How much Canadians use their vehicles is a strong predictor of revenue opportunities in both vehicle sales and fixed operations. Particularly fixed operations. Dealers know that all too well. At a time when inventories are basically non-existent, the need to lean into fixed operations is especially pointed.
Which begs the question: will we have a summer travel season, or will the record high fuel prices dampen the willingness of Canadians to get behind the wheel?
Let’s consider both recent history and recent research.
Canadians drive more in the summer. This is well known. The period from April to September is when we get in our cars and go, far more than in the fall and winter. This pattern has remained unchanged through the pandemic, even though the total driving Canadians have done has been impacted.
National kilometres travelled dropped sharply in the first part of the pandemic, down more than 10 per cent in 2020 versus 2019. But, by the spring of 2021, Canadians enthusiastically returned to the highways as pandemic restrictions began to loosen across the country. By the end of 2021, the country had returned to its 2019 pre-pandemic kilometre levels.
While the Omicron wave temporarily muted this recovery in kilometres driven, it hit during a time of year when Canadians drive the least. We don’t expect it to prevent a meaningful year-over-year increase compared to 2022.
But what about fuel prices? The war in Ukraine and other factors have driven the price at the pump to record levels. Surely that will cause a significant drop in kilometres driven. Or will it?
Two recent pieces of research suggest that it is the case. In a Leger poll done in March of this year, 54 per cent of Canadians said they were driving less because of the higher prices. Another 15 per cent said they were planning to adjust how much they drive in the near future.
An American Automobile Association (AAA) poll done in the same month mirrored those results.
National kilometres travelled dropped sharply in the first part of the pandemic, down more than 10 per cent in 2020 versus 2019. But, by the spring of 2021, Canadians enthusiastically returned to the highways as pandemic restrictions began to loosen across
the country.
59 per cent of US motorists said they would “make changes to their driving habits or lifestyle if the cost of gas rose to $4 per gallon” — a benchmark that has already been smashed in the wake of Russia’s attack on Ukraine.
On the other hand, there is some research suggesting that consumers are not very responsive to changes in gas prices, at least in the short run and particularly if that price change is volatile.
A National Bureau of Economic Research report in 2019 suggests only a temporary impact of price increases, and that consumers adapt to that level of prices. This is echoed in a number of other reports we’ve looked at that show consumers are less responsive to gasoline prices when price volatility is high.
Other factors that can influence kilometres driven include Canada’s record low unemployment rate and high levels of household savings, an outcome of two-plus years of pandemic restrictions. Both of these can provide a cushion against high gas prices in the near term.
The annual Toyota Canada Summer Road Trip Survey conducted by Ipsos certainly hints at a strong summer travel season. A Toyota press release said that “Canadians may be feeling that a “return to normal” is on the horizon.” The poll found that nearly all (91 per cent) Canadians are planning to reinstate activities that they had to set aside over the past few years.
And while gas prices are a consideration (53 per cent of Toyota Road Trip respondents stated that gas prices have had an influence on their road trip plans, 47 per cent say they are not affected) it’s worth remembering that this relates to discretionary driving. For most Canadians, much of their driving is not discretionary. Many of us are restarting our commutes as return-to-office policies kick in at a rate not seen since the start of the pandemic.
All in all, I’m betting your service operations will benefit from a continued return to more normal mileage levels, high fuel prices notwithstanding. Let’s hope that’s the case.
