The Automotive Industry in Canada.

Transcription

1 The Automotive Industry in Canada. Opportunities for Swiss Companies. March 2012 osec.ch The Automotive Industry in Canada 1

2 Content Leader: Geoffrey S. L. Green, P.Eng. President, Pegasus Global Initiatives Swiss Business Hub Canada uses primary, secondary sources and tertiary sources of information to produce a variety of reports on the Canadian market for small to medium sized Swiss enterprises. For further information on our services, please contact: Elias Bardouniotis, MSc, MBA Director Switzerland Trade and Investment Promotion Swiss Business Hub Canada 154 University Avenue, Suite 601 Toronto, ON M5H 3Y9, Canada Tel. : Fax : elias.bardouniotis@eda.admin.ch While this report is intended to provide an overview of this specific market and its opportunities at the time of its edition, each individual manufacturer, exporter or company may have to conduct their own analysis to get a better understanding of the possibilities and opportunities available to them. You are encouraged to explore and develop your opportunities based on research and in-depth analysis. Readers should take note that the Government of Switzerland does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations, associations, companies and individuals listed herein. Readers of this report should verify the accuracy and reliability of the information contained herein before making a business decision. Swiss Business Hub Canada 2012 The Automotive Industry in Canada 2

3 The Automotive Industry in Canada. This article has been written to familiarize Swiss companies with the Canadian Automotive industry and to examine opportunities for trade and investment with Canada. Canada is a giant in the production of automobiles and automobile components for North America and is the largest producer of vehicles in North America. Total revenues in 2007 were $96.7 billion, while export revenues were $70.5 billion. Total employment is in excess of 90,000 and 84 percent of the vehicles built in Canada are exported. Capital investment has averaged $3.5 Billion over the past ten years. Table A compares production of vehicles in key States and Provinces. Table A. North American Vehicle manufacturing by locations Province/State Production Percentage of Total Production Ontario, Canada 2.5 Million 22% Michigan, United States 2.25 Million 19.8% Ohio, United States 1.6 Million 14.1% Kentucky, United States 1 Million 9% Total Production (North America) Million 100% Canada is the third largest exporter of automotive products after Japan and the United States. The total industry employs about 170,000 in over 1000 companies in manufacturing and an additional 300,000 in distribution. There are a number of reasons for Canada s success: A 6.4% cost advantage over the United States. The calculation of the estimated annual labour costs for a typical automotive. component manufacturing operation shows that Canadian locations offer competitive cost levels compared to many U.S. counterparts. An important contributor to Canada s competitive labour is the lower costs of providing employee benefits. Under Canada s national healthcare system, most medical insurance costs are publicly funded, rather than paid by the employer. Better productivity than plants in the United States and Mexico. The second lowest corporate tax rate among the world s top ten automotive countries. High Research and Development spending. This is supported by tax credits. Capital investment of $3.5 billion per year. Availability of qualified engineers and skilled workers. The Automotive Industry in Canada 3

4 The highest quality of life among the top ten automotive countries. Integrated into NAFTA (i.e. Canada, U.S., Mexico). Globally competitive. The eighth largest automotive sector in the world. One of the dominant factors contributing to the ongoing success of the industry in Canada is research and development. The main areas of research include: Metal processing Advanced materials Advanced design Visualization and manufacturing Information and communications technology The research and development activities are conducted across Canada, although there is a concentration in Ontario. Annual investment in research and development exceeds $0.5 Billion per year. The activities are conducted on a broad front and include: University based research McMaster University University of Waterloo University of Toronto Industrial Research The major suppliers are working to develop next generation products. The major automotive assemblers are working in partnership with suppliers and universities to meet their future needs. Focused research facilities. AUTO21 supports more than 300 researchers across Canada. National Research Council (NRC). Canadian Areas of Expertise. The Canadian industry excels in a number of areas as detailed below: Metal Processing: Advanced casting of light metals Cutting and machining Sheet and tube forming Welding and joining Powder metallurgy The Automotive Industry in Canada 4

5 Advanced Materials Lightweight materials Nano materials Bio-materials Advanced Design, Visualization & Manufacturing Inspection and vision systems Laser imaging Tooling and robotics Stereo-lithography, laser deposition Virtual design Advanced Technologies Mechatronics Powertrain engineering Hydroforming Clean diesels Fuel cells, hydrogen & alternative fuels Manufacturing in Canada. In Canada, there are ten automobile assembly plants, which produce almost 2.5 Million vehicles per year. All of these plants are located in Ontario. Table B shows the automotive assembly plants in Ontario, with details of locations, models produced, ownership and employment: Table B. Assembly Plants in Canada Company Locations Models Produced Ownership Employment Toyota Cambridge, Ontario Toyota Corolla, Matrix, RAV 4, Lexus Japan 6,000 Woodstock, Ontario RX 350 Honda Alliston, Ontario (2 plants) Honda Civic, Acura CSX/MDX/ZDX Japan 4,300 General Motors Oshawa, Ontario (2 plants) Chevrolet Impala, Camaro, Equinox, United States 10,000 Ingersoll, Ontario GMC Terrain Chrysler Brampton, Ontario Chrysler 300, Town and Country United States 9,000 Windsor, Ontario Dodge Charger, Grand Caravan VW Routan Ford Oakville, Ontario Ford Edge, Flex, Lincoln MKT, MKX United States 14,000 The Automotive Industry in Canada 5

6 Production of Vehicles. Below is a summary of the level of activity in the automotive sector in Canada. Table C. Overall Production of Automobile and Trucks Passenger Vehicle Heavy Duty Vehicle Motor Vehicle Parts Truck Body and Assembly Assembly Trailer Production Employment Number of Plants Production Units 1, 479, NA NA Shipments ($ Billion) Exports (Billions) Canadian Consumption Export Ratio Automotive Component Manufacturers. As shown in Table D, the industry includes many international companies as well as Canadian companies. The manufacturing of components covers the full spectrum of parts required to assemble the vehicles. These plants range from manufacturing plastic parts to stampings and castings. The supply chain for the automotive industry is global. In order to compete, a high level of automation is included in the manufacturing processes. The majority of this automation is designed and built in Canada. Leading Manufacturers in Canada include: CAMI Automotive Inc. (GM-Suzuki) Chrysler Canada Inc. Continental AG (formerly Siemens VDO) Denso Corporation Ford Motor Company of Canada Ltd. General Motors of Canada Ltd. Honda Canada Inc. Johnson Controls Inc. The Automotive Industry in Canada 6

7 Linamar Corporation Magna International Inc. Martinrea International Inc. Toyota Canada Inc. TRW Inc. These are the largest companies, but with over 1000 companies in the industry, there is the excellence and capability to produce parts with zero defects, with on-time delivery to meet the schedules of the assembly plants, both in Canada and the United States. Table D. Component Manufacturers Company Location Specialization Ownership Website DensoOntario HVAC Japan Johnson Controls Ontario ElectronicsUnited States com Linamar CorporationOntario Precision metallic components for vehicle transmission and driveline systems Magna International Inc. Ontario Automotive systems Assemblies Modules Components Canada Canada Martinrea International Inc. Multiple components for: Canada Engine & transmission Power Steering and Brakes Fuel System HVAC Body & Chassis Exhaust components TRW Canada Ltd. Ontario Electronic systems Braking Systems Woodbridge Group Ontario Seat Cushions Seat Frame Components Occupant Safety Components Noise/vibration/Harshness Solutions Composite Sheet Foam products Cargo Management Components United States Canada woodbridgegroup.com The industry has confirmed Ontario as one of the premier locations in the world to research, design, develop and manufacture vehicles and component parts. Ontario shipments totalled $26.14 Billion or 95% of total Canadian output. The Automotive Industry in Canada 7

8 The automobile assembly plants are supported by a components industry that comprises over 400 Canadian companies and supplies the assembly plants in Canada, the United States and internationally. The industry s export market is largely the United States. This is because an agreement was signed between the two countries in The Automotive Pact provided the sale of automobiles and parts to be made without duty at the border. This agreement was the foundation of the automotive industry as it is today. It provided access to the US markets, but in addition, it was the catalyst to create a major industry. The agreement had a broad impact. Not only did it present an opportunity; it was the foundation of a very competitive industry that has been built from that initial agreement. As a result, Canada began to produce far fewer different models of cars and much larger branch plants producing only one model for all of North America were constructed. In 1964, seven percent of vehicles made in Canada were sent to the United States, but by 1968, the figure was sixty percent. By the same date, forty percent of cars purchased in Canada were made in the United States and automobile and parts production quickly became Canada s most important industry. The Pact was replaced in 1988 by the Free Trade Agreement between the United States and Canada and by the North American Free Trade Agreement (NAFTA) in This trilateral agreement was signed by Canada, the United States and Mexico and is still in effect. The Ontario automotive corridor extends from Oshawa to Windsor. The main centres and the number of plants are detailed below: Burlington 29 Chatham 37 Guelph 36 Hamilton 27 Kitchener-Waterloo 61 Mississauga 137 Oshawa 26 St. Catherines 45 St. Thomas 20 Stratford 22 Toronto 169 Windsor 107 Woodstock 35 Windsor has a large automotive industry because of its proximity to Detroit and the US Market. With the changes in the industry, the tendency has been for the plants to be located in the proximity of the assembly plants that they serve. Whereas, Windsor had a number of assembly plants, now that number has been reduced because of outsourcing and rationalization. Nevertheless, Windsor remains a centre for the industry. The Automotive Industry in Canada 8

9 This article deals with the manufacture of automobiles, but it is necessary to share the full spectrum of the automotive manufacturing industry in Canada. Therefore the other areas will be discussed but not in the same depth. There is no question that the industry in North America is driven by the US market and by US corporations. But now, due to the economic situation in the United States, Canada is the location of choice for international companies that want to develop or expand their markets in North America. Some of the reasons were detailed earlier in this article. But now one of the main factors is the fiscal security in Canada, which reduces the risks for these companies. Other Automotive Sector Activities. In Table E, there is a breakdown by Province of the other main sectors within the industry. It can be seen that there is significant activity in these industries and the manufacturers are in clusters to promote their supply chain efficiency. The companies are located mainly in Ontario, Quebec and Manitoba. Table E. Main Sub-Sectors by Province Aftermarket Manufacturers and Rebuilders Trucks Buses Province # of Companies Employment # of Companies Employment # of Companies Employment Ontario 84 10, Quebec 56 5, British Columbia * * Alberta * * * * Manitoba * * *Blanks indicate low activity The Automotive Industry in Canada 9

10 Geographic Breakdown of Industry Activity in Canada. Ontario Automotive assemblers and parts manufacturers are making major investments, positioning Ontario as one of the world leaders in the manufacture of vehicles and component parts. Auto parts manufacturing shipments in Ontario totalled $26.14 billion in 2007, or 94.6 percent of total Canadian output. Ontario assembly plants are highly ranked by J.D. Powers among facilities in North America. Ontario s workforce competes favourably in terms of quality and cost against the best in the world, consistently winning the initial quality survey from J.D. Powers and the Harbour Report productivity survey. As a region, Ontario has more qualified engineers per capita than any G7 country. Of Ontario s roughly 135,000 highly- skilled autoworkers, 43 percent have a postsecondary education, and on average they stay with an employer for nine years. Throughout Ontario, world-leading companies collaborate with more than 150 university, college and public research centres to bring new technology, new products and processes from the laboratory to the marketplace. Ontario is the largest producer of light vehicles and components in Canada, with over 1000 plants. There is a manufacturing corridor from Oshawa to Windsor, where most of the component plants and assembly plants are located. The Ontario component manufacturers supply assembly plants which are located in Ontario and the United States. Ontario exports most of the production to the US, so whether it is assembled vehicles or component parts, delivery to the US has to be efficient. The consolidation in the industry in Ontario has resulted in the infrastructure necessary to provide fast access to US assembly plants. Quebec The Quebec automotive sector comprises over 250 companies and employs approximately 15,000 people in two main market segments: the original equipment market (OEM), and the secondary market, comprising of replacement parts and accessories. The automotive sector brings together internationally renowned companies in Greater Montréal, including Rio Tinto Alcan, Mecachrome and Raufoss Automobile Components Canada. Montréal s strong expertise in light metals represents a competitive advantage with large, cutting-edge research facilities such as the Industrial Materials Institute (IMI), the Center for Applied Research on Polymers (CREPEC) at the École Polytechnique, and Concordia University s Center for Composites. Manitoba The automotive industry in Manitoba is centred in Winnipeg. The cluster of companies specializes in the bus market. Over one third of the North American market is supplied from this group. The main companies are Motorcoach Industries and New Flyer Industries which are supported by a diversified supplier network. In addition, there are about forty companies building other types of vehicles, including motor homes, fire engines, etc. The Automotive Industry in Canada 10

11 British Columbia The British Columbia Fuel Cell cluster is the largest in the world, in terms of the number of companies and employment. The Automotive Fuel Cell Cooperation (AFCC) was formed in 2008 as a joint venture between Daimler, Ford and Ballard and is now responsible for the research and product development of automotive fuel cells. The AFCC employs approximately 200 people to commercialize this technology in automotive applications. There is a cluster of supplier companies supporting these efforts. Summary. We have looked at the Canadian automotive industry and seen that there is a capable supply chain. But the industry demand is significant to a number of other industries: 37% of steel foundry production 17% of rubber production 14% of processed Aluminum 13% of wire goods 9% of carpeting and fabric 8% of glass This demonstrates the opportunities, not only for conventional automotive parts, but for other products and technologies that can be applied to present and future automotive products. The industry is open to new products and technologies that can support it to become more competitive, better meet environmental requirements, and become greener and cleaner. This includes the development of hybrid and electric cars (including fuel cells). The development of these technologies is underway but there are many opportunities for international companies to participate. The industry provides a broad spectrum of opportunities for Swiss companies to take part in its growth. The industry is already international, but there are many opportunities to expand into Canada for the supply of the North American market. These opportunities extend beyond components and into new technology and products that can be incorporated in vehicles in the future. The technology can range from new power systems such as Fuel Cells to environmental technology and the production of greener vehicles. The Automotive Industry in Canada 11

12 More information is available through the websites listed below: Invest in Canada Industry Canada Ontario: North America s Automotive Powerhouse Manufacturers Association AUTO21 The Automotive Industry in Canada 12

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