A new report from J.D. Power points to the shift in driving and vehicle ownership habits in Canada as having a significant impact on the automotive service industry.
According to the J.D. Power 2021 Canada Customer Service Index—Long-Term (CSI-LT) Study, which was released on September 9, the total size of the four- to 12-year-old auto service market plunged to $6.6 billion in 2021 from $9.2 billion in 2020.
“Obviously, it was not a great overall picture as I’m sure anybody connected to the automotive industry who has lived through the last 18 months would very likely already know,” said J.D. Ney, Automotive Practice lead at J.D. Power Canada, in an interview with Canadian auto dealer.
Ney said a lot of factors came together, and what we are seeing is the effect of broader macro-economic forces in the automotive space—such as fewer kilometres being driven during this period, and a shortage of service availability in some major markets.
“What we found is that, in general, and specifically for new car dealers on that front of this study, for a number of reasons—(such as) reduced kilometres and people extending out their maintenance windows—new car dealers in general lost out on about three and a half million service occasions year-over-year,” said Ney.
This is when considering how often people are bringing their vehicle in for service, and really the lion’s share of the decline in the overall industry was due to that reduction in the number of service occasions, according to Ney.
J.D. Power said the industry experienced a drop in total service occasions of almost 20 per cent year-over-year, “with aftermarket locations capturing 54 per cent of those service occasions remaining, compared with 46 per cent for new-vehicle dealers.”
Furthermore, the share of overall industry revenue from aftermarket locations jumped to 44 per cent in 2021 from 40 per cent in 2020, representing a swing of more than $200 million in relative revenue share.
The study also found that the average cost per service at dealerships also fell to $332 from $375 a year ago, during a period when these businesses experienced more than 3.5 million fewer service visits YOY. Total revenues also declined in the aftermarket, with the average spend among non-dealer facilities decreasing to $226 from $241 in 2020.
“This year we saw something of a reversal in probably a decade-old trend of more and more service revenue moving away from the aftermarket and towards new car dealers,” said Ney.
To sum it all up, dealer revenues decreased approximately $1.83 billion, while non-dealer service facilities were down $725 million.
“For dealers, the good news at the moment is a little more muted, although we are certainly not going to jump in and say the swing in service behaviour that we saw this year is here to stay,” said Ney.
“This year we saw something of a reversal in probably a decade-old trend of more and more service revenue moving away from the aftermarket and towards new car dealers,” said Ney by way of explanation. “Last year, about 60% of all of the money spent on maintenance and repair in this group was at a new car dealer, only 40% was at an aftermarket or non-dealer location.”
This year, he said the aftermarket clawed back about four points of that revenue market share, to the point where they are now up to 44% of total dollars spent. But because this is the first year reversing a decade-old trend, it does not mean it is the establishment of a new trend heading in the other direction.
“I wouldn’t be surprised to see dealers rebound and re-capture some of that lost share this year,” said Ney.
