Overview

Canada is the second largest automotive market in North America. Imports represent approximately three quarters of the new vehicles market. Most global vehicle manufacturers are present in Canada, including five with local assembling lines: Ford, General Motors, Stellantis (formerly FCA), Toyota, and Honda. In addition to new auto sales, the automotive aftermarket annual retail value was estimated by the industry at over US$19 billion and was relatively stable in 2021.

Local manufacturing declined considerably during the last two years and is now lower than total imports. The total annual value of Canadian automotive sector import was relatively stable in 2018 and 2019 but severely impacted by the COVID-19 pandemic decreasing 24% in 2020. In 2021 it rebounded but it was still 9% lower than 2019.

In 2021, the import of passenger vehicles rebounded approximately 26% to US$27.8 billion, close to pre-pandemic levels. The imports of trucks and other vehicles for the transport of goods, as well as of tractors, increased but fell short of 2019 levels. In 2021, Canadian imports of automotive parts and components totaled US$13.1 billion, close to 2020 levels. The United States’ share in the total Canadian automotive import market remains dominant at approximately 63%.

The new light vehicles market (units of passenger cars and light trucks) increased 6.6% to 1.64 million units in 2021, of which approximately 40% were U.S. brands. Passenger cars sales are now about 20% of units sold while 80% are light trucks.

The Canadian regulatory environment for the automotive sector is harmonized to that of the United States, while over 90% of the two countries’ road-safety regulations are harmonized.

 

[Total market size = (total local production + imports) – exports]

Units: $ millions

Source: Statistics Canada reports, Bank of Canada annual average 

Market Drivers and Structural Shift

Statistical data and market reports are showing a severe impact on demand and sales due to the COVID–19 pandemic.  Each economic component, manufacturing, export, import, recorded similar decreases. Sales started to rise slowly in 2021, but 2022 year-to-date is lower compared to 2021. An additional driver is the significant increases in fuel costs due to the impacts of global events.

Electric vehicle sales, which reached 85,500 units in total sales in 2019, of which 40% were battery electric (BEV) and the rest plug-in hybrid (PHEV), were also impacted by the pandemic in 2020, but remained at 3.52% of total new vehicles registrations, according to industry reports. The market penetration started earlier and was the fastest in Quebec, which has 46% of electric vehicles registered in Canada (according to a CD Howe Institute report).

The supply chain challenges affecting production resulted in challenges in meeting demand and consequently led to some price increases.

The major market drivers affecting demand in 2021 were supply chain challenges and the slow post-pandemic recovery. A shift in the North American market structure was also a factor. Since 2018, vehicle manufacturers accelerated the resizing of their capacities in Canada and even closed some assembly lines in 2019. Some increases in imports of new vehicles were offset by the reduction of imports for assembly lines.

The segment of electric vehicles is expected to grow steadily due to the overall policies toward zero emissions.

The aftermarket segment will continue, however, to remain strong due to the large size of vehicles registered on the road. Components and parts will remain in demand and provide many opportunities for U.S manufacturers.

Leading Sub-Sectors (total imports in 2021)

• Motor Vehicles for Passenger Transport (not Buses/Public Transport) (US$ 27.8 billion)
• Trucks and Other Vehicles for The Transport of Goods (US$14.8 billion)
• Motor Vehicle Assembly Components and Parts (US$13.1 billion)
• Motor Vehicles for Special Non-Transport Purposes (US$727 million)

Opportunities

The Canadian Government is aiming to reach carbon neutrality by 2050 and has allocated large investment resources in the 2021 and 2022 budget towards infrastructure and a green economy. Canadian subsidiaries of U.S. automakers announced substantial investments, including General Motor (US$785 million), Ford (US$1.5 billion), and Stellantis (US$ 1.14 billion), to prepare their production lines for electric vehicles.

Additionally, in early 2022, GM Canada, Ford Motors Canada, and Stellantis Canada announced building their own facilities to manufacture batteries for electric vehicles.

Many market players represent significant opportunities in this sub-sector. Canadian Tier 1 and 2 automotive manufacturers have very large supply chains to cover a variety of high-tech needs for their processes. They are building automotive assemblies and systems in locations in Canada and worldwide. Canada also has a strong national industry association, the Automotive Parts Manufacturers Association (APMA), which represents OEM producers of parts, equipment, tools, supplies, advanced technology, and services.

Advanced technology clusters are also significant opportunities. One such example is the autonomous vehicle cluster Kanata North Business Association. Several municipalities are already developing related programs.

Example of significant opportunities in components and parts sub-segments showing 2021 Canadian imports:

• Gear Boxes (Transmissions) and Parts - US$ 1.6 billion
• Drive-Axles with Differential and Parts - US$ 803 million
• Suspension Systems and Parts Thereof, including Shock-Absorbers – US$ 1.0 billion
• Silencers (Mufflers) and Exhaust Pipes and Parts - US$ 340 million
• Clutches and Parts - US$ 288 million
• Motor Vehicle Parts, not elsewhere specified - US$ 2.8 billion

Resources

Major Events and Trade Shows in Canada

• Automotive Parts Manufacturers Association Annual Conference and Exhibition, Windsor, Ontario, October 19, 2022
• Truck World, Toronto, Ontario, April 2023
• Canadian International Auto Show, Toronto, Ontario, February 17-26, 2023
• Montreal Electric Vehicle Show, Montréal, Québec, April 21-23, 2023

Industry Associations

• Automotive Industries Association of Canada
• Automotive Parts Manufacturers’ Association
• Kanata North Business Association

Additional Resources

• Transport Canada
• Statistics Canada
• DeRosiers Automotive Consultants

Commercial Service Contacts

For additional information on this sector, please contact Commercial Specialist Stefan Popescu at Stefan.Popescu@trade.gov or by phone at (416) 595-5412, Ext. 223