Original Equipment Parts Outlook

The original equipment parts sector plays a vital role in the Canadian automotive industry from all perspectives, be it employment, shipments or technological innovation. However, coverage and analysis of this segment tends to be fairly limited and niche specific compared to the more visible new vehicle sales and vehicle assembly side of the market.

In an attempt to illuminate the ever-important parts sector this month’s Observations will focus on automotive parts and the outlook for this side of the industry at a North American level.  Discussion will focus on the recovery of the industry in recent years, increased parts content per vehicle, and the implications of the current Canadian labour negotiations for the parts industry’s outlook.

Pent-up, Incremental and Replacement Demand

In the past we have touched on the demand aspect of the automotive industry. With recent discussions surrounding disruptors and how they may threaten the sector, some have questioned the effects of disruptors on the outlook of sales.

In this month’s Observations we will look at the three concepts that drive sales of new vehicles: Pent-up demand, incremental demand and replacement demand. The main topic of discussion will revolve around these concepts and how the disruptors interact with them in our industry.

Disruptors To The Automotive Industry

A common theme found in recent articles relating to the automotive industry is that that there are “disruptors” (fundamental technologies/trends that are expected to change the nature of the industry) arising that will permanently reshape the automotive market as we know it.

In this month’s Observations we will take a deep dive on the most popular “disruptors” brought to our attention and address each and their potential effect on the automotive industry. Topics of discussion include: Lack of vehicle ownership by younger age groups, ride-sharing, hybrids, EVs and autonomous vehicles.

Market Outlook

Almost every month during the last couple of years has set a record of some sort. Two questions come to mind when looking back at our industry’s recent history: First, what caused this? Secondly and perhaps more importantly, can it continue?

In this month’s Observations we will look at the current phenomenon of record new light vehicle sales, discuss the reasons behind it and look towards the future. Topics of discussion include replacement demand, the environment surrounding the industry and the “churn” rate of vehicles (the percentage of vehicles on the road that are replaced each year).

Monthly Fuel Efficiency in New Vehicles

One of the biggest changes to new vehicle development in recent years has been the regulation of social policy matters such as safety, pollution and greenhouse gas emissions. While strides have been made with regards to safety and Criteria Air Contaminants (CAC) in light duty vehicles, greenhouse gas emission, due to it being tied with the fuel efficiency of a vehicle, is a target that can continuously be improved upon.

By law, CAFE standards have to be achievable so the tracking of this progress towards a more fuel efficient fleet is crucial for both the industry and the government. With the aid of new data and a new methodology we have developed the DesRosiers Average Rated Fuel Consumption Index (DARFCI) to track the average rated fuel consumption of new light vehicles sold each month.

In this month’s Observations we will discuss the methodology of the DARFCI and analysis of the data used. Topics include fuel efficiency over the years, the seasonality of fuel efficiency and the change in fuel efficiency based on vehicle segments.

 

For more information on the DesRosiers Average Rated Fuel Consumption Index (DARFCI) please contact Martin Stanczak at 905-881-0400 ext. 27 (martin@desrosiers.ca)

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