Canada’s Auto Outlook: Consolidating Amid Uncertainty

The Conference Board of Canada, February 22, 2018 at 02:00 PM EST
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Canada’s motor vehicle manufacturing and parts manufacturing industries remain fairly strong, despite the risks arising from an uncertain trade environment and intensifying competition from Mexican and southern U.S. assembly hubs. Yet, this positive outlook feels like a calm before a storm. The current contentious state of the North American Free Trade Agreement (NAFTA) negotiations poses a significant threat to the current stability of the continental motor vehicle sector, with significant implications for the Canadian economy.

Webinar Highlights

In this 60-minute webinar, Sabrina Bond presents the short-and medium-term economic and profitability outlook for Canada’s Motor Vehicle Manufacturing Industry and Motor Vehicle Parts Manufacturing Industry. Based on the Conference Board’s Canadian Industrial Outlook Service, Sabrina will cover production, prices, investment levels, employment revenues, labour and material costs, profits and profit margins.

Key trends include:

  • Strong demand —Automakers have benefited from demand for new vehicles among American consumers, which has propelled new vehicle sales south of the border to record levels the last two years.
  • NAFTA negotiations—The key issue is rules of origin. The Trump administration has pushed for 85 per cent North American content and up to 50 per cent of U.S. content. Canada and Mexico have objected to production quotas by country.
  • Foreign Competition—Canadian productions automakers assemble 12.9% of North American vehicle production. Due to generous government subsidies and low wage costs, Mexico has recently eclipsed Canada in terms of relative contribution to North American light vehicle production.
  • Innovation—In part due to Mexican competition, Canadian automakers have streamlined operations and consolidated production in high value-added light truck assembly, where Canadian parts makers enjoying a competitive advantage. Commercialization of innovative assisted driver and efficient internal combustion engines and drivetrains are now strategic priorities in design and development.
  • Investment — Canadian automakers have committed $2 billion to plant refurbishment and are moving up the value chain. Two-thirds of production is in the high-margin light truck segment. Auto parts makers are concentrating on high-value-added connected technology systems and engines design and manufacturing.
  • Interest Rate Risk—With interest rates expected to rise over the forecast, higher debt-servicing costs could limit consumer spending on new vehicles, particularly through higher financing costs.

About Sabrina

Photo of Sabrina BondSabrina Bond is a contributor to the Conference Board's Provincial, National, and Industrial Forecast teams, and provides current economic analysis on business investment, business confidence, the Ontario economy, and the automotive sector. Ms. Bond is the author of a variety of economic publications, with topics touching on fiscal reform, federal and provincial budgetary analysis, health care reform, and labour market imbalances. She has expertise in cost-benefit analysis, and has also created a range of custom economic models for private clients. Ms. Bond is a regular spokesperson for the Conference Board, and delivers presentations and economic commentary in the media on her work.

Ms. Bond has previously worked as a strategy consultant for a management consultancy specializing in providing sales and marketing advice the pharmaceutical sector. As a strategy consultant, she advised top-10 Canadian pharmaceutical subsidiaries on organizational design, product pipeline development, institutional sales force design, and market entry strategy across a range of clinical indications.

Ms. Bond is an MBA graduate and Bregman Scholar of the Rotman School of Management at the University of Toronto, and holds a Master's of Economics from York University and a B.A. (Hons.) with distinction from Queen's University.

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Price: $249.00 (CAD)