The Canadian Auto Industry Present & Future

The Canadian auto industry’s production may well have declined this year with the profits projected to drop by 14.7 per cent to $1.5 billion, the latest report released by the Conference Board of Canada suggests a brighter outlook in 2009.

After a great showing in auto production and sales during the beginning of the millennium, Canada’s auto production has recently been negatively affected. Despite, the stepped down production, the Q1 sales for 2008 have been 372 243, which is still higher than the 2007 figure of 348 991 in the same quarter.

The Pale Present

Since the industry went down after 2002, the total number of job losses in Canada's auto parts industry has been 32,000 and was the highest in the year 2004. International competition from Mexico and China is said to have contributed to these job losses. However, as per the projections, the employment figures are slated to show some stability and range from 107,000 and 108,300 workers till 2012.

As has already been conceded by General Motors Corp that the US auto industry is in recession, this factor too has contributed to Canada’s falling production figures. Canada exported US $75.5 billion worth of automotive goods to the U.S. in 2006. Ranked at the 9th position in the world for motor vehicle production, Canada was a major automobile producer in North America with a share of 16.2 % in 2007. The Canadian suppliers are expected to face some rough weather ahead this year as about 57% of their products are shipped to the United States, the reports suggests. The decrease is expected to be around 14.7% or $1.5 billion in fiscal terms.

The present recession in the US markets have already forced the automakers to slash their prices by a big margin, however despite their efforts the sales are forecasted to be the lowest in the past ten years. On the other hand it is expected to be a third successive fall in sales for auto part manufacturers.

Amongst other challenges that the industry faces is the competing with low-cost foreign suppliers of auto parts viz. braking system, automobile transmission system, automobile engine, etc.

The Hale Future

The Canadian economists suggest that while the industry is experiencing tough time, the continuing investment in the sector, and the high efficiency of the Canadian manufacturers has the potential to lead to job sustainability.

The weather is supposed to change for the better by 2009 as the demand for products in the US gains pace and new manufacturing units surface towards the end of 2008.


Already in the pipeline is the opening Honda's Alliston, Ontario manufacturing unit by the end of 2008. Further, coupled with the production increases of the Toyota's new plant in Woodstock, Ontario it will perk up production by 6.9 per cent in 2009.

Adding to the momentum of growth would be the stable performance of the manufacturing units of Ford Motor Co, General Motors Corp in both US and Canada as a consequence of the new labor contracts valid till 2011. The measures taken to provide tax rebates by the federal and provincial governments would further aid suppliers of parts and automotive tools.

The forecast also includes better exchange rates, and export activity picking up to serve a varied international clientèle, and cause the profits to reach $1.9 billion by 2012. With so many changes taking place in the economic environment the profits after falling in the recent future would stabilize and continue to increase at the rate of 5.7% to 5.8%.

All in all, there’s undoubtedly some hard time ahead for the industry in the coming months, but thankfully the gloom isn’t going to last long and boom would surface by the year-end. At this point I remember a quote from Benjamin Disraeli, "Nothing can resist the human will that will stake even its existence on its stated purpose."

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