U.S. President Joe Biden’s Build Back Better framework passed in the House—a move that may have certain OEMs and global automotive players feeling uncertain, particularly in Canada.
According to the U.S. government, the framework’s electric vehicle tax credit “will lower the cost of an electric vehicle that is made in America with American materials and union labor by $12,500 for a middle-class family”—putting other OEMs, countries, and non-union labour at a disadvantage.
In light of these ongoing developments, including a visit to the U.S by Prime Minister Justin Trudeau to discuss the “blatantly protectionist U.S. proposals for EV incentives”—as DesRosiers Automotive Consultants puts it, DAC offered a look at the state of the Canadian auto manufacturing sector.
Its data reveals a sector that experienced significant turmoil in 2021, from shifting production mandates to the introduction of EV assembly, pandemic-related issues, and the semiconductor shortage. This all led to a decline in shipments, with the vehicle assembly sector down 16.8% from 2020 levels, and a decrease of almost 50% from five years ago.
“The picture is definitely not pretty at the current time, although there are signs of hope for the future once the industry emerges from its current structural reshaping,” said DAC. Shipment levels for the assembly sector this year appear to be at the lowest level since 2009.
The Canadian assembly sector is currently undergoing “a period of fundamental structural change,” according to Andrew King, Managing Partner at DAC, which he said is on par with the changes seen after the 1965 Auto Pact, or when Japanese manufacturers arrived in the 1980s.
“While positives can be found, the transitionary period will undoubtedly be difficult and uncertain, and the Canadian and Ontario governments need to actively fight to support the industry during this time,” said King. “The picture is definitely not pretty at the current time, although there are signs of hope for the future once the industry emerges from its current structural reshaping.”
However, other sub-sectors of Canadian auto manufacturing performed better and were more positive. The auto parts industry is experiencing below historic levels, but still managed to hold steady with the 2020 output. And the smaller metalworking and body-trailer manufacturing industries experienced some growth in 2020.
