Canadian auto industry investment down sharply

Mexico by contrast gets $3B worth in last six months

TORONTO: A report from Scotia Economics says a sharp drop in investment in Canadian carmakers this year will likely put the brakes on future output from the industry.

The report says only $1.2 billion was spent in the auto industry in 2011, the lowest level since mid-1980s and well below the $3.1 billion that has been spent every year for the past decade.

The drop in spending on Canadian car plants comes despite a big rebound in the industry’s performance this year, as it continues to recover from the global economic downturn and supply disruptions caused by natural disasters in Japan and Thailand.

Senior economist Carlos Gomes says strong investment in machinery and equipment since the mid-90s has helped so far, but the big drop in spending will likely make it difficult for Canada to increase its share of North American output.

By comparison, Gomes says investment in Mexico’s carmakers are growing much faster, with $3 billion worth of investments in new plants and expansions over the past six months.