Canadian automakers are reaping the benefits of strong U.S. new vehicle sales, but auto exports could be at risk under NAFTA renegotiations, according to the The Conference Board of Canada. Their latest industry outlook shows that potential changes in rules of origin for autos and parts could impact Canadian auto exports and production.
The forecast, which assumes that existing trade regulations are maintained, calls for continued strong demand for Canadian vehicles. U.S. light vehicle sales are expected to average above 17 million units annually over the next five years.
The strong demand has prompted automakers to commit more than $2 billion to upgrade their existing facilities in Canada.
But trade uncertainty remains a risk. According to The Conference Board of Canada, preliminary indications are that the U.S. will seek to adjust the current rules of origins in the upcoming NAFTA renegotiations.
Currently, light autos, engines and transmissions must have 62.5 per cent North American content before they can be imported duty-free into Canada. Potential changes could increase the levels of required North American content, or impose US-specific content requirements.
Rising industry costs, a strengthening Canadian dollar and a temporary pullback in production volumes by GM will offset some of the tailwinds Canadian automakers are currently enjoying, according to the report.
Canada’s Motor Vehicle Manufacturing Industry: Industrial Outlook, is available from The Conference Board of Canada.
