi, and the largest decrease in fuel economy, at 1.3 mpg, due mostly to a large shift towards SUVs. Hyundai also showed lower fuel economy and higher emissions.

All the large manufacturers (with production of more than 150,000 in model year 2018) ended the 2018 model year in compliance with the GHG target program.

The authors of the report reflected on data collected on every new light-duty vehicle model sold in the U.S. since 1975. They cautioned that some data from 2019 models are preliminary.

The full report can be viewed at the agency’s auto trends web page. 

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The Automotive Aftermarket Suppliers Association (AASA) has introduced a new membership category, designed to aid those who have been laid off during the current pandemic.

“The Networking Member category is designed for those in our industry who are transitioning between companies,” the association’s senior vice president of operations said in an AASA press briefing this week.

Chris Gardner said AASA has partnered with executive search firm APA Search to create a database of temporarily out-of-work aftermarket professionals, who have lost their jobs due to Covid-19.

“This will remain in operation until the end of the crisis to help those who have been directly impacted,” Gardner said.

The platform will provide unemployed automotive associates with opportunities to be found and hired by automotive industry employers at no cost to either party.

A related website also will provide industry employers a free, searchable, and indexed database of automotive associates with vital industry skills and experience. The database has been updated to accommodate all positions related to the transportation industry.
Automotive associates who have lost their positions and would like to be found can register at www.register.apasearch.com.

“This important partnership with APA Search is a crucial part of what our association does best,” said Paul McCarthy, AASA president and chief operating officer. “We foster meaningful connections within our industry and offer resources to our members. Retaining valuable people in our essential industry is how the automotive aftermarket will continue to grow and prosper in the future despite the impact of the COVID-19 pandemic.”

During the press briefing, McCarthy acknowledged that the past few weeks have been an absolute whirlwind for his association.

“Let me just say this crisis is the busiest we’ve ever been, probably in our 116-year history, as we try to connect members to insights and guidance, and navigate through this crisis,” he said.

While the headwinds facing the industry are obvious and daunting, he suggested there are also some tailwinds that may not be fully appreciated.

Among the bright spots:

* He believes the downturn has hit its low point, with April likely marking the bottom of the trough;

* Miles driven—the biggest driver for our marketplace – are starting to recover;

* The coming economic restart will likely bring increased employment in the aftermarket;

* Gas prices are at rock bottom; and

* Millions of people are eager to hit the open road.

“There are stir-crazy people around the world who want to move around again, and do so safely,” he said. “Wall Street has identified the aftermarket as a valuable opportunity in the recovery.”

As for how AASA members are viewing the current situation, McCarthy said he’s hearing a lot of optimism.

“We are hearing rational caution in our industry, and we’re also hearing rational hope that at least from a business perspective, the rest of the year may look better than what we’ve experienced so far this year. Compared to other industries, we have a brighter outlook in the recovery period.”

www.apasearch.com

www.aftermarketsuppliers.org

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April data signalled by far the steepest downturn in manufacturing conditions since the IHS Markit began its Canadian Purchasing Manager’s survey in October 2010.

Survey respondents almost exclusively attributed lower production, new orders and employment to shutdowns amid emergency public health measures to halt the spread of coronavirus disease 2019.

At 33.0 in April, the seasonally adjusted index was down sharply from 46.1 in March, to signal a rapid decline in manufacturing sector business conditions.

This reflected survey-record declines in output (index at 22.6), new orders (23.9) and employment (25.1), alongside a severe reduction in stocks of purchases.

The fall in the Manufacturing PMI since March was softened to some extent by a steep lengthening of suppliers’ delivery times (which has an inverse contribution to the headline index). However, longer lead-times were not demand-driven in April, but instead simply reflected severe distress across global supply chains amid widespread business closures and delays at international borders.

Around 66% of the survey panel reported a drop in production volumes in April, while only 10% signalled an expansion. Canadian manufacturers cited factory shutdowns or reduced production capacity, alongside severely reduced customer demand. Where growth was reported in April, this was mainly linked to consumer essentials and production for healthcare supply chains.

The survey-record decline in new orders reflected a rapid decline in sales to both domestic and export clients in April. Lower demand was almost exclusively linked to the COIVID-19 pandemic and subsequent cutbacks to customer spending. Manufacturers often commented on severe reductions in sales to clients in the automotive and energy sectors.

Manufacturers reported severe cash flow challenges during April, which resulted in rapid declines in purchasing activity, staffing numbers and inventories. The latest fall in employment levels was by far the sharpest seen since the survey began just over nine-and-a-half years ago. There were also survey-record declines in stocks of finished goods, pre-production inventories and input buying across the manufacturing sector in April.

Looking ahead, manufacturers are the more pessimistic about their prospects for the next 12 months than at any time since this index began in July 2012, reflecting uncertainty about the length of customer showdowns and an expected slump in energy sector spending.

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IHS Markit has revised its forecasts for global light vehicle sales and production as the impact COVID-19 impact has depressed demand even further than originally expected.

According to new analysis, global light vehicle sales are now forecast to be 69.6 million units this year in the wake of the pandemic, 22.0 percent lower than in 2019, with a risk of even further deterioration.

Similarly, it has reduced its global light vehicle production estimate to 69.3 million units, a 19.6-million-unit decline from 2019
The impact of COVID-19 on vehicle sales and production has outstripped the 2008-2009 recession, and significant uncertainty remains about prospects for a meaningful recovery.

“The pandemic remains a clear and present danger to the autos sector, with months of uncertainty expected to cloud hopes for global recovery prospects,” said Colin Couchman, executive director, global autos demand forecasting at IHS Markit. “The expected cycle of decline, stabilization and recovery for autos varies by market, reflecting variations in containment strategies and policy responsiveness” he said.
In recent weeks, Mainland China is seeing green shoots of recovery, while much of the rest of the world remains in lockdown. The IHS Markit forecast for Greater China sales in 2020 sees volume at 21.4 million units, a drop of 15 percent from 2019 levels. In 2021, volume could recover to 23.2 million units, based on current forecasts.

In Europe, COVID-19 lockdowns remain firmly in place for Italy, Spain, France and the UK, though show signs of easing in Germany. The forecast is for Europe to see sales fall 24.6 percent to 15.5 million units.

North America is forecast to see sales drop 26.7 percent year-on-year. The U.S. market sales forecast is 12.5 million units for the year, from 16.3 million in 2019.

In Japan, full-year 2020 production is now expected to decline by 20.4 percent year-on-year to 7.3 million units. In South Korea, full-year 2020 Korea production is forecast at 3.2 million units, declining by 16.7 percent relative to 2019.

www.ihsmarkit.com

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DesRosiers Automotive Consultants is reporting “a further step into uncharted territory” with light vehicle sales estimated to have fallen 74.6% from 2019 levels.

The company says March saw an estimated 48.3% decline in light vehicle sales compared to March 2019, as the first impacts of the pandemic emerged in the Canadian automotive market.

April 2020 – the first full month where quarantine measures were pervasive – saw sales of only 45,833 units, compared to 180,616 in April 2019.

Year to date, the market is now trending down 36.7% from 2019.

“With a complicated and ever-changing situation, foresight on the industry is clouded,” DAC reports. It speculates, however, that with efforts to reopen the economy gaining momentum, April could prove to be “the bottom of this chasm.”

www.desrosiers.ca

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How would you describe the current state of your business under the current Covid-19 crisis? Have you laid of some of your staff? Are some working from home? Have you created curbside-solutions that minimize customer contact?

The Automotive Industries Association would like to know. The national association is seeking your help to peg the cost of the current Covid-19 pandemic.

Their new poll  is asking repair shops, jobbers, retailers, and manufacturers to weigh in on a variety of questions on the impact of coronavirus on the automotive aftermarket.

In particular it is looking for anticipated changes over the next 30 days, and what kind of government assistance you truly need.

You can take the poll HERE.

www.aiacanada.com

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The specialty automotive industry remains largely open for business despite the Covid-19 pandemic, and executives are optimistic about a timely return to normalcy, a new poll shows.

Between April 1-7, the Specialty Equipment Manufacturers Association (SEMA) asked 2,000 industry insiders their view of the current market conditions, and found an bedrock of reliance and optimism.

About two-thirds of the industry continues to operate during the COVID-19 pandemic, more than half of the industry’s employees continue to work from a company site, and 87% of those surveyed indicate they have been impacted in the short-term but say they “will get through it.”

“The results of this survey show the resiliency of the specialty automotive industry and how it continues to push forward, working to move past the COVID-19 disruption,” said SEMA president and CEO Chris Kersting. “We are using this feedback to further develop resources to help member businesses through this time of economic interruption.”

The poll was intended to identify areas where the aftermarket industry needs additional support as the economy moves towards recovery. The strength of the industry is proven by the nearly 2,000 companies that have already signed up to exhibit at this year’s SEMA Show, to be held in Las Vegas in November.

“The aftermarket industry and our members remain positive, and are looking forward to opening back up in the months ahead and participating in a SEMA Show that will play a key role in launching a successful 2021,” said Kersting. “Now more than ever our priority for SEMA is clear: assuring the health, safety, and business continuity for our members, partners, employees, and the overall industry community.”

To further assist businesses during the Coronavirus pandemic, SEMA has created a dedicated webpage.

www.sema.org/coronavirus

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New Brunswick Premier Blaine Higgs

New Brunswick and Prince Edward Island have both identified identified automotive repair shops and gas stations as essential services during the current coronavirus outbreak.

In New Brunswick, Premier Blaine Higgs has invoked the province’s Emergency Measures Act, giving the government broad powers to enforce business closures and social distancing to prevent the spread of the virus.

Retail operations must close, with some exceptions, such as grocery stores, retailers of fuels, repair garages, post offices, financial and lending institutions, convenience stores, hardware and automotive parts, animal and fish feed providers, pharmacies, gas stations, NB Liquor and Cannabis NB.

All businesses required to stop admitting patrons are permitted to sell online or over the phone and to arrange delivery or pickup of purchases.

In Prince Edward Island, auto service is also on the list of essential personal services during the Covid-19 crisis.

The province released a list of service which, if interrupted “would endanger the life, health or personal safety of the whole or part of the population.”

P.E.I.’s full list can be found HERE.

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The list of essential services includes the “mechanical repair of motor vehicles, trucks and specialized equipment for industries deemed essential and roadside assistance.”

All non-essential services must shut down by midnight tonight.

Quebec Premier François Legault’s announced Monday that Quebec is being put in partial lockdown, with all non-essential stores are being closed until at least April 13.

So far, three other provinces – Ontario, Prince Edward Island, and New Brunswick – have designated the aftermarket as an essential part of the economy during province-wide emergencies.

Here is the complete list of what can stay open in Quebec:

Grocery stores

Convenience stores

Pharmacies

Garbage collection

Hardware stores

Public transit

Media and communications services

Taxis and adapted transport

Liquor stores and marijuana dispensaries

Courthouses (minimal services)

Banks

Gas stations and garages

Funeral homes and cemeteries

Hotels

Dry cleaners and laundromats

Restaurant takeout counter service

Dentists and optometrists (emergency services).

Veterinary services

Animal shelters

Medical and orthopedic supply stores

Movers

Ports and airports

Blood services (Red Cross) and organ donation services

Red Cross

Police and fire services

Correctional officers

Coroners

Food distribution networks

Food inspection services

Transport and storage services

Postal services and couriers

Construction services including infrastructures deemed essential

Construction rental equipment

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A detailed analysis of the impacts of the coronavirus outbreak by the Automotive Aftermarket Suppliers Association (AASA) this week started with words of encouragement.

AASA president Paul McCarthy adopted soothing tones to reassure those who logged on to the association’s emergency webinar that the aftermarket will not only survive the crisis but will thrive.

“When we emerge from this, and we will, our aftermarket fundamentals are strong,” he said. “Our importance to consumers is vital.”

He said the association has sent letters to all 50 state governments to remind them that vehicle repair remains an essential service.

“We need functional vehicles to take workers to hospitals, and goods to our grocery stores,” he said.

“It is very strange times that bring us together here today,” he acknowledged. “Though we are facing challenges, we should be hopeful. We are doing difficult things, and aiming for the best possible outcome.”

He acknowledged that all the answers are not known yet. In fact, new questions continue to arise.

AASA senior vice president Chris Gardner echoed the positive sentiments.

“We will recover and we will recover strongly, as this industry always has,” he said.

To discuss what is known however, the webinar heard from

• • Kevin Depew, deputy chief economist and eminence program leader for tax consulting firms RSM
  • Mark Segner, vice president of global sales for supply chain consulting firm Descartes Datamyne
  • Sheldon Klein, a shareholder with the legal firm of Butzel Long
  • Rebecca Davies, shareholder with the legal firm of Butzel Long

The webinar was recorded and will be made available for viewing online.

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The U.S. vehicle fleet hit a record for fuel efficiency in 2018 averaging 25.1 miles mpg in real-world driving as it rose 0.2 mpg, according to that company’s Environmental Protection Agency (EPA).

The fleet is also preliminarily anticipated to jump to 25.5 mpg for the 2019 model year.

The EPA and the National Highway Transportation Safety Administration (NHTSA) are working to finalize rules to rollback Obama-era requirements through the 2026 model year. Officials hope to finalize the new rules by April 1 but are still working to address remaining issues.

The report also showed Fiat Chrysler Automobiles purchased a significant number of vehicle emissions credits, while Tesla Inc., Honda Motor Co. and Toyota Motor Corp. sold credits. Daimler, Volkswagen Group and BMW also bought credits.

Among the 13 largest automakers, only VW and Hyundai Motor Co. saw average fuel economy fall in 2018, as they sold more utility vehicles and fewer cars.

Dan Becker, director of the Safe Climate Campaign, said automakers were far short of the 1 mpg improvement they were supposed to meet in 2018. “The rules should be strengthened to cut pollution and save consumers money at the pump,” Becker said.

EPA Administrator Andrew Wheeler cited the small annual increases as evidence the Obama era requirements are “unfeasible.”

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The gradual recovery in business conditions across the manufacturing sector continued in February, according to the latest data compiled by IHS Markit. Production volumes increased for the sixth month running, supported by the fastest rise in new orders since October 2019. Moreover, export sales returned to growth in February, with Canadian manufacturers noting that greater demand from US clients had helped to offset weaker spending in the Asia-Pacific region.

At 51.8 in February, up from 50.6 in January, the seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index registered above the 50.0 no- change value for the sixth consecutive month and pointed to the strongest overall improvement in business conditions since February 2019.

The rise in the headline PMI mostly reflected faster rates of output and new order growth, alongside a modest rebound in employment numbers during the latest survey period. Production volumes expanded at the strongest pace since last November, despite a small number of reports that supply chain delays had disrupted business operations.

Latest data indicated the sharpest lengthening of average lead times from suppliers for 12 months. Worsening vendor performance was attributed to a combination of rail transport blockades and delays with the receipt of items sourced from suppliers in China.

Meanwhile, new work received by Canadian manufacturers increased for the second month running in February. The sustained rebound in sales volumes was helped by an upturn in new export orders for the first time since September 2019.

Despite a modest increase in new business intakes, latest data signalled another reduction in backlogs of work across the manufacturing sector. Survey respondents mainly linked to a lack of pressure on operating capacity and successful investments in new plant machinery.

Payroll numbers increased slightly in February, which contrasted with the fractional decline in employment that was reported at the start of the year. Moreover, manufacturers remain optimistic about their prospects for output growth in the next 12 months, with the degree of positive sentiment only slightly lower than in January.

Meanwhile, input buying continued to fall in the latest survey period. Lower volumes of purchasing activity have now been recorded in each of the past three months, largely reflecting efforts to reduce pre-production inventory holdings. Stocks of finished goods also declined in February, which continued the downward trend seen since October 2019.

On the inflation front, average cost burdens increased at a robust and accelerated pace in February. The latest rise in input prices was the fastest since April 2019. Pressure on margins contributed to another modest upturn in factory gate charges during the latest survey period.

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By Allan Janssen

In the era of high-tech motoring, potential dangerous vehicle components, and advanced driver assist systems, technician certification is key to public safety, says the president and CEO of British Columbia’s Automotive Retailers Association (ARA).

Adrian Scovell said the days where anyone can charge money to fix vehicles — without first obtaining the proper training, tools, and equipment — are over.

British Columbia is currently the only one that does not require mandatory certification for automotive technicians. ARA has launched a campaign to convince government that anyone who works on a modern vehicle should require certification. Scovell said the argument is all the more compelling because British Columbia has mandated that 30% of all new vehicles sold by 2030 must be zero-emission vehicles (ZEVs). By 2040, all new vehicle sold in B.C. must be ZEVs.

“We’re telling government that we need a robust functioning aftermarket industry in order to make this successful,” he said.

“If we want the adoption of ZEVs to be successful, we need to have an infrastructure that supports that. It’s no good just selling these vehicles and then finding out that no one wants to tow them because they’re dangerous, no one can fix them properly when they’ve been in a collision because they don’t have the data or the equipment, and no one can fix them when they break down because they don’t know how to handle the electronics.”

Scovell believes the automotive industry is at the most important juncture since the introduction of the gas engine.

“The vehicle is changing rapidly. The standard mechanic of the past is no longer suited to that task. There is new training, new things that has to be thought about,” he said. “We are the only province that has no mandatory trades [where tradespeople must be certified in order to do that particular job]. None. You can get certified if you want to, but you don’t have to.”

He points out that modern ADAS systems affect all aspects of the aftermarket, from collision, to glass, to mechanical repair, to towing, to recycling. ARA represents more than 1,000 automotive-related businesses in B.C., in all of these disciplines. He’d like to see a roll-in program which requires certification to work on certain models or model years. Requirements should steadily expand until all vehicles are covered. It could even be patterned after the certification requires to work on air conditioning systems. Technicians don’t have to be certified for general repairs but to work on AC systems, they do.

“Nobody can say their business relies on the repair of ZEVs right now,” he said. “We recognize that we can’t expect that by Monday morning all automotive businesses have to be certified. There are people whose livelihood relies on the ability to continue fixing cars as they have. But they can’t argue that they should be charging money to repair vehicles if they don’t have the training or proper equipment to do so.”

He said he has not encountered push-back from technicians who do not want to be forced to be certified. And he says the association’s letter-writing campaign is gaining steam.

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In an effort to spur innovation and encourage the widespread adoption of electric vehicles (EVs), the Government of Canada is providing Ontarians with more options to purchase, charge and drive zero emission vehicles.

Navdeep Bains, minister of Innovation, Science and Industry, and Seamus O’Regan, Canada’s Minister of Natural Resources, have announced that the government will invest $8 million to build 160 fast chargers at 73 locations for EVs to help Ontarians transition to a clean energy future.

Funding, will be provided through Natural Resources Canada’s Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative (EVAFIDI), and will allow Hydro One and Ontario Power Generation (OPG) to build one of the province’s largest EV networks.

It is part of the Government of Canada’s commitment to support green infrastructure projects that will create good jobs, advance Canada’s green future and help reach THE ambitious target of 100 percent of passenger zero-emission vehicle sales by 2040.

The federal government is investing over $300 million to support the establishment of a coast-to-coast network of fast-chargers for EVs, charging stations at apartment buildings, public places and workplaces, and hydrogen stations in metropolitan centres.

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The federal government of Canada says it is taking steps to encourage young Canadians to explore careers in the trades.

Labour Minister Filomena Tassi, and Employment, Workforce Development, and Disability Inclusion Minister Carla Qualtrough have launched a project designed to attract female high school students to careers in the skilled trades.

The “Build a Dream’s Career Exploration Expansion Project will give approximately 5,000 girls across Canada a chance to pursue careers in the skilled trades through career exploration, skills training and work experience.

The project will receive $728,000 through the Skilled Trades Awareness and Readiness program.

As part of the two-year project, high school-age women will benefit from career expos and exploratory workshops where they can “try a trade” and have access to an online resource where they can connect with professional skilled tradeswomen and learn about supports that will help them start careers in well-paying skilled trades.

“The new Skilled Trades Awareness and Readiness program will help equip young Canadian women facing barriers to employment with the foundational skills, knowledge and experience they need to get training and start well-paying careers in the skilled trades,” said Qualtrough. “By creating a skilled, diverse and inclusive workforce, our government is strengthening the middle class and creating a more prosperous country.”

According to the Government of Canada, skilled trades are a key component of the national economy, employing more than 3 million Canadians in well-paying jobs (2018 Labour Force Survey).

Employers, provinces and territories, learning institutions, unions, community organizations and individuals all have key roles to play in Canada’s continued success in building a skilled, mobile and certified workforce that supports Canada’s labour market.

The demand for tradespeople is expected to remain strong. Between 2019 to 2028, about 700,000 skilled trades workers are expected to retire (Canadian Occupational Projection System, 2019 Projections).

Women face barriers to entering the trades, largely due to a lack of mentors, difficulty finding an employer, discrimination and family obligations. Only 9% of Red Seal apprentices are women (2018 Registered Apprenticeship Information System).

The average age of starting an apprenticeship is 29 years old (2018 Registered Apprenticeship Information System).

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Prime Minister Justin Trudeau says Canada will move next week to formally approve North America’s new, long-delayed free trade pact.

Trudeau says the government will introduce a ways and means motion Jan. 27 when Parliament resumes, and will table legislation to ratify the deal two days later.

Trudeau says millions of Canadians depend on stable, reliable trade with their largest trading partners.

That will effectively remove the final legal hurdle in preserving continent-wide trade after President Donald Trump foisted the acrimonious renegotiation of the 25-year-old North American Free Trade Agreement on Canada and Mexico in 2017.

Last week, the Republican-led U.S. Senate passed its so-called implementation bill of the new U.S.-Mexico-Canada Agreement.

The Liberal government had been waiting for the U.S. to formally ratify the pact before introducing its own bill, after Mexico ratified the deal back in June.

Ratifying the new North American Free trade deal is a top priority for the Trudeau government.

The deal will require the support of at least one major opposition party to pass; a defeat on matters of confidence, such as the coming budget, would topple the government.

The Liberals can probably rely on the support of the Conservatives to win ratification of the United States-Mexico-Canada-Agreement, despite the fact that the Tories have accused Trudeau of caving in to concessions demanded by U.S. President Donald Trump.

The NDP and the Bloc are likely to oppose USMCA, which replaces the old North American Free Trade Agreement.

On Monday, government House leader Pablo Rodriguez said ratification of the new NAFTA is “an absolute priority” — a view echoed by Deputy Prime Minister Chrystia Freeland, who was the lead minister throughout the tortuous negotiations to renew the continental trade pact and who remains responsible for seeing it across the finish line.

“The new NAFTA was ratified last week by the U.S. Senate, it was ratified before Christmas by Mexico. Now it’s Canada’s turn,” Freeland said.

“I think that is very important for certainty in the Canadian economy, very important for millions of Canadian workers, of Canadian businesses, of Canada families.”

Rodriguez called upon opposition parties to ratify the deal “as quickly as possible.”

“I think we should send a strong message that we are united in the ratification of this very, very important agreement,” he said.

The government did introduce a ratification bill last year, but did not forge ahead with it, preferring not to get ahead of the ratification process in the United States. The bill died when the election was called.

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The U.S. Senate has approved a revamp of the 26-year-old North American Free Trade Agreement that includes tougher labour and automotive content rules but leaves $1.2 trillion in annual U.S.-Mexico-Canada trade flows largely unchanged.

The legislation for the U.S.-Mexico-Canada Agreement passed on an 89-10 bipartisan vote, sending the measure to U.S. President Donald Trump for him to sign into law.

The Motor and Equipment Manufacturers Association (MEMA) released a statement saying it is pleased that the vote was overwhelming and bipartisan.

“We look forward to a quick signing ceremony by President Donald Trump that will close a chapter in this bipartisan success story,” the association stated.

The trade pact, which passed the U.S. House of Representatives on Dec. 19, was first agreed upon in September 2018 and will replace the 1994 North American Free Trade Agreement. Trump vowed for years to quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs to low-wage Mexico.

The new agreement modernizes NAFTA, adding language that preserves the U.S. model for internet, digital services and e-commerce development, industries that did not exist when NAFTA was being negotiated in the early 1990s. It eliminates some food safety barriers to U.S. farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75 percent from 62.5 percent in NAFTA, with new mandates to use North American steel and aluminum.

In addition, 40 percent to 45 percent of vehicle content must come from high-wage areas paying more than $16 an hour – namely the United States and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for U.S. tariff-free access.

According to MEMA, which represents more than 1000 member companies in the motor vehicle parts sector, the USMCA will help ensure that motor vehicle suppliers stay competitive in the global marketplace.

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The Pennsylvania House of Representatives has decided against proceeding with new legislation that would exempt vehicles eight years and newer from the state’s emissions inspection program.

Lawmakers decided instead to commission a study, reviewing the program with input from consumers and small businesses.”

The Automotive Service Association’s Washington, D.C. representative, Bob Redding, described the step as a matter of “taking a more reasonable approach” to potential changes to the state’s vehicle emissions inspection and maintenance program.

The proposed law, he said, “would have eviscerated the state I/M program, impacting Pennsylvania’s air quality and small businesses.”

“We think a study is important to ensure that the emissions program enables us to meet air quality standards,” said Ron Turner, ASA Pennsylvania’s mechanical division director.

www.ASAshop.org

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Business optimism in Canada dropped to its weakest level since February 2016, according to the IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI).

December 2019 data revealed slower output growth amid falling new orders, a subdued rate of job creation, and a setback for the recent recovery in manufacturing growth from the low point seen in the middle of 2019. This was highlighted by the near-stagnation of production volumes and a renewed downturn in order books during the latest survey period.

Manufacturers also indicated more cautious staff hiring strategies and efforts to tighten inventory management, which partly reflected concerns about the near-term business outlook.

The latest survey meanwhile signalled the lowest degree of confidence about year-ahead prospects for production growth since February 2016.

“December data revealed a disappointing end to 2019 for the Canadian manufacturing sector as the steady recovery in production volumes stalled, while new orders fell back into decline,” said Tim Moore, economics associate director at IHS Markit.

At 50.4 in December, down from 51.4 in the previous month, the headline seasonally adjusted index signalled the weakest overall manufacturing performance since August. The latest reading was only fractionally above the crucial 50.0 no-change mark.

Sub-sector data indicated that robust growth in the consumer goods category offset a sustained downturn among investment goods producers. Meanwhile, the intermediate goods category continued to register a steady but relatively subdued growth trajectory.

Measured overall, production volumes across the manufacturing sector increased fractionally in December, with the rate of expansion the slowest for three months. The near-stalling of output levels reflected a drop in new work at the end of 2019. Although only marginal, the decline in new business contrasted with modest growth in the previous three months.

Survey respondents noted that subdued demand across the automotive and energy sectors was a factor weighing on manufacturing order books in December. Some firms also commented on the need to initiate discounting strategies to stimulate customer demand.

Export sales also dropped at the end of the year, with manufacturers often citing difficulties winning new work in US markets. On a more positive note, there were a number of reports that demand from China had improved.

Employment levels increased at the weakest pace for four months in December. Softer rises in payroll numbers were partly linked to cost cutting and concerns about the demand outlook. Backlogs of work dropped again at the end of 2019, while manufacturers reported their weakest growth projections for almost four years.

Supply chain pressures persisted during the latest survey period, with lead times from vendors lengthening to the greatest degree since February. A number of manufacturers cited delays with shipments due to rail strikes and a lack of alternative transport capacity, which also contributed to depleted inventories of materials at their plants.

The IHS Markit Canada Manufacturing PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

www.ihsmarkit.com

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The U.S. Federal Reserve has released a study that found the tariffs imposed by the Trump administration in 2018 led to higher prices and fewer manufacturing jobs.

The study, written by Aaron Flaaen and Justin Pierce was released in December, reporting that manufacturing production has not increased as a result of the administration’s actions.

U.S. tariffs may have reduced competition domestically, but trading partners responded with retaliatory tariffs that may harm U.S. manufacturers “by decreasing their competitiveness in foreign markets.”

“The traditional use of trade policy as a tool for the protection and promotion of domestic manufacturing is complicated by the presence of globally inter-connnected supply chains,” the Fed said.

“We find the impact from the traditional import protection channel is completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries”

The Motor & Equipment Manufacturing Association (MEMA) has been a leading voice against proposed tariffs that impact motor vehicle parts suppliers.

The association released a statement in the summer expressing concern about expanding and escalating the tariffs, arguing they leave U.S. companies less able to compete in the global market place.

Read the full report HERE.

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Canada’s economy contracted slightly in October, with real gross domestic product down 0.1 per cent from September – the first month-to-month decline since February, Statistics Canada has reported.

Economists had projected a flat GDP report for October compared with September, according to financial markets data firm Refinitiv, despite a recent flurry of StatsCan reports that indicated significant slowing in some sectors.

The slowing included the biggest month-to-month decline in retail sales since March 2016 as well as significant declines in wholesale sales and manufacturing.

“Markets and the Bank of Canada have been tempted to sound the ‘all clear’ signal… but a 0.1 per cent decline in October GDP puts the economy on a chilly path at the start of the fourth quarter,” CIBC chief economist Avery Shenfeld said in a note to clients.

“You have to go all the way back to June to find a monthly growth reading better than a plus-0.1 per cent, so coupled with the steep employment decline reported for November, there’s at least some doubts about the underlying trend late this year.”

Brian DePratto, senior economist for TD Economics, wrote that the Statistics Canada report on Monday sends his bank’s estimate for fourth quarter GDP growth significantly lower, to just 0.5 per cent annualized.

“If borne out, that pace of growth would, in an echo of the retail sales data, be the weakest in more than three years, and fall well short of the Bank of Canada’s 1.3 per cent tracking from their October Monetary Policy report.”

The Bank of Canada has kept its key interest rate on hold at 1.75 per cent since October 2018, despite rate reductions at other central banks including the U.S. Federal Reserve.

Its Dec. 4 rate decision, as well as subsequent comments from Bank of Canada officials, noted that the domestic economy seemed to be resilient but that the biggest risk was from trade conflicts weighing on global economic activity.

Jobs data surprised analysts on Dec. 6 when Statistics Canada announced the economy had lost 71,200 jobs in November, pushing up the national unemployment rate to 5.9 per cent _ the highest since August 2018. The monthly jobs report is notoriously volatile, so economists caution not to put too much weight on one month’s results, but the disappointment for November followed a weak October showing.

The October GDP report says October had the biggest month-to-month decline in retail trade since March 2016 – falling 1.1 per cent, with 10 of 12 sub-sectors down.

There were also declines in wholesale trade (down 1.0 per cent) and manufacturing (down 1.4 per cent).

DePratto, in the TD Economics commentary, said that manufacturing represented the biggest drag on the economy.

“The biggest story there was spill-overs from a U.S. auto sector strike that sent transportation equipment manufacturing 2.5 per cent lower, but there were additional drags,” DePratto wrote.

“Eight of 10 subsectors reported lower output in October, including machinery manufacturing, fabricated metal products, and wood products, as well as rubber and plastics products.”

Those declines were only partly offset by an advance in the mining, quarrying and oil and gas extraction sector (up 0.1 per cent overall) as well as transportation and warehousing services (up 0.6 per cent).

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