Declining demand from US consumers has placed a strain on Canada’s motor vehicle manufacturing industry.
Increasing uncertainty regarding trade relations across the border has raised questions about the future of Canada’s position in the industry. Since the early 20th century, the auto-industry in Canada has been one of its strongest, driving positive import/export rates, employment, and overall production in the country.
Last year saw a 3.8% drop in auto-industry production. This year, it’s estimated Canadian auto production will rise a mere 0.8%, according to the latest “Conference Board of Canada's Canadian Industrial Outlook: Canada's Motor Vehicle Manufacturing Industry”. In the US, sales of brand new vehicles hit their peak in 2016. Looking at 2018 and beyond, future demand is predicted to cool off.
The aging Baby Boomers in North America (aged approx. 55 to 72) are purchasing fewer vehicles while the urban Millennial population (those in their mid-30s and younger) are opting for divergent modes of transportation, think public transportation or mobile ride-sharing.
Favourable conditions in the US economy can and should excite Canadian auto-manufacturing. Since the American dollar maintains its influence, and the US population has a fairly low unemployment rate, it would suggest that cars/parts manufactured in Canada would be attractive and affordable to those looking to buy.
Despite this, the Millennial population will eventually succeed in determining North America’s market interest in vehicle ownership.
Combining demographic changes with the possibility of a changing NAFTA agreement spells trouble for the Canadian auto-parts and investment industry. New NAFTA rules might restrict the number of Canadian parts that can be exported and used on American vehicles duty-free, causing the uncertainty of Canada’s automotive industry to remain intact.