The impact of the evolving vehicle fleet on vehicles in operation and vehicle kilometres travelled 

Todd Campau, MAAP, ACP, S&P Global Mobility

It is no secret that Canada’s auto care sector is undergoing significant changes due to various factors, ranging from emerging technologies, global production trends, and economic fluctuations to adjusting to a post-pandemic society.  

At the 2024 edition of the AIA Canada National Conference, Todd Campau, MAAP, ACP, Aftermarket Product Lead, of S&P Global Mobility spoke on the impacts on the evolving vehicle fleet and kilometres travelled and what this means for auto care businesses in Canada. 

A look into Canada’s economy 

The root impact behind the evolving vehicle fleet today is centered around economic factors. Canada’s economy reflects a blend of challenges and opportunities for the auto care industry. Despite forecasts indicating gross domestic product (GDP) growth below potential rates, there is a glimmer of hope as we navigate through inflationary pressures. 

“Canada’s tight labour market and labour unrest has been putting upward pressure on wage growth. However, labour market conditions are easing, with the unemployment rate rising more quickly than expected,” says Campau. 

Overall, the central bank’s policy rate remains steady, with adjustments expected in the latter half of 2024, aligning with a revised long-term neutral rate, underscoring the need for adaptability amid changing economic tides. 

Vehicle sales and production: A mix of complex factors 

While there are challenges, there is also a sense of recovery for Canada’s auto sales—auto sales in the fourth quarter of 2023 were at the strongest levels since 2020. In addition, battery electric vehicle (BEV) sales surged, reflecting an evolving consumer preference and environmental consciousness. 

“Overall, there are a lot of conflicts contributing to these soft vehicle sales, but the Canadian vehicle fleet is strong. There are about 26.7 million units of passenger cars and light trucks, which have been relatively flat since 2020. However, we are seeing a lot of churns and sales towards light trucks and BEVs.” 

That said, where there are positives, there are also a couple of negatives. When it comes to Canada’s vehicle sales, limited new vehicle inventory contributes to its slow growth. 

Even so, these challenges are not unique to Canada—this is being observed across many global markets. On a worldwide stage, the auto care industry is undergoing dramatic shifts. China’s operations witness notable boosts, primarily thanks to tax cuts and improving supply chains. Yet, in some regions, there is still the fear of a recession and potential challenges. For instance, Europe’s dynamics show a delicate balance between backlog depletion and emerging electric vehicle (EV) trends, further emphasizing the industry’s intricate interplay of factors. 

Amidst global disruptions, the resilience of Canada’s automotive supply chain is under scrutiny. From chip shortages to raw material bottlenecks, supply chain vulnerabilities have highlighted the need for diversified sourcing strategies and enhanced risk management practices. 

“We are past a lot of the supply chain issues, and we are beginning to settle into the more even, normal flow of the economy, and with that, the vehicle fleet,” says Campau.  

“While there is still some uncertainty, I think there will be some headwinds for new vehicle sales. Prior to the pandemic, we were pushing close to 100 million units a year for new vehicle sales globally. We can probably expect to achieve 100 million after 2030. We are slowly starting to see the recovery.” 

A shift in vehicles in use 

Canadian vehicles in operation, as a whole, remain stable. There is minor volatility due to some lingering supply chain issues and the weak Canadian dollar, but vehicles in operation and new vehicle sales are moving toward normal. 2022 was the worst year for vehicle sales, standing at 1.52 million since 2009, but fortunately, now, it is moving towards normal rates. 

What is changing, though, is that vehicles are currently being exported at a younger rate than ever before. The average age of vehicles being exported was nine years old, but that number has changed since the pandemic and is now around six to seven years old. The younger the vehicles get exported, the less opportunity there is for the auto care sector—vehicles over six years old or in their prime for repairs and maintenance. As a result, service and repair shops may see fewer older vehicles come in, potentially impacting their business in the long term. 

The future of electric vehicles in Canada 

It is no secret that EVs are taking Canada by storm, whether due to consumer preferences or government mandates. With BEV sales surging and light trucks (which include SUVs) driving registrations, while still a fraction of the total market, EVs carve out a niche with promising growth trajectories. 

“EV sales last year (2023) were at 143,000, with light trucks really driving sales,” says Campau. Overall, it is growing well. From an auto care perspective, you will probably not be seeing a lot of EVs in your repair shops just yet because the sales have only recently increased. However, you will begin to see more of them in the near future as they age and require repairs and maintenance.” 

Understanding shifting consumer preferences is key to driving product innovation and market strategies in today’s evolving vehicle fleet. The surge in BEV sales shows a broad shift towards sustainable mobility solutions. That being said, though, consumer hesitancy and cost considerations pose hurdles to widespread adoption. 

Key takeaways 

Canada’s vehicle fleet is healthy and growing, despite low new-vehicle sales, says Campau. Consumers have shown that they want vehicles and that they are going to drive them. Overall, vehicle kilometres travelled has returned to more normal behaviour. While the pandemic changed how vehicles were driven, kilometres are still being accumulated and better than expected. 

In the ever-evolving automotive landscape, adaptability is key. While challenges are prevalent, so are opportunities. New vehicle sales rebound while EVs carve a path toward sustainability. As technology evolves, industry opportunities expand, showing promising avenues for growth and innovation. 

This blog has been created based off of a the The impact of the evolving vehicle fleet on vehicles in operation and vehicle kilometres travelled session by Todd Campau, MAAP, ACP, Aftermarket Product Lead of S&P Global Mobility, at the 2024 edition of the AIA Canada National Conference. For more information on vehicle metrics, you can sign up to S&P Global Mobility’s newsletter.