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Canadian auto sales up but production down

Canada has become one of the most costly places in the world to build cars

Published: August 29, 2013, 4:00 PM

Caution - trending down - Caution - graph trending down

New vehicle sales in Canada are currently running at a record pace. Barring some major setback between now and year-end, 2013 could see the highest annual sales figure ever – beyond 17-million vehicles.

But the other side of that coin doesn't look as promising. Despite burgeoning sales both here and in the U.S., which is the primary market for many of the vehicles and components built in Canada, overall output in the Canadian auto industry fell during the first six months of 2013 – substantially.

According to DesRosiers Automotive Consultants, the total value of all shipments in the vehicle assembly sector fell 5.8% from $28.23-billion during the first half of 2012 to $26.60-billion during the same period this year. A $1.63-billion decline!

Similarly, shipments in the component parts and accessories sector fell 8.3% from a strong 14.51-billion position in the first half of 2012 to $13.31-billion this year, an additional $1.20-billion decline!

That combined $2.83-billion decline comes in the face of an 8.3% surge in the light-vehicle market in the U.S. and a 2.9% gain over the second-best year ever at home.

The inevitable, if unpleasant, conclusion is that Canada is getting a declining percentage of the growing North-American automotive manufacturing and assembly business.

While there may be some political factors at play in certain sourcing decisions, the most likely reason for this dramatic turnaround is the most pragmatic one. From being one of the lower-cost countries in which to build cars, Canada over the last several years has become what one industry executive describes as the most costly place in the world for vehicle production.

Surprisingly, perhaps, this significant downturn has not yet resulted in significant job losses, according to DesRosiers. Employment in the automobie manufacturing sector has remained stable through June 2013 at 65.5k jobs (+0.1%), while the parts and accessories sector showed job growth through June of this year, reaching its highest first-half employment total since 2008 at 85.6k jobs (+12.9%).

Employment is a lagging indicator, however, so it may take months for this metric to reflect the reduced shipment totals noted through June, DesRosiers explains.

The prognosis is not good. And there is no white knight on the horizon to suggest it's going to change anytime soon.