Auto parts industry rebounds: Scotia Economics
Canada’s position as a major auto parts producer is being undermined by the inability of suppliers to make inroads in the Asian and Latin American markets.
TORONTO: Canada’s position as a major auto parts producer is being undermined by the inability of suppliers to make inroads in the Asian and Latin American markets, says Scotia Economics’ senior economist Carlos Gomes.
Global vehicle sales are improving and the Canadian auto parts industry is bouncing back, but Canada has been knocked out of the Global Top 10 auto parts exporter.
“As recently as 2007, Canada was the sixth-largest auto parts exporter in the world,” said Gomes. “During the global economic downturn, Canada was overtaken by Spain, Korea and China, but managed to remain in the Global Top 10. However given a lack of exports to rapidly growing emerging markets, Canada was overtaken by the Czech Republic last year.”
So far the industry has posted a double year-over-year increase for an annualized $20 billion in shipments, it’s highest level since 2008. Gomes noted employment and profitability are also rebounding. Payrolls are up 3% over the past year and 8% since the bottom of the industry cycle in mid-2009. This reflects a rebound in the North American market from fleets and consumers, a trend he suggests will buoy the industry for several years.
“Despite these positive developments, … Canadian auto parts exports are still 30% below the level prevailing at the top of the previous global automotive cycle in 2007 – the worst performance among the top 20 auto parts exporting nations,” he said.
Global vehicle sales are up 6% over last year in March and nearly 5% in the first quarter, a rebound driven by rising replacement demand, improved credit availability and the drive for increased fuel efficiency, said Gomes.
“Small cars and fuel-efficient crossover utility vehicles accounted for 23 per cent of the overall U.S. market last month – the highest level since last spring and up from less than 20% in all of 2010.”