Vehicle Service Market Declines as Effects of Pandemic Shift Customer Behaviour, J.D. Power Finds

After more than a year of pandemic-related lockdowns and lifestyle disruptions, the shift in driving and vehicle ownership habits in Canada have had a significant effect on the automotive service industry.

According to the J.D. Power 2021 Canada Customer Service Index—Long-Term (CSI-LT) Study, the total size of the four- to 12-year-old automotive service market plunged to $6.6 billion in 2021 from $9.2 billion in 2020.

With fewer kilometres driven and a shortage of service availability in some major markets, 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. What’s more, aftermarket locations increased their share of overall industry revenue to 44 per cent in 2021 from 40 per cent in 2020, representing a swing of more than $200 million in relative revenue share. This reverses a multi-year trend of new-vehicle dealerships steadily taking a greater share of revenue.

The study also finds that while dealerships had more than 3.5 million fewer service visits year over year, the average cost per service at those dealerships also fell to $332 from $375 a year ago. Total revenues are also down in the aftermarket, with the average spend among non-dealer facilities decreasing to $226 from $241 in 2020. In total, dealer revenues fell approximately $1.83 billion while non-dealer service facilities declined $725 million.

“We’re seeing the effect of broader macro-economic forces in the automotive space,” said J.D. Ney, automotive practice lead at J.D. Power Canada. “Besides the decline in service visits and revenue, there is a bright spot for the service business. Many vehicle owners opted to make more expensive repairs to their current vehicle rather than to trade it in for a new vehicle or absorb the added cost of a pre-owned vehicle, where we’ve seen prices soar recently.”

While the number of customer visits and spend per visit declines year over year, overall satisfaction with auto service departments remains constant. Combined overall satisfaction with dealerships and non- dealers is 791 (on a 1,000-point scale), which is unchanged from 2020. Satisfaction with non-dealers averages 796 and satisfaction with dealerships averages 786.

Following are some key findings of the 2021 study:

• Macro-economics forcing some owners into more significant repairs: With major inventory constraints in the new-vehicle marketplace, J.D. Power has seen a rapid and significant increase in used-vehicle values. There is evidence of more owners opting for more expensive repairs this year, ultimately choosing to keep their four- to 12-year-old vehicle on the road longer. Because working from home and other pandemic-related influences have had a dampening effect on average kilometres driven in 2021, this would appear to be a very pragmatic decision for owners.
• Effective communication increases satisfaction: The age-old advice of effective communication being key to a successful relationship also applies to relationships between automotive service facilities and customers. Tracking the effect of dozens of diagnostic factors or key performance indicators (KPIs) across multiple study years reveals that actions such as keeping customers informed of the status of their repair have become much more effective over time. This year, the KPI for keeping customers informed is sixth-most effective vs. being 10th in 2019. In addition, utilizing the customer’s preferred communication method (i.e., phone, text, email, etc.) has jumped to 11th this year from 18th in 2019.