Automotive Transformation

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by Andrew Brooks

Market changes creating opportunities for automotive manufacturing in Canada

The automotive industry in Canada is facing some well documented challenges, notably the movement of jobs and manufacturing operations to low-wage countries, as well as tougher environmental laws and the development of new, disruptive technologies such as autonomous vehicles and an economic climate where car owners are keeping their vehicles for longer than ever before, undermining new vehicle sales.

But while it might not seem like a good time for a shop to consider getting into automotive work, the fact is that there is still opportunity in this market. Some industry watchers are positively upbeat.

“The automotive industry across North America has been on quite a roll,” says Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., a Canadian market research consultancy that specializes in analyzing the automotive sector. “Although the US and Mexico are getting more of the upside, the Canadian auto sector is indeed growing and has stabilized.” DesRosiers projects significant growth to at least 2018, if not through to the end of the decade.

That’s good news for an industry that has seen the lion’s share of capital investment go to the US and Mexico, with figures dwarfing the new investment dollars headed to Canada’s automotive industry. According to a report in the Globe and Mail, in 2014 car manufacturers invested about $13.6 billion in automotive assembly and manufacturing in the US, $9.1 billion in Mexico, and, in Canada, a paltry $977 million, or four per cent of total North American automotive investment for that year.

But it’s the very challenges that Canada’s automotive sector is facing that are driving–or will drive–opportunity for the industry’s manufacturing suppliers. A primary challenge is emerging standards for fuel efficiency. These concerns are motivated by the increasing pace of global climate change, but, interestingly, the drive for improved fuel efficiency hasn’t so far led to a strong uptake of electric and hybrid vehicles. It looks like the internal combustion engine will continue to be the main focus in the search for better fuel efficiency for the foreseeable future.

The Canadian government has committed to falling in line with aggressive US fuel economy standards next year. The two-stage plan, DesRosiers says, calls for new vehicles in the 2025 model year to achieve a fuel efficiency rating of 35 miles per gallon, and 53.5 miles per gallon a decade after that. The timelines seem long, but a sector as massive as the automotive industry takes a long time to change course.

“At this point these are stretch goals that are going to be extremely difficult to meet, so there’s an all-out push at every vehicle company, at every level, to get more fuel efficiency,” DesRosiers says. “Any technology or process that improves fuel efficiency is significant. Any company that has an idea that can move the industry even a tenth of one per cent closer to those goals is going to get the attention of the buyers at the vehicle manufacturers.”

One of the main strategies for improving fuel performance is the use of advanced materials to make vehicles lighter. While in many cases this means the increasing use of advanced composites and even ceramics for the components themselves, the auto makers will also have to retool their production lines extensively, which presents an opportunity for metalworking suppliers. The continuing development of telematics and high-tech engine management systems will also present new opportunities.

Another challenge that has always driven change and innovation in the automotive sector is safety, and it’s likely to become even more of a concern with the development of driverless vehicles. “The hottest topic in automotive right now is autonomous vehicles,” DesRosiers says. “Virtually every technology that touches that issue is related to safety.” Today’s vehicles are safer than they’ve ever been, but making them driverless is going to require a whole new approach to passenger safety, and this will have a huge impact on suppliers to the industry.

“Every single vehicle on the marketplace will have to be completely re-engineered within a decade, or at most 15 years,” says DesRosiers. “That means every set of tooling out there will have to be redone, and all the processes that make the vehicles will have to be re-examined. We’re in for one heck of a ride.” SMT

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