When it rains, it pours And right now, it’s pouring.
That, in essence, is what Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, told Automotive News Canada when discussing a host of issues facing the industry in Canada, from renegotiations of the North American Free Trade Agreement (NAFTA), to new Ontario labour laws. His association is also “concerned” about the Trans-Pacific Partnership trade deal Canada recently agreed to.
“We’ve always said that it’s not just one item or one thing that makes us uncompetitive, it’s the ultimate aggregate of those things that puts us in a more tenuous position in terms of cost of doing business here.”
This is the new reality for automakers and suppliers in Canada. Old assumptions that trade with the United States and Mexico will remain open have gone out the window. At the same time, new labour standards in Ontario, the Quebec zero-emissions mandate and a long-term shift toward autonomous and electrified vehicles are creating more uncertainty — and opportunity — than ever.
To be sure, the Canadian auto industry is in great shape by most measures. New vehicle sales broke another record in 2017, and vehicle manufacturing has continued its strong recovery from the depths of the Great Recession and the 2009 bankruptcies of General Motors and Chrysler. A Scotiabank report forecasts a 9.75 per cent increase in auto production in the first quarter of 2018, alone.
But it’s difficult not to notice some headwinds in 2018. Ontario’s new laws increase in minimum wage —raised to $14 per hour on Jan. 1 and moving to $15 per hour in 2019 — makes it easier to unionize and guarantees temporary workers equal pay for equal work. That could spell trouble for businesses in the province, already at a disadvantage due to high electricity costs.
As Liberal-government lawmakers and labour activists point out, the new rules could just as easily be described as a major and much-needed win for working-class Canadians, including those in the auto industry, that have been left behind even as the economy recovered from the last recession. But there’s no question that it gives automakers and suppliers more to think about when deciding where to invest in North America. And that list of things is topped by NAFTA renegotiations — the sixth round of which just ended in Montreal this week.
Whether Canada emerges as a stronger and more competitive nation for auto manufacturing or in a weaker spot is uncertain. This is leaving many suppliers and automakers in a holding position until talks wrap up.
Given the uncertainties, the Canadian industry will look much different 10 years from now than it does today, especially when factoring in major changes in automotive technology.
Between its highly efficient assembly plants, education system and advantages in health care, Canada could be in a great position to succeed.
How bright of a future it is will depend in large part on the decisions lawmakers make and how adept the industry will prove to be in response.