In my previous entry, analysis and corresponding data show how internal and external demand to the auto parts manufacturing industry is created in nations that had little to no raw materials production. France and Korea’s strong position in the global automotive market have positioned their respective countries extremely well in building a top auto parts manufacturing industry.
In addition to demand, France and Korea have created successful trade partnerships by implementing meaningful regulations, tariffs, subsidies and non-tariff barriers which remove barriers and create incentives supporting the automobile and auto parts manufacturing industry.
Now it’s time to connect the dots in order to determine how Canada can better support Ontario’s auto parts manufacturing. What can Ontario do locally to strengthen the industry?
Canada’s top export destinations are the USA, China and Japan and top import partners are the USA, China and Mexico.
Top imports into Canada are Cars, Crude Petroleum and Vehicle Parts. Auto Manufacturers import these parts into Canada so that automobiles can be assembled and sold in Canada.
- In order to strengthen Canada’s automobile manufacturing industry, Canada should boost trade agreements with its major export partner China. Canada currently exports USD 20B, items such as wood, minerals, paper products, fish products and oil seeds. Imagine if Canada were to partner with China to export Automobiles.
- Chinese population: 1.357B people
- Chinese population with drivers license 2014 – 300M
- Canada needs to act now in order to fill the growing need for automobiles and auto parts in China
- The larger question is how does Canada partner which China to boost its auto sector? My initial thoughts are that Canada should play to its strength. What does China need from Canada? A partnership is such that there is something in the partnership for both parties. Easy regulation/tariffs for a percentage of Chinese goods. Easy regulation and bureaucratic process for raw materials China requires. This creates an incentive for exports and imports with China strengthening the upstream demand which if structured correctly, will filter down to greater demand downstream.
- Promote innovation in technology, process and manufacturing. Ontario is already doing a bit of this however a wider investment net could be argued for.
France and Korea have successfully done the above and the results speak for themselves. With the right strategy, Canada can become the next strong player in the world as a supplier for auto parts.