Canadian auto industry records sharp drop in investment image

Canada is experiencing a sharp drop in investment in the auto manufacturing segment, with 2011 on track to become the worst year for investment since mid-1980s.

A report from Scotia Economics says future output of the local auto will be affected by the lack of investment. According to the report, only $1.2 billion was spent in the auto industry in 2011, the lowest level since mid-1980s and well below the $3.1 billion that has been spent every year for the past decade.

The drop in spending on Canadian car plants comes despite the increase in performance of the industry this year, as it continues to recover from the global economic downturn and supply disruptions caused by natural disasters in Japan and Thailand.

Strong investment in machinery and equipment since the mid-1990s has helped so far, but the big drop in spending will make it difficult for Canada to increase its share of North American output, said senior economist Carlos Gomes. By comparison, investment in Mexico’s carmakers are growing much faster, with $3 billion worth of investments in new plants and expansions over the past six months.