The manufacturing sector for Canada’s vehicle parts is enjoying brighter days as a high demand for cars and unstable loonie increase exports.
“Vehicles sales are growing,” said Anthony Faria, marketing professor at the University of Windsor. “As vehicle sales grow, we need to build more vehicles to serve the market. More vehicle parts are needed,”
The Canadian vehicle industry is now recovering from the devastating economic crisis of 2008. According to data generated by Industry Canada, export of vehicle parts increased by 34 per cent in 2015 compared to 2013. This includes only the original equipment to produce new vehicles, and not the parts to repair cars already on the road.
“Last year saw record sales of vehicles in Canada and the U.S.,” said John Holmes, professor at Queen’s University with a research focus in the auto sector in Canada.
In 2015, the export of motor vehicle parts raked in roughly $19.4 billion compared to $14.5 billion dollars in 2013. Ontario’s contribution to the country’s export earnings was the highest with $17 billion. In the last three years, all provinces saw an increase in export gains except Saskatchewan.
“The auto industry is often described as being an Ontario industry, but it is still an important industry in a number of provinces,” said David Moloney, professor at Ivey Business School at the Western Ontario University.
Moloney said it is an important part of the economy for Southern Ontario and Southern Quebec. It provides $500 million in the western provinces.
The Atlantic Provinces recorded more than double of their 2013 export values in 2015. In the western provinces of British-Columbia and Alberta, slight gains had been made of around $20 million each. In Quebec, 30.8 percent had been made to establish the value of exports at nearly $985 million.
The fluctuation of the Canadian loonie also gives the Canadian market an advantage. “It is cheaper to produce vehicles and parts in Canada with the loonie down, and the exports growing,” said Faria.
Car manufacturers in Canada benefit from the low-cost of selling their products outside Canada, as well as operating an affordable labour force.
“This represents a gold opportunity,” Moloney said. Canada’s economy offers good price to producers, as well as cheap transportation costs for material coming from the U.S.
Holmes said although the value of Canadian auto part export increased over the last three years, the numbers for 2015 are lower than 2006, before the crisis.
The largest export sales were made to the U.S and Mexico. Canada car manufacturing production count for 10 per cent of the North American production, but is one of the biggest manufacturing industry in the country.
Although Ontario is the biggest car manufacturer in the country, other provinces build car-parts and ship them to the Ontario plants and the United States. Faria said this trend explains the increase in exports for provinces outside of Ontario.
The Automotive Parts Manufacturer’s Association is confident about the future with a low dollar turning around 75 to 85 cents. They say it will sustain the growth of the motor vehicle-part manufacturing exports.
Faria predicts the vehicle production rhythm across North America won’t slow down and keep on trucking, ensuring the Canadian exports to still have bright moments, and continue its growth.