Good afternoon, Mr. Chairman and committee members. Thank you for the invitation to take part in your study of the Canadian manufacturing sector. I'm very pleased to be here today on behalf of the Automotive Industries Association of Canada and its members, with more than 4,000 locations and branches across Canada.
Our association has represented the interests of Canada's automotive service and repair industry for 74 years. Our members are companies that manufacture replacement parts and manage the supporting supply chain, right down to parts stores and installers who work with the Canadian public. We do not represent companies that make or sell vehicles.
The automotive aftermarket, as it's referred to, is a $19.4 billion industry that employs approximately 400,000 people across Canada. Our segment of the industry represents approximately 50% of all employment and about half the overall value of the total auto sector.
There are over 23 million registered vehicles on the road today, and the average age of these vehicles is now just about nine years. We know that vehicles are being built better and last longer than ever before. This means our members are delivering an important service in every community across the country by keeping Canadians and their vehicles safely on the road.
Our sector is primarily made up of small to medium-sized businesses, and today our comments represent ongoing discussions with our nearly 850 members, big and small, on the topic of manufacturing.
Although at AIA we do have a diverse membership, manufacturers represent an important and complex segment of our membership. We continue to work with them to understand how and where they manufacture, their import/export behaviours, what innovation means to them, and which government programs they currently leverage to support their operations.
Last year AIA commissioned a study to look at the possible threats and opportunities to our sector brought about by the trans-Pacific partnership agreement. AIA's TPP impact analysis report was released in January of this year and helped our association understand our manufacturers' needs. This report was provided to you today in both official languages.
Overall, I'm happy to inform you that the TPP agreement is unlikely to have a great impact on the automotive aftermarket. Through this exercise, we've learned that most manufacturers of aftermarket parts have already moved their production to Asia. We have approximately 110 self-identified manufacturers in our membership, and with that, approximately 20 companies continue to manufacture on Canadian soil. That said, the remainder of our members still innovate here in Canada, and employ people in operations, marketing, finance, and sales. We have found the core manufacturing is now primarily offshore. Furthermore, the vast majority of this offshore manufacturing is ultimately brought back to Canada for branding and packaging and then sold throughout North America.
Our study also found that the volume of Canadian trade to countries other than the United States and Mexico is currently quite small. Hence, we expect little impact from the implementation of the TPP.
Of importance to this committee's study, I would add that our manufacturers will be more affected by other factors, such as technical innovation, exchange rate movements, and climate change initiatives.
With regard to technical innovation, the advancement in vehicle technology will fundamentally change how Canadians own and use vehicles, but, more importantly, it will fundamentally change how they get service and maintenance done on their vehicles. Telematics will become the new normal. The capacity of the aftermarket to access information to fix vehicles today is a direct result of the right-to-repair efforts that we waged about eight years ago. In fact, a member of this committee, Mr. Masse, was a key contributor to the ultimate access that our sector now enjoys.
Make no mistake: as vehicle technology moves in leaps and bounds, our sector is at risk of being excluded from accessing vehicle data and therefore providing consumers with little or no choice but to return to their dealership to get their vehicles serviced.
There's an enormous opportunity for innovation in vehicle telematics, without question. BlackBerry and Google are significant players in vehicle telematics and connected grid research, and so are members of AIA such as Delphi and Bosch.
Any efforts by government to support not only the research aspect but also to look at how vehicle data will be shared with parties other than manufacturers would be most welcome.
Before I move on, I would also like to add that innovation in the supply channel, such as Amazon's potential use of drones to deliver products, points to a near-future disrupter to our sector, thus requiring major study, preparation, and adoptions in order to survive. E-commerce is already changing how our sector's supply chain connects automotive parts with installers.
Another area of interest to AIA is the employment, recruitment, and training of the labour force within our sector. Our industry's most pressing concern is the lack of labour market information available. AIA is in the process of submitting a proposal to ESDC for funding to support a massive labour market study. Our industry will soon need to completely retrain its workforce as electric vehicles become more common and as technology evolves. Government approval of AIA's labour market study proposal would be very helpful to our manufacturing members.
The next topic I would like to speak about is product standards. Let me illustrate this issue using one key example.
On April 28, numerous voices across Canada, including AIA, called on the federal government to ban imports of products containing asbestos. In Canada there are few, if any, product standards for automotive replacement parts. Fortunately, the vast majority of players in the sector produce parts of equivalent-to-OE quality or even better without being forced to do so by any regulations. Nonetheless, we see millions of dollars worth of brake pads containing asbestos entering Canada every year. I'd like to be clear here: those brake pads are not being manufactured and produced in Canada, but simply imported. As recently announced, if the Government of Canada does move forward with its proposed ban on asbestos, this will support manufacturers and parts distributors who currently, voluntarily, choose not to produce or import asbestos-containing products.
This is only one example but it illustrates that members who choose to do the right thing are left on an uneven playing field when facing competitors who do not have minimum standards to meet.
As I noted earlier, AIA does not represent the automakers in Canada. However, I would like to state that strong OE assembly operations will still positively affect the aftermarket.
First, some of our members still supply into the OE operations, and many other AIA members may benefit from the business clusters that exist in and around those assembly plants. Continued opportunity for cross-sector engagement, such as through the Canadian Automotive Partnership Council, is imperative. AIA is also a member of the Canadian Manufacturing Coalition, so I will not spend time today going through all of the items those two groups will advocate on, but will lend AIA's support to their efforts, and I must take this opportunity to highlight that energy costs remain a constant irritant for our manufacturing members.
Lastly, I must mention that our members continue to raise concerns over patent and copyright infringement, as well as issues with counterfeit products entering Canada. This is of extreme importance to our members, and the government's leadership in combatting these issues will be essential to fostering a healthy automotive parts replacement sector that thrives on developing and building better products.
In closing, budget 2016 was a good step in the right direction. Innovation is key for our sector, although our members are not typically captured in current program funding opportunities. For example, the automotive supplier innovation program—ASIP—is reserved for OE suppliers only. To support manufacturing in the aftermarket, our members need access to smaller funding investments in the millions of dollars, not the hundreds of millions, and careful effort needs to be taken to ensure it is not difficult to navigate the red tape in applying for these programs. In many cases, our members seem to just have overlooked government programs, believing that they just won't qualify. We need to ensure that Canada's aftermarket is not an afterthought.
Thank you very much for the opportunity to speak to you today. I look forward to your questions.
Thank you.