Geographic diversification “crucial” for Canadian auto exporters: report

Geographical diversification is “crucial” for Canada’s auto exports, but it appears to be stuck in neutral while most other major vehicle producing countries, including the U.S., have diversified their markets by expanding sales outside their home regions, a new report from Scotiabank says.

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.

The Global Auto Report also says Canada accounted for only 20 per cent of all imports to the U.S. last year, down from 31 per cent in 2000, losing ground to vehicles from Mexico, Europe, and Asia.

The report noted that Canada remains the second-largest vehicle exporter to the U.S. after Japan, but that they are the only two members of the top 10 that haven’t surpassed their pre-recession output.

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.

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.

The report doesn’t elaborate on the reasons for Canada’s lacklustre performance globally but says the recent free trade agreements with the European Union (EU) and South Korea could provide an opportunity to expand exports outside the U.S. “To combat stagnant production and exports, Canada’s industry needs to leverage recently-signed free trade deals with the EU and South Korea in order to broaden the landing spots for its vehicles,” the report said.