Rising auto demand boosts production in Canada
- November 14, 2013
Stronger vehicle sales in Canada and the US and the recent free trade agreement with the European Union bodes well for Canada's automotive manufacturing industry according to a new "Global Auto Report" from Scotiabank.
In October, purchases of cars and light trucks set a fourth consecutive monthly record. totalling a much stronger than expect annual rate of 1.84 million units, up from an average of 1.73 million through September. And while media reports have focused on the ongoing shift in the North American auto industry investment and production from Canada towards the southern US and Mexico, Scotiabank says "rising vehicle demand across North America has boosted production on the continent, including Canada, to hte highest level in nearly a decade, lifting operating rates and leaving some plants bursting at the seams....Moreover, the recently announced free trade agreement with the European Union opens the door for Canada to begin diversifying its motor vehicle exports behind the United States."
The report notes that strengthening demand in North America as a whole will lift vehicle production above 16 million units this year for the first time since 2005. It notes that the growing demand for vehicles will put pressure on automotive manufacturers to add capacity: "Rising capacity constraints is one of the reasons why Ford Canada recently announced that it will invest $700 million to retool its assembly plant in Oakville in order to expand and improve its manufacturing capability to meet rising global demand for its vehicles...In October 2013...General Motors announced the addition of a third shift on the Flexible Manufacturing Line in Oshawa. At that time the company also indicated that production at the Consolidated Line, which was originally scheduled to close in mid-2013, would be extended until June 2014." GM recently announced its Consolidated Line would remain in produdction through 2016 to meet projected market demands.
The report concludes that the recent improvement in Canada's competitive position "leaves the industry on a much better footing than during most of the past decade, when Canada was viewed as one of the most expensive vehicle-producting jurisdictions.