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Canadian auto parts shipments up 14% in 2014: Scotiabank

Benefiting from a recovery in U.S. vehicle sales, Canadian auto parts shipments have surged 14% this year, according to the latest Scotiabank Global Auto Report.


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September 24, 2014 by Canadian Plastics

Benefiting from a recovery in U.S. vehicle sales, Canadian auto parts shipments have surged 14% this year, according to the latest Scotiabank Global Auto Report.

 

“Auto parts shipments and exports have posted double-digit gains so far this year, climbing in July to the highest level since late 2007, prior to the global economic downturn,” the report said. “The industry has also started to make inroads in becoming more geographically diversified, with shipments outside of the U.S., advancing by 19% so far this year — the largest increase of the past decade.”

 

While vehicle production in Canada has been dampened this year by the retooling for new products at several assembly plants, the study noted, the parts sector has become a leader in Canada’s manufacturing revival in 2014. “Auto parts shipments have…nearly tripled the increase in overall manufacturing activity,” the study said. “Leading indicators point to further gains, as both new and unfilled orders have outpaced the increase in auto parts shipments this year. In addition, stronger-than-expected car and light truck sales in the U.S. during the summer months have prompted automakers to further boost their fourth-quarter vehicle production schedules for Canada, the U.S. and Mexico.”

 

Given this strengthening demand, Scotiabank expects North American vehicle assemblies to climb to a record 17.8 million in 2015, surpassing the previous peak of 17.7 million in 2000. “Record production across North America will provide a further lift to the Canadian auto parts industry, as each vehicle produced in North America contains roughly $1,600 of Canadian-made parts,” the study said.

 

The sharp gain in auto parts exports this year, combined with a largely flat performance for imports due to the retooling at assembly plants, has reduced Canada’s auto parts deficit to an annualized $18.1 billion, Scotiabank noted, down from an average of $19.5 billion over the past two years. “However, further gains will be hard to come by as imports are likely to pick up as vehicle production ramps up at Canadian plants in coming months,” the report said.

 

The industry is also starting to make much-needed inroads in diversifying its exports outside of the U.S., Scotiabank said. “While the U.S. will continue to be the main destination for Canadian auto parts exports, shipments to other jurisdictions have increased by 20% so far this year, outpacing the 16% advance to the U.S. In particular, exports to Mexico have surged by 30% over the past year, and are approaching the $507 million peak attained in 2007,” the report noted. “In contrast, shipments to the U.S. remain 25% lower than a decade ago, despite this year’s rebound.”

 

Highlighting the improving fundamentals in Canada’s auto parts sector, employment has jumped 5% over the past year, the report said – the sharpest gain since 2000. “In addition, employment in Canada’s auto parts sector has increased a cumulative 22% since bottoming out in mid-2009, a sharp contrast to overall manufacturing employment which continues to hover around the trough,” the report said.