Canadian Manufacturing

Record one-year growth expected for Canadian auto parts industry

Growth for 2012 projected at 22.4 per cent in production, 22.7 per cent in revenues


OTTAWA—Canadian auto parts production posted record growth in 2012 and is forecast to expand at a more modest but still strong pace in 2013, according to a new report.

The Conference Board of Canada’s Industrial Outlook: Autumn 2012 for the motor vehicle parts manufacturing industry projects 2012 growth of 22.4 per cent in production and 22.7 per cent in revenues.

According to the Conference Board, the revenue growth is the largest one-year increase on record.

“The Canadian auto parts industry has been in recovery mode since output fell by a staggering 43 per cent between 2007 and 2009,” Conference Board director of industrial economic trends Michael Burt said in a statement.

“The parts industry continues to benefit from a turnaround in North American vehicle sales, which are on track to post their best results since 2007. Demand for parts has been so strong, that some parts manufacturers are running six days a week in an effort to keep up with the automakers.”

Beyond recovery in North American sales, the report says production has been boosted by Japanese automakers Honda and Toyota returning to normal operating conditions following last year’s production disruptions caused by the earthquake and tsunami.

Looking beyond this year, the two Japanese auto giants will continue to represent a big opportunity for Canadian parts manufacturers, the report says.

Japanese automakers are actively looking to move more production to North America in order to limit the impact of a strong yen and improve the durability of their supply chains.

Revenues will advance more moderately beyond 2012, but parts manufacturers will continue to benefit from healthy sales growth until North American vehicle sales fully recover.

According to the Conference Board, revenues are forecast to increase by 11.4 per cent in 2013 and 7.4 per cent in 2014.

Due to record growth in production and revenues, profits surged by an estimated 37 per cent in 2012, to $1.4-billion.

However, profit growth is expected to be more muted in the coming years.

Lower-cost economies, such as Mexico and China, are capturing market share in North America and will place pressure on industry profits and margins, the report warns.

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