Toronto, Ontario — February 20, 2020 — There are some businesses that do not struggle, even in periods of economic uncertainty. Funeral parlours are one. Collision repair businesses are another.
Even in period where the automotive sector–even the automotive aftermarket–is affected, the collision sector has been relatively free from speedbumps.
In fact, during the great recession, Canada’s auto repair sector did not seem to flinch.
According to Statistics Canada, profits in the sector grew relatively steadily in the period–and during the recovery that followed. From 2007-2015, its workforce grew by 11 percent, just as its profits grew by almost 14 percent.
Auto parts manufacturers didn’t fare so well, with their growth hitting just 3.7 percent during the same period–far lower than the economy as a whole. Domestic auto manufacturers fared even worse, with profits dipping slightly over the period.
Intrinsically, this makes sense.
When times are tight, drivers are more likely to try to keep their vehicles driving longer in order to put off the expense of buying a new car.
This isn’t to say that we are entering a second great recession. But it has been a rough week–for the global economy as-a-whole, and for the auto parts and manufacturing sectors in particular.
In Asia,the leading stock exchanges of Hong Kong, Japan and Korea are all down by more than three percent from recent highs. In China, they are more than five percent underwater.
In Europe, losses are higher still. Germany, France and the U.K. have all seen more than six percent of the value of stocks traded at their top exchanges evaporate. Share price drops among Europes most valued companies have reached 12 percent.
In the U.S., things are worse still. The NASDAQ and Dow have both seen ten percent dips on recent highs. Its own top businesses are also down by 12 percent. In Canada, things aren’t much better, with the TSX seeing a nine percent drop.
Across the world, the auto sector and auto parts sector has been particularly badly hit. Honda and Toyota shares are both down by more than 8 percent. Kia and Hyundai are both down by more than 12 percent. Out West, GM and Ford have seen similar share dips.
Even the auto aftermarket has been rocked. In fact, Canada’s own Magna International has seen concerns about the coronavirus affect its share price before the most recent global correction. From its 2020 high, its shares are down by 15 percent.
While this shake-up may well be just a simple correction, collision repairers have less reason to fear than members of most industries. In this era of brand-specific certifications, however, repairers may be wise to remember one thing.
In the aftermath of the great recession, as Canadians opened their wallets to buy new cars once more, they began to buy more imported cars, particularly Japanese cars, than North American ones. After several years of trying to make their cars last, it seems tastes had shifted towards favouring cars known to last a long time.
Whether the coronavirus correction of 2020 will have a lasting impact on consumer’s tastes remains an open question.
