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Canadian aftermarket set for record growth

Friday, October 26, 2018 - 07:00
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The Canadian aftermarket is poised for significant growth, according to the Automotive Industries Association (AIA) of Canada’s 2018 Outlook Study. Last year, the Canadian light vehicle aftermarket reached $21.6 billion (a new record), and is poised to hit $23.8 billion in 2021.

According to the Executive Summary:

“Automotive parts, including do-it-yourself (DIY) and do-it-for-me (DIFM) parts, accounted for $12.5 billion, or 57.9 percent, of the total market. Installed parts made up the lion’s share of the parts market and was worth $9.5 billion in 2017. The retail parts market was estimated to be worth $3.0 billion. Labor costs were 42.1 percent of the total aftermarket size, totaling $9.1 billion. For each dollar spent on labor, parts for the install cost approximately $1.04.”

DesRosiers Automotive Consultants conducted the study for the AIA.

Contributing to the aftermarket’s growth is the continued aging of the vehicle fleet. According to AIA, 18.4 million of the 26.8 million total light vehicles on Canadian roadways (roughly 70 percent) are six years or older, a segment that has grown 19.5 percent over the past five years.  The average age of light vehicles in Canada is now 9.71 years.

According to the Executive Summary: “This is the largest recorded number of vehicles that are likely out of their manufacturer’s warranty period. As a result, the aftermarket will see some of its best years in the near future as the market for out-of-warranty repair and maintenance continues to grow.”

According to the report, in 2012, the largest age group in the fleet was the 8 to 12-year-old vehicle segment at 29.3 percent. Those vehicles are now older than 12 years, while scrappage has not increased, making 12-year-old or older segment the largest group of vehicles.

The older segment of vehicles also comprised the largest chunk of aftermarket spending. The largest group was the 8 to 11-year-old vehicle group, at $5.9 billion, followed by the 15-years-plus group at $5.1 billion.

The driving age population in Canada is also on the rise, increasing by 5.1 percent to reach 30.7 million.

The cost of operating a vehicle rose 5.5 percent in 2017. Labor for maintenance and repair services rose 1.8 percent, while parts costs increased 1.5 percent.

Higher revenues have also spurred more hiring in the aftermarket. The number of Canadians employed in the aftermarket increased 1.6 percent in 2017 to 398,900. The parts, accessories and tire store retailers segment grew 2.3 percent, as did the repair and maintenance sector.

The report does note that there are a number of factors that impede growth, including potential interest rate hikes and lower consumer spending. Household debt has also it an all-time high in Canada.

You can read the executive summary here.

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