That could include opening a Steyr-style assembly plant in North America in the future, Kotagiri said.
“We’ve always said that if there’s a business case — a viable long-term business case — we would be open to a footprint in North America. That would be based on the demand from the customer perspective.”
Canada has a shot at attracting such a plant given the country’s strong ties to the global auto industry and expertise in emerging technologies, AutoForecast Solutions’ McCabe said. But it will face stiff competition from several U.S. states that use substantial tax breaks and other financial incentives to attract new manufacturing.
“Every time someone looks at North America, there’s going to be a battle for jurisdiction,” said McCabe. “Just because Magna is in Canada doesn’t mean Canada wins.”
The recent decision by the federal and Ontario governments to invest hundreds of millions of dollars to help Ford add future EV production to its Oakville, Ont., plant helps, he said.
The location of any future North American contact assembly plant would depend on what the customers wanted, said Don Walker, the former CEO of Aurora, Ont.-based Magna, who retired at the end of 2020.
“If we get enough people interested, we would certainly do it,” Walker said in the Oct. 23 “Canada Conversations” podcast with Automotive News Canada.“Where the plant would go will depend on who the customers are, where they think they’re going to sell them [vehicles] and what they want.”
Magna would likely look at developing a brownfield site, he said. “We’re having some very interesting discussions and we’ll see where they go.”
Historically, North American automakers have been reluctant to use outside assemblers, said Dave Andrea, a principal with management consulting firm Plante Moran, in Michigan.
But contract assembly could help them keep costs down, whether it’s to meet the new United States-Mexico Canada trade requirements for higher North American content or produce low-volume halo vehicles.
“Let’s say you want to have a convertible option. You might only sell 10,000 units per year. Rather than say, ‘No, we’re not going to offer that,’ you might look outside to a specialty builder to provide it,” Andrea said.
“It works there [in Europe] for BMW and Volkswagen and the others. And the major portion of this goes to Magna. Why not here?” Andrea said.
Canadian parts supplier Martinrea said the Magna-Fisker deal had it posing the same question internally.
“Personally, I love the idea,” said CEO Pat D’Eramo. “But a supplier would have to have a lot of capability and breadth. Someone like Magna, who does it already in Europe, certainly has the experience,”
With what appeared to be declining auto assembly in Canada, Martinrea has considered whether a group of suppliers could get together to provide full vehicle assembly under contract, he said.
“We were concerned because the supply base goes where assembly is. If there’s no assembly, there’s no supply,” D’Eramo said.
Whether there’s sufficient demand among North America-based automakers for contract assembly remains to be seen. Many have excess capacity in existing plants, D’Eramo said, adding that consumer adoption of electric vehicles might take longer than expected given the lack of charging stations, especially in the United States.
Magna’s vision for contract assembly requires at least three or four customers, each with production runs of 20,000 to 50,000 vehicles a year, to justify the investment in a plant, Walker said.
“When a new entrant comes into the market, the likelihood of them saying we want to do everything for engineering project management, do all the tooling and assemble the vehicles, that’s a real, real tough thing to do,” Walker said.
“I do think there’s opportunities with the new entrants, and I think to the extent the car companies have to be competitive, I think they have to look at [whether they] are going to be more competitive if they outsource some of their low-volume unique vehicles. I think that gives us an opportunity to put a plant [in North America].”