Canadian auto aftermarket earns 'essential' status, subsidies

OTTAWA, Ontario — Much like its U.S. counterpart, the Canadian automotive aftermarket has been struggling under government restrictions to limit the spread of COVID-19, according to the Automotive Industries Association of Canada (AIA).

For the most part, automotive repair and parts distributing companies have been deemed "essential services" by the federal agencies and provincial governments that have issued restrictions on general business activity.

But some companies have lost sales under stay-at-home orders AIA President Jean-Francois Champagne said during an April 1 conference call, so the federal government recently created wage subsidy and loan programs to help small businesses and employees who lost their jobs.

"We need to balance the safety for our staff and provide safety for our customers," Mr. Champagne said.

"While doing this, we also need to be involved with those people on the front lines — doctors, police officers, nurses — with the support they need to fix their vehicles and keep them going. We need to be an active component to the essential services in our country."

The AIA — which represents automotive aftermarket retailers, wholesalers and manufacturers and has championing the aftermarket's designation as an "essential business" under government "stay-at-home" restrictions — has created a support page on its website dedicated to COVID-19 updates for its members.

Mr. Champagne noted that on March 24 both Ontario and Quebec temporarily closed non-essential businesses, and while both provinces deemed the automotive aftermarket as an essential service, there were slight differences between their interpretation.

Automotive repair shops in Ontario can continue to provide services to all customers but those in Quebec are restricted to servicing vehicles used by first responders. Any service that can wait, should wait, he said.

So, for example, most collision repair centers are now closed in Quebec, while most have remained open in Ontario, he said.

British Columbia closed all non-essential businesses but allows automotive aftermarket businesses to provide services. Regulations and definitions of essential services vary in other provinces, as well.

Mr. Champagne said the AIA expects Canada to limit movement of people further as the pandemic grows.

"More important to all of us is the hard reality that we are seeing a substantial drop in demand, in many cases above 50%, and as a result we've seen many businesses that made the choice to close their business," he said.

For those businesses that continue to operate, the government is offering subsidies is encourage them to refrain from laying off their employees.

The Canada Emergency Wage Subsidy is a three-month program, back-dated to March 15, that provides a privately held employer which lost 30% of its revenue because of COVID-19 with a 75% wage subsidy for each employee.

Revenue loss is calculated by comparing the company's revenue during the pandemic with the same months in 2019.

The subsidy covers up to a maximum of C$847 per week per employee.

Applications for the subsidy will launch through the Canada Revenue Agency portal and employers will need to apply each month. The subsidy is available for small and large businesses.

The new Canada Emergency Business Account will provide interest-free loans of up to C$40,000 to small businesses to help cover their operating costs during a period where their revenues have been temporarily reduced.

To qualify, businesses need to demonstrate they paid $50,000 to $1 million in total payroll in 2019.

The federal government also is offering a Co-Lending Program in which the Business Development Bank of Canada is working with financial institutions to co-lend term loans to small to mid-size businesses for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program.

For employees who lost their jobs due to the pandemic, the federal government introduced the Canada Emergency Response Benefit to provide eligible workers with $2,000 per month for up to four months.