Asian carmakers on cusp of overtaking Big Three in NA: Study

OTTAWA — One of the most significant impacts on the Canadian economy over the last 20 years has been the rapid change automotive industry landscape.

So says a new report by Statistics Canada, titled Canada’s changing auto industry.

Still, the auto industry in Canada remains on a solid footing, according to the report.

Overseas carmakers moving their auto production to North America, following their success in sales, has left a lasting impression on the domestic market. Asian auto manufacturers have sustained output, investment and employment in this industry at a high level, with the prospect for future growth.

More overseas brands than North American cars
have been sold in Canada every year since 2001.

The downsizing of the traditional Big 3 firms has been widely-publicized, reflecting the traumatic impact on their employees and their suppliers. Less appreciated, however, is how rapidly overseas firms have ramped up production in Canada to offset many of these losses, says the report.

Japanese-based manufacturers have filled much of the gap left by the traditional North American automakers in production in Canada. In 2006, Japanese automakers produced just over 900,000 automobiles in Canada, double their level in 1998. As a result, their share of the domestic market in production jumped from 16 percent to more than one-third (36%) during this period. This followed a similar trend in sales.

Also, previously unpublished data reveal that these new domestic auto manufacturers behave like the traditional North American firms in terms of exports and imports.

While exports by the traditional North American manufacturers tumbled, exports by the Japanese-owned manufacturers picked up much of this slack.

Exports of the traditional North American firms peaked at $51.0 billion in 1999, before falling by almost one-third since then. However, exports of the new Japanese-owned manufacturers rose by one-third, from $10.1 billion in 1999 to $15.9 billion in 2006.

In 2006, the net exports of new domestic manufacturers equalled 68 percent of the net exports of the Detroit-based manufacturers: as recently as 1997, their share was negligible. Only a shortage of production capacity slowed the growth of their net exports in 2006.

Meanwhile, the behavior of the new domestics and traditional producers in importing parts are comparable. In the mid-1990s, overseas-based manufacturers imported auto parts in such large numbers that they offset their growing revenues from auto exports. Since then, however, the situation has completely turned around, with Japanese-owned manufacturers posting a surplus of $5.9 billion in 2006. These new domestic automakers used fewer imported parts in their vehicle exports than the traditional Big Three.

Imports into Canada by the traditional North American manufacturers increased much more than imports by the new domestics from 1997 to 2004, before shortages forced the direct importation of more vehicles from overseas. Like the traditional North American manufacturers, the new domestic manufacturers ship most of their exports to the United States.

On the whole, Canadian consumers are now buying almost as many overseas models as North American brands. In the car segment, more overseas brands than North American have been sold in Canada every year since 2001. And this gap is growing.