Canada stands as a significant player in the North American automotive industry, holding the position of the second-largest market on the continent. A substantial portion of new vehicles sold here, approximately three-quarters, are imports, showcasing the nation’s robust trade relationships and consumer preferences. The Canadian automotive sector hosts a wide array of global vehicle manufacturers, with five maintaining local assembly lines: industry giants Ford, General Motors, Stellantis (including Chrysler), Toyota, and Honda. Beyond new car sales, the automotive aftermarket in Canada is a thriving sector, boasting an estimated annual retail value exceeding US$16 billion, demonstrating resilience and stability through 2022.
While local automotive manufacturing demonstrated a strong recovery in 2022, reaching levels comparable to the pre-pandemic era, imported vehicles continue to hold a larger share of the market. The COVID-19 pandemic initially caused a significant downturn, with the total annual value of Canadian automotive sector imports plummeting by 24% in 2020. However, the industry quickly rebounded, achieving a 23% growth in 2021 and a further increase of roughly 15% in 2022. This impressive recovery has propelled the market to be six percent larger than its pre-pandemic size in 2019, highlighting its adaptability and enduring demand.
In 2022 alone, the import of passenger vehicles into Canada saw a notable increase of approximately 12%, reaching a total value of US$31 billion, surpassing pre-pandemic figures. Furthermore, imports of commercial vehicles like trucks and transport vehicles, alongside tractors, also experienced growth beyond their 2019 values, indicating a broad-based sectoral expansion. Imports of automotive parts and components into Canada totaled US$15.4 billion in 2022, remaining consistent with 2020 levels, suggesting a steady demand for these crucial elements of vehicle production and maintenance. The United States continues to be the dominant source of Canadian automotive imports, holding approximately 62% of the total market share, reflecting strong North American trade integration.
The Canadian market for new light vehicles, encompassing passenger cars and light trucks, experienced a 6.6% increase to 1.64 million units in 2021. However, this volume slightly decreased to 1.49 million units in 2022. Notably, U.S. brands accounted for roughly 40% of these sales, emphasizing their continued market presence. Passenger cars now represent a smaller segment of the market, accounting for about 16% of unit sales, while light trucks, including the increasingly popular SUVs, dominate with 84% of sales. This shift in consumer preference towards light trucks and SUVs has significant implications for Canadian car parts companies, influencing the demand for specific types of components and aftermarket products.
Canada’s regulatory framework for the automotive sector is closely aligned with that of the United States, with over 90% of road-safety regulations being identical in both countries. This harmonization simplifies operations for Canadian car parts companies engaged in cross-border trade and ensures consistent standards across the North American market.
| Table: Canada Automotive Market Data (US$ Millions) |
|---|
| Total Local Production |
| Total Exports |
| Total Imports |
| Imports from the US |
| Total Market Size |
| Exchange Rates |
[Total market size = (total local production + imports) – exports]
Units: $ millions
Source: Statistics Canada reports, Bank of Canada annual average
Market Dynamics and the Shift Towards Electric Vehicles: Opportunities for Canadian Car Parts Companies
Following the severe disruptions to demand and sales caused by the COVID–19 pandemic, the Canadian automotive market has witnessed a strong rebound across all economic indicators, including manufacturing, exports, and imports. This recovery presents a positive outlook for Canadian car parts companies as the overall market activity increases.
A major driving force shaping the Canadian automotive sector, and consequently the car parts industry, is the government’s commitment to achieving net-zero emissions. Canada has set ambitious targets for new vehicle sales, aiming for 60% zero-emission vehicles by 2030 and 100% by 2035. To facilitate this transition, the government is implementing specific incentives, such as point-of-sale rebates, designed to encourage the adoption of electric vehicles (EVs). Furthermore, significant increases in fuel costs, influenced by global events, are also propelling consumers towards more fuel-efficient and electric vehicle options. This shift creates both challenges and opportunities for Canadian car parts companies, requiring adaptation and innovation to meet the evolving demands of the market.
Sales of electric vehicles, encompassing both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), are on the rise in Canada, now exceeding 85,500 units annually. The adoption rate of EVs has been particularly rapid in Québec, indicating regional variations in consumer preferences and infrastructure development. This growth in the EV market is significantly impacting Canadian car parts companies, necessitating investments in new technologies and manufacturing capabilities to produce components for electric powertrains, batteries, and related systems. Companies specializing in traditional internal combustion engine (ICE) parts are presented with the opportunity to diversify and transition towards EV component manufacturing to remain competitive.
Supply chain challenges that have affected global automotive production have also impacted Canada, leading to difficulties in meeting vehicle demand and contributing to price increases. The structural shift towards electric vehicles further complicates supply chains, requiring Canadian car parts companies to navigate new sourcing networks for specialized EV components and materials. This environment necessitates resilient and adaptable supply chain strategies for companies operating within the Canadian automotive parts sector.
Leading Sub-Sectors within the Canadian Automotive Parts Market
Several sub-sectors within the Canadian automotive parts market demonstrate significant import volumes, highlighting key areas of activity and opportunity for Canadian car parts companies:
- Motor Vehicle Assembly Components and Parts (US$13.1 billion): This sector represents a substantial portion of imports, indicating a strong demand for components used in vehicle assembly within Canada. Canadian car parts companies that can supply these components, either to domestic manufacturers or for export, have significant market potential.
- Gear Boxes (Transmissions) and Parts – US$ 2.1 billion: While the EV transition may eventually reduce demand for traditional transmissions, this sector remains significant in the short to medium term, particularly for aftermarket and replacement parts. Canadian car parts companies involved in transmission manufacturing can explore opportunities in hybrid and EV transmission components.
- Drive-Axles with Differential and Parts – US$ 1.1 billion: Similar to transmissions, drive-axle components will continue to be relevant, especially for larger vehicles and trucks, including electric versions. Canadian manufacturers in this area can adapt to produce drive-axle systems for EVs.
- Suspension Systems and Parts Thereof, including Shock-Absorbers – US$ 1.2 billion: Suspension systems are critical for all vehicle types, including EVs. Canadian car parts companies specializing in suspension components have a stable and growing market, with opportunities to innovate in lightweight and advanced suspension technologies suitable for EVs.
- Silencers (Mufflers) and Exhaust Pipes and Parts – US$ 387 million & Clutches and Parts – US$ 346 million: These sectors are more closely tied to ICE vehicles and may see a decline in the long term with EV adoption. However, the aftermarket for these parts will persist for the existing fleet of ICE vehicles, and Canadian car parts companies in these areas can strategically plan for diversification.
- Motor Vehicle Parts, not elsewhere specified – US$ 3.3 billion: This broad category indicates a diverse range of automotive parts being imported, suggesting opportunities for Canadian car parts companies to specialize in niche areas or develop import substitution strategies.
Opportunities for Canadian Car Parts Companies in a Transforming Market
The Canadian government’s commitment to carbon neutrality by 2050, coupled with substantial investments in green infrastructure and a green economy in recent budgets, presents significant opportunities for Canadian car parts companies. Major automotive manufacturers with Canadian subsidiaries, including General Motors, Ford, and Stellantis, have announced substantial investments in their Canadian operations to retool production lines for electric vehicle manufacturing. This shift creates direct opportunities for Canadian car parts companies to become suppliers of EV components to these manufacturers.
Furthermore, the establishment of battery manufacturing facilities by GM Canada, Ford Motors Canada, and Stellantis Canada signifies a growing domestic EV supply chain. This development presents further opportunities for Canadian car parts companies to integrate into the EV battery supply chain, providing components, materials, and specialized services.
The presence of a strong national industry association, the Automotive Parts Manufacturers Association (APMA), is a valuable resource for Canadian car parts companies. APMA represents OEM producers of parts, equipment, tools, advanced technology, and services, providing a platform for collaboration, advocacy, and industry development. Canadian car parts companies can leverage APMA’s resources and network to enhance their competitiveness and navigate the evolving market landscape.
Advanced technology clusters, such as the autonomous vehicle cluster in the Kanata North Business Association, also present forward-looking opportunities. As autonomous vehicle technology advances, Canadian car parts companies can explore partnerships and innovations in this area, developing specialized components and systems for autonomous driving.
Examples of significant opportunities for Canadian car parts companies in specific component and parts sub-segments:
- Electric Vehicle Powertrain Components: Developing and manufacturing electric motors, inverters, power electronics, and related components for EVs.
- Battery System Components: Producing battery modules, battery management systems (BMS), thermal management systems, and other components for EV batteries.
- Lightweighting Materials and Components: Innovating in lightweight materials like advanced composites and aluminum to reduce vehicle weight and improve EV efficiency.
- Advanced Driver-Assistance Systems (ADAS) Components: Manufacturing sensors, cameras, radar, and other components for ADAS and autonomous driving systems.
- Aftermarket EV Parts and Accessories: Developing and supplying aftermarket parts and accessories specifically designed for electric vehicles, catering to the growing EV owner base.
Resources for Canadian Car Parts Companies
Major Events and Trade Shows in Canada:
- Canadian International Auto Show, Toronto, Ontario, February 16-25, 2024
- Truck World, Mississauga, Ontario, April 18-20, 2024
- Montréal Electric Vehicle Show, Montréal, Québec, April 2024
Industry Associations:
- Automotive Parts Manufacturers’ Association (APMA): A key association specifically for Canadian auto parts companies.
- Canadian Vehicle Manufacturers’ Association
- Global Automakers of Canada
- Automotive Industries Association of Canada
- Kanata North Business Association
Additional Resources:
- Transport Canada: Provides information on automotive regulations and policies.
- Statistics Canada: Offers comprehensive data on the Canadian automotive market and industry.
Commercial Service Contacts:
For further information and assistance in navigating the Canadian car parts market, please contact Commercial Specialist Stefan Popescu at [email protected] or by phone at (416) 595-5412, Ext. 223. This contact can provide valuable insights and connections for Canadian car parts companies looking to expand or establish themselves in the market.
