U.S. Economy—Current U.S. economic conditions are supporting Canadian vehicle and parts manufacturing: low fuel prices, nearly full employment, low interest rates, and an appreciating currency favour U.S. consumers. The boom in Canadian vehicle parts manufacturing is expected to subside gradually after two years of record-level light vehicle sales.
Demographic Change—The aging of the baby boomers in the U.S. and Canada is driving a more muted profile for demand for new vehicles. Due to lower-than-average vehicle consumption rates among millennials and seniors in the U.S., Canadian auto parts manufacturing output growth will gently recede over the next five years in response to softer market demand.
Trade Uncertainty—The current uneasiness in North American trade relations poses a threat to automakers’ investment and production on Canadian soil. Potential changes to rules-of-origin requirements could take up to $5 billion out of Canadian auto parts exports between 2018 and 2022. The current outlook assumes the continuation of NAFTA.