Automakers will dial back their spending in Canada and export fewer vehicles to the United States from Canada over the next four years, according to forecasting firm LMC Automotive.
The forecaster expects OEMs to continue to increase spending and production in Mexico over the same time period, despite tariff threats and social media shaming from President-elect Donald Trump.
LMC predicts Canada will be the only country in North America to see a decrease in “production capacity investment,” forecasting a four-per-cent decrease over the four-year period.
Meanwhile, investment in Mexico will rise 47 per cent and investment in the United States will increase 12 per cent during the same time frame.
“This is not surprising in any way. Essentially what they’re pointing out is what’s been forecast pretty continuously by everybody, that production in Canada has been in decline since 1999 and will continue to decline,” said Tony Faria, Co-Director of Automotive and Vehicle Research at the University of Windsor's Odette School of Business. “If you’re going to build an assembly plant, why would you build it in Canada? There isn’t right now a really good reason.”
He called the cost of labour, high electricity rates and provincial and federal plans for carbon taxes deterrents to investment.
“Canada remains not a particularly good location,” Faria said. “It’s costly to build vehicles here, and we’re just not a big market.”
By 2020, the United States is expected to get fewer vehicles than it does today from all five automakers with facilities in Ontario, LMC said. General Motors, Ford, Toyota, Fiat Chrysler and Honda all assembly vehicles in Ontario and ship the majority of them to the United States.
General Motors is forecast to suffer the biggest decrease in the number of exports. Currently, 15 per cent of GM’s U.S. sales are comprised of Canada-made vehicles, but by 2020 GM will be down to nine per cent. Ford’s percentage of Canada-built vehicles sold in the United States is projected to fall to five, down from seven; FCA’s percentage will fall to 18 from 21; Honda’s percentage will drop slightly to 21 from 20; and Toyota will see its share fall to 18 per cent, down from 20 per cent today.