January 14th, 2016
The Canadian automotive industry provides essential support to the Canadian economy, employing over half a million people across the country. The sector remains influential across the globe, with the eighth largest positive trade balance in the world and a place in NAFTA, which includes Canada, the United States, and Mexico. Simply put, Canadian automobiles represent an important trade in the country.
There are several elements that comprise the automotive sector: automotive parts manufacturing, automobile assembly, and the lesser known small auto body and trailer manufacturing. There are high levels of competition influencing all of these industries, challenging its leaders to respond with new innovations or increased specializations.
Of course, the industry faces its fair share of challenges, especially from abroad. Mexico’s auto investments continue to soar while Canada now faces junior-partner status in NAFTA, highlighting the discrepancies between the countries. Investors increasingly look to Mexico and the U.S. to lower their automotive production costs. For instance, global automakers invested $7 billion USD into Mexico in 2014, but only $750 million into Canada. As Mexico solidifies a central status in the industry, this raises eyebrows about Canada’s future in the industry.
Ontario’s essential contributions
In the face of adversity, the province of Ontario remains as North America’s automotive powerhouse, housing most of the country’s automotive sector. It is also the only province with Original Equipment Manufacturer (OEM) automotive assembly operations. It is on the strength of this province that Canada as a country sits as high as it does in overall vehicle production.
Ontario has 350 innovative parts manufacturers, 90,000 skilled workers, five of the world’s top automakers, and production numbers of over two million vehicles every year. Research, innovation, technology, and collaboration at the public and private level help give Ontario automotive producers the edge over their competition. The province has a variety of initiatives to help facilitate the production of new technology, or develop improvements for existing processes.
As well, many global investors also don’t realize that tax rates are lower than many important production hubs in the U.S. The province has one of the lowest tax jurisdictions on the continent. There are also a wide variety of some of the most plentiful tax credits available around the globe for local and global automakers producing vehicles or parts in Ontario (or in other parts of Canada, for that matter).
A strong infrastructure of expertise plays into this promising future as well. Ontario is home to some of the world’s most advanced colleges and universities that produce cutting-edge talent (both in people and in research) every single year. Couple this with the close-knit cluster of parts producers and entire automobile manufacturers across the country, and you have the recipe for a sector on the rebound. Ontario helps provide an answer for a competitive economy and market where consumers increasingly demand the best and newest technology as soon as possible.
Adapting to trends
State-of-the-art innovation is what will help maintain current investors and attract new ones. Doing so will likely require a pronounced shift towards new technologies, including carbon fibres, connected vehicle technology, or vehicles with even lower fuel emissions or electric cars.
Fortunately for investors, whether local or global, there are a variety of federal and provincial government funding options for to which businesses can apply. These include the Automotive Innovation Fund, the Southwestern Ontario Development Fund, and Investing in Business Growth and Productivity, for instance. Get in touch with INAC Services for more information on funding opportunities for the Canadian automotive industry.