Canadian automotive exports recover
After a decade of decline in exports, the Canadian auto industry has seen strong export growth over the past three years, with exports rising 58% since 2009.1
Canadian automotive exports
From 1995 to 2000, Canadian auto & parts exports increased to a high of $92.7 billion, decreased to a low of $41.7 billion by 2009, then gradually increased to $65.3 billion by 2012.
Data: Statistics Canada
Source: Office of the Chief Economist, DFATD
As Canada’s second-largest exporting industry, the automotive sector is a vital part of the Canadian economy. According to the Canadian Vehicle Manufacturing Association, the industry directly supports 550,000 jobs in Canada. It consists of assembly plants (mostly in Ontario) dominated primarily by U.S. and Japanese firms. The industry is export-intensive, with 76% of the Canadian production exported in 2011. However, with 97% of these exports destined to the U.S., Canada’s auto industry is highly dependent on demand from south of the border and must compete with other exporters as well as domestic U.S. producers.
Due to a strong U.S. economy, Canadian exports surged 51% between 1995 and 2000, peaking at nearly $92.7 billion in 2000. After 2000, however, auto exports began trending downwards. A series of five consecutive drops in Canadian auto exports followed starting in 2004 and ending in 2009, the trough of the financial crisis. That year, Canadian auto exports hit their decade-low at $41.3 billion — a 55.4% drop from their 2000 peak.
This downward trend stemmed partly from a decline in the overall U.S. demand for motor vehicles and parts during these years. Over this period, U.S. consumption of motor vehicles and parts dropped 21.4%.
But Canada’s exports also fell due to a number of other factors. Canadian exports were affected negatively by the appreciation of the Canadian dollar while at the same time U.S imports increased from other markets, including new automotive exporters such as South Korea. In addition, production increased in both Mexico and the southern United States. The auto industry also went through major restructuring, with several production plants being closed and two of North America’s “big three”, on which Canada is especially dependent, receiving government assistance.
In 2010, Canadian auto exports began to recover, as economic conditions in the U.S. started improving and demand for auto products picked up. In 2012, the value of Canadian auto exports reached $65.3 billion.
Nonetheless, Canadian auto exports are still 29.5% below their 2000 peak. Moreover, Canada’s share of North American production has continued to decline, from 17.0% in 2009 to 14.2% in 2012, as production capacity has been shifting towards the southern U.S. and Mexico. In addition, Canada’s auto export recovery has been largely driven by gains in motor vehicle exports, up 68.5% since 2009, while exports of auto parts rose 35.9% during this period. With a strong Canadian dollar, and a growing investment in the Mexican and southern U.S. auto sectors, these competitive challenges will most likely continue.
Canadian automotive exports have begun to recover with a pick-up in U.S. demand, but exports are still far off their record peak and the industry faces strong competition from abroad.
For more information, visit Foreign Affairs, Trade and Development Canada’s Office of the Chief Economist.
1Automotive exports are defined as NAICS 3361 (Motor vehicle manufacturing) and Auto parts, accessories, bodies and trailers (NAICS 2622, NAICS 32621, NAICS 33621, NAICS 33637, NAICS 33632, NAICS 33631, NAICS 33635, NAICS 326193, NAICS 33636, NAICS 33633, NAICS 33634, NAICS 33639).
- Date Modified: