Canadian automotive sector hollowing out, despite record sales

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There were best performance auto sales in Canada in 2015, but the industry itself shrank, according to energy analysts.

About 2.3 million cars and light trucks were shaped in Canada last year, a 5.5 per cent reduction from the earlier year, according to a report from BMO Financial Group.

rt of the unruly in 2015 was lines out of service as automakers retooled – but going forward auto generate looks set to flatten or shrink further as production of cars to moves to lower-cost hearts and Canadian plants build more trucks and cross-over vehicles.

“Undeterred by the strong short-term results, the Canadian auto assembly industry is fighting to grow,” said Michael Burt, director of industrial fiscal trends for the Conference Board of Canada.

“Over the next five years, no success in production is expected in Canada.”

Scotiabank also forecasts a flattening of Canadian auto exchanges for 2016, as provinces reliant on the resource sector experience declining on sales. However, provinces with strong manufacturing sectors will see developed sales of cars and light trucks as consumers take advantage of low move rates.

Strong sales for 2015

For 2015, Canadian auto sales climbed a stronger-than-expected three per cent to a record outrageous 1.9 million units.

The Conference Board points to low gas prices as exhilarating demand for trucks and cross-over vehicles.

In the short-term, that will be righteousness for Canadian auto manufacturing as automakers are moving production of cars into Mexico and the southern U.S. and retooling here to beget higher-value vehicles.

So Toyota Canada plans to end Corolla production in Canada and change it with the crossover SUV, the RAV4. Ford retooled its Oakville, Ont., assembly line to construct the Edge, also a crossover vehicle.

GM continues to be undecided on ongoing opus in Canada, as it has not committed to assembly in Oshawa beyond 2017. However, it advance production on the line beyond 2016 because of strong demand for the Equinox, a closely-knit SUV.

“As a whole, however, Canada is continuing to lose out on auto sector investment to the southern U.S. and Mexico,” the Forum Board said in its report.

The $2 billion in investment by the auto sector this year in Canada is minimized by the billions committed to plants in the U.S. and Mexico.

Low dollar helps

Labour rleys in 2016 may play a key role in whether the Detroit Three automakers conduct new models to Canadian plants, Burt said.

The low Canadian dollar may assist the Canadian union make the case for more work in Canada, as it is bringing costs here, however, he warned much will depend on how Canadian overemphasize costs com re to the U.S.

The falling loonie is also helping boosts profits in Canada, as much of our auto clientele is with the U.S. Exports of motor vehicles and rts totalled $7.9 billion for November 2015, up 5.9 per cent from the year sooner than, and overtaking energy exports in value.

That has helped the bottom furrow for automakers in Canada.

Revenues for the auto sector are forecast to grow by 8 per cent in 2015 and by slenderize more than 7 per cent in 2016, the Conference Board says. But Burt augurs those kinds of increases will fade st 2017 if GM allures out of Canada.

The Trans- cific rtnership also may eat into opportunities for Canadian auto sector as it intention be easier to sell vehicles with TPP-made rts into the Canadian hawk.

“While the im ct of the Trans- cific rtnership (the TPP) agreement is still somewhat hazy, it is expected to heighten competition for Canadian assemblers and rts manufacturers,” Burt mean.

That won’t affect anything for years, he added. “It’s not even endorsed yet. Any im rt will be years down the road.”

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