Dealers are worried that access to the Canada Emergency Wage Subsidy (CEWS) program, described by the Canadian Automobile Dealers Association (CADA) as a “critical lifeline for dealerships and employees,” will disappear once revenue declines dip below the 30% mark.
That’s the latest finding from a CADA national monthly survey regarding the impact of COVID-19 on the auto retail sector. The federal government’s program has helped dealerships recall employees back to work, but there is a question mark around how the situation will unfold once the program ends.
“It’s become clear that the CEWS program is a critical support measure that’s been instrumental in helping dealers bridge through the pandemic and hire their employees back, with over 85% of dealers utilizing the program and 92% reporting the program is easy to use with no issues,” said Tim Reuss, President and CEO of CADA.
As revenue begins to return, Reuss said the challenge now concerns CEWS and how it is measured: “by an all-or-nothing approach of a 30% revenue decline for a 75% wage subsidy.”
CADA has started the conversation with the federal government on whether there is a way for the program to be scaled according to revenue. For example, this could include the implementation of lower subsidy levels at revenue declines of 20% and 10%.
Overall the positive effect of various government programs, coupled with the gradual reopening of dealerships in provinces, is beginning to shift the tide.
“The bulk of dealership services that are currently open remains on the parts/service and sales sides, with a low (30%) open rate for body shop-collision repairs,” said Reuss. But the situation is expected to improve as governments loosen restrictions on businesses and consumers.
Findings from CADA’s survey reveal that 92% of dealerships are conducting vehicle sales on premise, and 42% are conducting sales online or remotely.
At this point, 20.5% of sales operations are open by appointment only (which is down from 33% in May’s survey), and 30% of dealers reported new vehicle sales revenue dropping by more 50% compared to 2019. That last one may seem significant, but the percentage of dealers reporting this decline is down from 80% in CADA’s May survey.
And 47% of dealerships that were surveyed reported new vehicle sales revenue decreasing between 25%-50% versus a year earlier. Another 15% indicated revenues are down 5%-25%. Many of these dealers (below 30% revenue drop) do not currently qualify for CEWS, according to CADA.
“The federal government’s financial support in response to COVID-19 has helped to mitigate the impact on businesses and workers — but now we need to ensure that dealers are supported through this reopening phase,” said Oumar Dicko, Chief Economist at CADA.
Dicko said a strong recovery plan is needed, one that includes consumer-incentives like HST/GST waivers on new sales or a scrappage program, and business support measures.
“That’s why an expanded and scalable CEWS program is critical during this time of transition- most businesses are already using it, and adapting it on a sliding scale basis will help transition businesses off the program in tandem with increasing revenues,” said Dicko.
The survey was conducted between June 1-5, and includes 425 respondents representing over 867 dealership rooftops across Canada.
