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Adapting to new challenges

Aftermarket analysts question how the drop in kilometers driven will affect business, as shops struggle to adjust to new operating conditions during the ongoing pandemic.

By Allan Janssen

INDUSTRY WATCHERS are carefully gauging tra c patterns for clues on how the auto repair and service industry will rebound when fears of the spread of coronavirus ease and business conditions fully open up.

According to analysts at DesRosiers Automotive Consultants (DAC), kilometres driven is among the biggest concerns for the Canadian a ermarket.  eir recent report on the impact of the current public health emergency suggests it is a particularly insidious challenge for repair shops. "What is perhaps most striking for this downturn as opposed to previous ones from the a ermarket perspective is the sudden and unprecedented drop in kilometres driven,” analysts at DesRosiers said.

Although they said current data on the amount of driving Canadians are doing is still sparse and imperfect, they’ve found evidence that it has collapsed from previous levels. Google mobility data shows that as of April 30, mobility to workplaces was down 57% in Canada. Factoring in other data, such as toll highway statistics and gas consumption, DAC calculates the decline in kilometres driven in Canada to be in the range of 46-52% with a slow recovery in coming months.

Kilometers driven has long been a benchmark measurement for the auto repair and service industry, tied to component failure and chemical depletion.

“ e current baseline DAC model of a ermarket demand indicates that a ermarket demand will fall 11-13% this year,” analysts said. “ e statistical scenarios in the model vary greatly, however, from a decline of 6-9% in the optimistic scenario, to a precipitous decline of 20-25% in a negative scenario under which a severe second wave of the virus stalls provincial economic re-openings.”

Kilometers driven was also referenced in a report by the Automotive Industries Association of Canada (AIA).  e survey noted that at the peak of the crisis, in early April, tra c diminished by about 80%.  e report analyzed business con dence among a ermarket supply chain companies and service providers –  nding the most optimism in the supply chain.

Some 63% of supply chain respondents in the AIA's recent Business Operations Survey said they expect to see signs of recovery in the near-term. Only 18% of supply chain respondents saw things deteriorating further before the end of June.  at is notably more optimistic than mechanical service shops (41% expecting early signs of recovery) and collision repair shops (31%).  e biggest cohort of supply chain respondents, (27%) reported a revenue decrease of 21-30%. Among mechanical repair shops, the biggest cohort (39%) reported a revenue decrease of more than 50%. Among collision shops, the biggest cohort (43%) reported a revenue decrease of more than 50%. Impact on urban shops A survey conducted by Ohio-based IMR Inc. found that urban repair shops in the United States appear to be su ering the biggest drop in business as a result of Covid-19 prevention measures.

According to the survey, 91.5% of urban repair shops reported a signi cant decrease in revenue, compared to 85.4% of suburban shops and 73.8% of rural shops.

However, urban shops are reporting fewer supply chain issues. Asked how frequently they experience a disruption in getting parts, 20.5% answered “frequently” or “very frequently.” By comparison, 27% of suburban shops, and 30.4% of rural shops answered that way.

Overall, the survey of 400 repair shops in the United States, conducted May 5-11, found that 25.8% of shops had frequent or very frequent supply chain issues.  e top reasons for sourcing new suppliers during disruptions were availability of parts (49.4%), faster delivery required (27.1%), and regular supplier closed (14.1%).

Despite supply chain issues, shops remained largely loyal to their preferred brands, with most shops reporting that they rarely or never switched brand.

Deferred work Another DAC poll noted a decrease in revenue among Ontario repair shops of between 26% and 50% in April.

Shops reported decreases in most job

types, with preventive maintenance and diagnostic work seeing the largest declines. e most common forecast of how 2020 will play out anticipated a decrease in business of less than 25%. e survey, distributed during the week of May 11-15, found that the majority of businesses remained open (nearly 60%), but some of them (about 40%) with reduced hours. Almost half of respondents noted problems with parts supply, with these issues arising from both jobbers and dealerships.

Industry concessions Social distancing protocols have led to a surfeit of web training (see feature, page 19) and video conferencing, as industry leaders replace physical events with virtual ones.

And suppliers have made a number of concessions – from eased deadlines to reduced costs – to keep the industry functioning during the ongoing pandemic.

Notably, the National Institute for Automotive Service Excellence (ASE) has extended all certications to Dec. 31.

“Now more than ever, our transportation infrastructure needs skilled individuals with professional credentials to keep the supply chain and motoring public going,” said Bobby Basset, chairman of the ASE board of directors.

Bassett, who serves as the North American national training manager for Gates Corporation, said service professionals have plenty on their minds and do not need to worry about expiring ASE certications.

“Brighter days will come, and with them will come an increasing need for highly motivated, well-trained professional service technicians,” he said.

According to Bassett, ASE is more relevant than ever before, and its mission more critical, as the industry seeks to attract more talented professionals and ensure they are procient in new technologies.

“With ongoing advancements in technology, we must look ahead and work to address a signicant challenge that we face as an industry – a shortage of professional technicians and educators that have the knowledge and skills to service the vehicles of today and tomorrow,” he said.

The significant drop in kilometres driven is among the biggest concerns for the Canadian aftermarket, say analysts at DesRosiers Automotive Consultants (DAC).

Consumer behaviour 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 another IMR report, when consumers are faced with economic challenges, A survey of aftermarket supply chain companies and service providers by the Automotive Industries Association of Canada revealed the extent of the impact of coronavirus. they tend to favour aermarket 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 ompson, CEO of IMR Inc. “Where they cannot, they’ll choose one of various aermarket outlets for service.” IMR’s report, designed Ohio-based analytics company IMR Inc. found that 91.5% of urban repair shops reported a significant decrease in revenue, to glean insights from the compared to 85.4% of suburban shops and 73.8% of rural shops. way purchasing behaviour changed during the last major economic downturn, found that Interestingly, IMR Inc. found that in do-it-for-me activity declined in the leadthe 10 years since the Great Recession, up to 2009, removing service events from dealerships have managed to capture the DIFM market. But dealerships were more non-warranty work on aging hit harder. vehicles, compared to independent shops

Independent repair shops saw a which have lost ground. 6.5% increase in DIFM activity, while ompson said the report should oer dealerships suered an 8.2% drop. data that will be valuable to companies e report also found that the making structural changes during the independent repair sector’s share of noncurrent economic downturn. warranty work by vehicle age changed “No matter where you sit in the very little during the Great Recession. automotive industry, consumers purchasing But, over the years, independents have parts and services drives our collective lost share to dealerships among vehicles businesses and having some insight into older than three years. their behaviour is essential,” he concluded.

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