Despite Pandemic, Aftermarket Likely to See Long-Term Benefit

Q: What role does AIA play in the automotive industry?

A: AIA represents people in the automotive aftermarket. We represent all players that manufacture replacement parts, the supply chain that distributes those and ultimately the people who are maintaining and fixing cars. In Canada, we are the biggest employer of the automotive industry, employing close to 400,000 people. We also contribute close to CA$40 billion to the economy as there are many cars to be maintained. 

Q: What challenges and opportunities do you see for the automotive aftermarket following the pandemic?

A: When we talk about the aftermarket, which involves everything that comes after a car is sold, the question is how are we going to service cars in the future. First, we must look at the impact on the business: how many vehicles are on the road, how often are these used and how old are the vehicles on the road. More cars and more use mean more services needed for vehicles. The aftermarket can be typically analyzed by the combination of these three factors: the parked vehicle fleet, miles driven and the age of the cars.

Looking at the post-COVID-19 scenario, there are a few things that need to be considered. The first is that we think fewer people will commute. I think we are going to start to see more people working from home, which is going to reduce miles driven. But we also see that as part of the pandemic, people are now delaying the purchase of new vehicles. They are also delaying luxury purchases, keeping their vehicles for a longer time, which is a positive contributor to the aftermarket. 

However, the thing we all need to consider is that now a personal car is probably the best Personal Protection Equipment (PPE) against COVID-19. While people typically used public transport to go to work, now we are going to see more people choosing to commute in a private vehicle. All of these factors are going to have a long-lasting impact on the industry. However, consumers will gradually be more comfortable and confident about the economy and will buy new vehicles.

The real question for us, however, is how much less people will drive as a result? That is one of the big answers we have to get for the future. The second piece of the conversation is all about e-commerce and how people get their car service now. Due to the pandemic, people are scheduling appointments online and are considering maintenance in their planning, which is a good thing because it allows us to provide better and faster services. We are all going to benefit from this in the long run.

Q: How are you supporting members to migrate from traditional sales to e-commerce?

A: We have conducted surveys to generate a great deal of data on consumer behavior, really trying to explain and capture how fast consumers are changing their habits. We have seen an acceleration in the willingness of people to use an online platform for booking their maintenance services. The automotive aftermarket has been recognized as an essential service; we are providing front-line services and it is key to work closely with our members to make sure that they understand the rules of the pandemic so they can safely provide services to customers. 

Q: What business opportunities has the Canadian aftermarket industry identified in Mexico?

A:  I think we need to explore this. There are not many aftermarket activities between Canada and Mexico. What we need to look at is USMCA. The new agreement allows us to continue innovating. In Canada, we are innovators and developers of new technologies and I think we need to look at Mexico as a great place for manufacturing, instead of Asia. We definitely need to strengthen the relationship between the two countries. Technology developers in Canada are looking for cost-effective ways of manufacturing products and Mexico has so much to offer.

Q: What challenges and opportunities will Joe Biden’s administration present for the Canadian automotive sector?

A: We know that the Biden administration is going to bring some normalization to the relationship between Canada and the US. It is critical for the business community to have predictability, to know what is coming and to understand where the administration is going. In the previous administration, we have had difficulties adapting to changes in directions and as a result that creates a lot of uncertainty. Our business community in Canada always says that we need some level of stability and certainty. The new administration will bring this back.

At the same time, we need to be cautious because Joe Biden’s administration is going to have a much greater focus on climate change. We need to prepare to see some new form of policies for the automotive industry as a whole.

Q: How will USMCA boost the trade relationship between Canada and Mexico?

A: USMCA was critical. We had to ensure there was still a free trade agreement in North America to compete on the global stage. We are all bound to benefit from this new treaty. International partners can look at North America as a valid place to develop technology. UMSCA is not perfect but, surely, it is a good sign to the world.

Q: What advice would you give to the Mexican suppliers that are struggling to comply with original content rules?

A: That has been difficult and it is something that we are struggling with in Canada, as well. However, we have a resilient industry and we can make this work. Ultimately, an agreement is much than no agreement. Without it, none any of the three countries involved could compete at the global level. We will find ways to address those challenges. 

Q: How is Canada taking advantage of the regionalization in North America brought by the pandemic and the new treaty?

A: As a leader in the development of zero-emission vehicle technologies, the goal of the current Canadian government is to invest in innovation. We have not had, however, the manufacturing growth of Mexico, for example, but we are developing know-how and a lot of great partnerships with universities and technology companies. We are going to start to see Canada at the forefront of the development of these technologies.

Moreover, when you think about Canada’s national resources, there is also great potential for the development of battery technology, for instance. We are already seeing how the world is responding to Canada’s forethinking in terms of the development and manufacturing of zero-emission vehicle technologies.

Q: What impact will connected vehicles have on the automotive industry?

A: This is a topic we do not talk about enough. Last November, as part of the elections in the US, in the state of Massachusetts voters were asked if they wanted to extend the “right to repair” law, which ensures users of connected vehicles can directly access their car’s information. This speaks of the impact of deploying connected cars. We believe that connected cars are going to represent about 95 percent of the new cars sold in Canada in 2022. These vehicles have been built with a system that enables automakers to control all the information. But now all parties involved in a car life cycle can access this information, too. This is highly important to automakers. The role of data in our industry is critical for the sustainability of the sector. Just as we realized the impact of social media on society, cars will be the next step in that evolution.

Q: How do you see the recovery of the industry in the North American region developing?

A: The automotive aftermarket typically is more resilient and we are going to see the effect of COVID-19 until 2022. Car sales remain slow and it will take some time before they really recover. The automotive aftermarket has been depressed as a result, as well, but we have to wait a little bit more. There are still quite worrying numbers in terms of the pandemic. 

Q: As an industry leader, what lessons do you take with you this year?

A: We have realized the importance of our industry. We are enabling doctors, nurses and people working in grocery stores to go to their workplaces. We play an essential role in society to ensure people’s mobility. I have been so pleased to see so many people rise to the occasion and I have been so inspired by an industry that has come together in times that are so difficult. The industry has been able to provide those frontline services to serve society in a way that we may have not fully comprehended before.

As bad and as difficult as the pandemic has been, it has enabled us to accelerate our adoption of new technologies that are greatly needed to do business. There is always a silver lining and I think this will be the long-lasting positive impact of the pandemic.

The Automotive Industries Association of Canada (AIA) is the only national industry association in Canada that brings together the entire automotive aftermarket supply and service chain. It represents professionals dedicated to providing quality parts and products, as well as vehicle service and repairs to the country’s fleet of almost 26 million vehicles