Canada auto parts firms must look offshore report
TORONTO, March 27 (Reuters) - Automobile production in
emerging markets is set to outpace output in North America for
the first time this year and the Canadian auto parts industry
must adapt to the new reality, a study released by Scotia
Economics on Thursday says.
Combined vehicle assembly capacity in the BRIC nations,
Brazil, Russia, India and China, will climb to 20 million units
this year surpassing the 17.4 million units of assembly
capacity in place in North America, according to the Global
Auto Report.
Despite the dwindling North American market, the Canadian
auto parts sector remains almost exclusively focused on the
domestic and U.S. markets, which absorb more than 95 percent of
all Canadian auto parts shipments, said Carlos Gomez, senior
economist at Scotiabank and author of the report.
“What we’re highlighting is that by focusing exclusively on
North America, we are missing out on a lot of growth
opportunities that are occurring overseas,” he said.
After peaking at 19.6 million units in 2002, North American
capacity has fallen by roughly two million units over the past
five years, reflecting plant closures in North America by the
big three Detroit automakers.
In contrast, assembly capacity in emerging nations has been
advancing by 15 percent a year over the past five years as
automakers have been building new plants in markets that offer
greater growth potential as well as a lower cost structure.
Gomez pointed to small Quebec-based company, CVTech Group
(CVT.TO: Quote, Profile, Research), as one that is taking advantage of the changing
times.
CVTech will supply automatic transmissions for the new
low-cost vehicle that is being produced by Tata Motors
(TAMO.BO: Quote, Profile, Research) in India which is supposed to hit the market with a
price tag of just $2,500.
That proves that Canadian companies can win contracts in
high-growth, lower-cost areas, Gomez said. Continued…
