Canadian Manufacturing

Geographical diversification ‘crucial’ for Canada’s auto exports

Scotiabank report finds 97 per cent of Canada's auto exports destined to stay in North America

April 30, 2014  by Canadian Manufacturing Staff

TORONTO—Canada has the most export-intensive auto industry in the world and must diversify its destination markets in order to realize growth, according to Scotiabank’s latest auto report.

With nearly 90 per cent of overall production in Canada geared for export, the nation’s industry relies almost exclusively on the United States as a destination market.

According to the financial firm’s Global Auto Report, of the 2.38 million passenger vehicles manufactured in Canada last year more than two million were shipped to the U.S.

Including Mexico, 97 per cent of Canada’s auto exports are destined to stay on the continent.


By contrast, the U.S. and Mexico “have significantly” increased exports outside of North America over the past decade.

U.S. exports to markets abroad now exceed one million cars and light trucks a year and account for 10 per cent of the country’s production—four times the level of a decade ago.

Export growth outside of North America has been even stronger for Mexico, according to Scotiabank, and now accounts for 20 per cent of the vehicles assembled there.

While Canada remains the second-largest vehicle exporter to the U.S. behind Japan, its reliance on one market and lack of geographical diversification is hindering growth, with the 2.38 million vehicles produced here in 2013 in line with the average of the past 10 years.

The need to diversify export markets becomes even more apparent when considering the drop in market share for Canadian vehicles in the U.S., the world’s second-largest auto market.

Canada’s share of overall U.S. vehicle imports dropped to 20 per cent last year, down from a peak of 31 per cent in 2000 and an average of 25 per cent since the mid-1990s, according to the report.

Picking up the slack where Canada has dropped off in recent years are Mexico, Germany and South Korea.

Vehicle exports from Mexico to the U.S. have jumped 22 per cent since 2000, according to Scotiabank, and the combined auto exports from Germany and South Korea to the U.S. have gained 50 per cent over the same time.

In fact, exports from Germany and South Korea to the U.S. totalled almost two million vehicles last year—nearly matching shipments from Canada.

To combat stagnant production and exports, Canada’s industry needs to leverage recently-signed free trade deals with the European Union (EU) and South Korea in order to broaden the landing spots for its vehicles.

And with North America accounting for only 22 per cent of global car and light truck sales, down from 35 per cent a decade ago, the deals could provide a much-needed foot in the door to expanding markets, particularly in Asia.

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