The Canada–United States–Mexico Agreement—CUSMA provides greater incentive for automakers to source components from within higher-wage jurisdictions in North America. As such, the revised terms bode well for Canadian parts makers, encouraging high-value and labour-intensive parts production and spurring capital investments in transmission and engine plants.
Electrification Era—Several countries have pledged to ban the sale of internal combustion engines over the next two decades, while major OEMs plan to roll out new electric models before 2023. Traditional parts suppliers that produce mechanical components will have to heighten their expertise in software and electronics.
Domestic Demand—Canadian parts suppliers have become less export-intensive over the past decade as OEMs strive for leaner manufacturing processes (e.g., just-in-time practices). Domestic demand for Canadian components accounted for 44 per cent of total parts production a decade ago but is anticipated to surpass export demand before 2023.