The impact of the COVID-19 crisis on numerous industries has been severe, but the automotive sector has proven resilient in its market.
As I am writing this, we have recently welcomed the new year and many of us are reflecting on the one that has passed, wishing 2021 will be a better year.
2020 was tumultuous, to say the least. The COVID-19 global pandemic affected our health in an unprecedented manner and led to the deepest economic recession since the great depression. Virtually all sectors of the economy have been hit hard, and no business has been spared.
The impact of the pandemic has been particularly severe for many industries, including the auto sector, where activity declined by close to 75 per cent at the height of the first wave of the crisis in the spring. The strict containment measures put in place in many jurisdictions, and the resulting steep decline in economic activity, have led to an unprecedented drop in jobs and GDP in Canada and around the world.
There is a consensus among economists that the recovery will be slow and uneven across industries. It is estimated that it will take three to four years for the economy to fully recover back to pre-pandemic levels.
It is difficult to find a silver lining around the 20 per cent decline in auto sales in 2020, which dwarfs the decline in the market experienced during the financial crisis of 2008, and which in “normal” times would be beyond alarming. However, given the unusual circumstances and the abyss the market found itself in last spring, this was a much better performance than expected and there is a lot to be optimistic about.
However, given the unusual circumstances and the abyss the market found itself in last spring, this was a much better performance than expected and there is a lot to be optimistic about.
The market has shown resilience. Vehicle sales recovered relatively quickly and held steady in the fall through the resurgence of cases and the renewed restrictions. Dealers and manufacturers were able to quickly adapt to the new environment and took the necessary precautions to ensure a safe environment for employees and customers at dealerships.
The whole industry mobilized to ensure that the auto sector was adequately supported to bridge the gap through better times and, most-importantly, through the dark clouds. Despite the financial toll on their businesses, dealers remained leaders in their community. Whether it was providing vital maintenance and repair services to essential workers or making a generous donation to a local food bank and providing PPE to a local health center, dealers stepped up to help their fellow Canadians in need.
In hindsight, the industry accomplished a great deal last year. We successfully advocated for continuous support throughout the crisis, and worked closely with the federal government to allocate more funding to the highly successful ZEV incentive program. We also fought hard for the federal government to steer away from failed policies such as a ZEV mandate and the luxury tax, while advocating for a targeted stimulus package for the industry — including a “cash for clunkers” program.
As we set our sights on the new year and try to put 2020 behind us like a horrible nightmare fading in our memory, we need to stay engaged and remain vigilant. Downside risks persist and, as of this writing, the number of coronavirus cases continues to increase rapidly across the country.
The good news is the vaccine rollout is well-underway and authorities are confident that broad-based immunization will be achieved by fall. Auto sales are also forecasted to have a healthy rebound to 1.8 million units in 2021.
While the recovery will be underpinned by low-interest rates, economic recovery on both sides of the border, and strong government support, it is also very much linked to the trajectory of the virus and our ability to rapidly vaccinate a large number of the population this year.
It may not seem this way at this time, as restrictions are tightening again across the country, but it will get better. There is light at the end of the tunnel and the hope is that we will return to our “normal” way of life in the near future. In this era of high uncertainty, the auto industry has shown that it can and will continue to be a key driver of the Canadian economy.
Happy New Year, and good riddance 2020!
