Canada gains bigger share of U.S. market for auto parts: Scotiabank
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Canada's auto parts industry continued to gain ground in the U.S. last year despite pressures linked to a higher lo...
Canada’s auto parts industry continued to gain ground in the U.S. last year despite pressures linked to a higher loonie, Scotia Economics has indicated.
U.S. Department of Commerce data shows that Canada’s U.S.-bound exports of auto parts rose by six per cent to US $18.7 billion, surpassing the previous record of US $18.3 billion set in 2000.
“Canada’s performance partly reflects the decline in the trade-weighted U.S. dollar last year, requiring U.S. purchasers to pay more for imports,” says Carlos Gomes, Scotiabank’s auto industry specialist. “However, Canadian suppliers also continue to benefit from a lower cost structure than U.S. parts makers. Despite the sharp appreciation of the Canadian dollar last year, we estimate that Canadian suppliers still have a 15 per cent labor-cost advantage over their counterparts in the United States.”
The findings are in Scotiabank’s latest Canadian Auto Report.
Mexico is still the leading supplier of auto parts to the U.S. — a position Canada lost in the 1990s. Although, in the words of Scotiabank, “Canadian suppliers are clawing their way back.”
Canada accounts for 25.3 per cent of the auto parts imported by the U.S., compared to the 26.8 per cent that come from Mexico. In 2001, the southern-most member of NAFTA had a lead of 3.3 percentage points.
The Canadian auto parts industry has increased its value added per employee by 3.1 per cent per year since 1997, nearly doubling the 1.7 per cent annual increase seen in the U.S., Scotiabank says. Domestic plants have made more than $11 billion in capital upgrades in the past decade, with 90 per cent of that spent on machinery and equipment to enhance productivity.
Canadian operations have a 6.5-point edge over the 18.8 per cent share of the U.S. market held by Japanese competitors, compared to the advantage of 3.5 percentage points that existed in 1997. Gomes says this is proof that Japanese automakers are sourcing more parts for domestic plants in North America.