Weaker Canadian Dollar Fails to Ignite Auto Manufacturing Revival
Despite a sharp fall in the Canadian dollar, the country’s automotive sector has not seen the expected resurgence in factory investment or job growth seen in the US and Mexico.
A dramatic fall in the Canadian dollar has not delivered the manufacturing revival many in the country’s auto sector had hoped for. Despite the currency’s slide against the US dollar through 2014 and early 2015, Canada’s automotive industry has yet to see a meaningful return of investment or jobs lost during the global financial crisis.
Ontario, once the heart of the British Empire’s car production, remains marked by shuttered plants and unfilled capacity. While the US and Mexico have attracted substantial new automotive investment since 2009, Canada has lagged behind. According to figures from the Center for Automotive Research, Canada secured just $4 billion in new automotive investment over six years, compared to $50 billion in the US and $20 billion in Mexico.
Currency effect muted by other factors
The conventional wisdom suggests a weaker currency should boost exports by making Canadian-built vehicles cheaper for US buyers. However, this effect has not been enough to overcome other challenges facing Canadian manufacturing. Labour costs, productivity, and competition from lower-cost countries such as Mexico continue to weigh heavily on investment decisions by global carmakers.
Japanese manufacturers, especially Toyota, have benefited from a weak yen, expanding exports from Japan. In contrast, Canadian plants have not seen a comparable surge in demand or new model allocations. The recovery in US and global demand for vehicles has not translated into a wave of new jobs or reopened factories in Ontario. Production lost during the recession has yet to be replaced, and the region’s share of North American auto output remains under pressure.
Recent investments offer some relief
There are some positive signs. In early 2015, General Motors announced a C$560 million investment in its Ingersoll, Ontario plant to build the new Chevrolet Equinox. Fiat Chrysler Automobiles committed C$2 billion to retool its Windsor factory for the next-generation Chrysler minivan. These announcements have brought some optimism to local suppliers and workers, but they have not reversed the long-term trend of declining production share.
The Canadian government has responded with measures to support the sector, including extending the Automotive Innovation Fund for another five years. Still, the scale of new investment remains modest compared to the US and Mexico, and the hoped-for revival has yet to materialise.
Outlook for Canadian auto sector
With the Canadian dollar remaining weak, industry observers caution that a currency shift alone cannot restore Canada’s position in North American car manufacturing. Structural factors such as labour agreements, energy costs, and the global strategies of carmakers will continue to shape the sector’s future. For now, the gap in new investment between Canada and its neighbours remains wide.
