(Dec 6): Canadian automobile plants are set to produce about 1.3 million vehicles this year, the lowest level in decades outside the Covid pandemic, as US companies idle factories in the country amid slowing demand, according to a manufacturing think-tank.

As recently as 2018, Canadian factories built more than two million cars and light trucks. But output has fallen to the point that Mexico is the second-largest supplier of vehicles sold in Canada, the Trillium Network for Advanced Manufacturing said in a report, while Canadian plants have dropped to third. 

The US remains the No 1 manufacturer of cars and trucks sold in the northern nation, by far.

The numbers from Trillium shed new light on the damage that’s been done to Canada’s auto industry as Detroit-based automakers lost market share to Asian rivals and struggled with a pivot to electric vehicles (EVs). 

US President-elect Donald Trump has threatened to impose 25% tariffs on all goods coming from Canada and Mexico, a move that would further hinder a sector that depends on supply chains spanning the three North American trading partners.

While Trump’s sabre-rattling on tariffs currently hangs over the auto industry, this year’s drop in Canadian auto production has more to do with cooling demand for EV.

Ford Motor Co’s only Canadian assembly plant, in the Toronto suburb of Oakville, Ontario, isn’t producing anything, as the manufacturer had planned a switch to EVs and now finds itself shifting its strategy again. Ford previously said it would make a large electric sport-utility vehicle there, then cancelled that plan in April. Now it says it will build F-Series Super Duty pickup trucks in Oakville, but not until 2026.

A Stellantis NV factory in Brampton, Ontario, made its last Chrysler 300C sedan about a year ago, though the plant is meant to ramp up again in the future with a Jeep model, according to previous statements by the company. 

And a General Motors Co plant in Ingersoll, Ontario, is still active but operating well under capacity, making electric commercial vans in a market experiencing weak activity from buyers.

Canadians are important buyers of US vehicles: About 50% of the cars and light trucks sold in the country are made at American plants, as measured by dollar value, according to Trillium. Mexico now has 15% of the market.

Canadian-made cars and trucks have declined to 9%, according to Trillium’s calculations, and the rest of the market includes vehicles from Japan, Germany, South Korea and other countries.

At the same time, the auto-parts industry in Canada is still growing, feeding factories across North America. For example, Ford Motor Co makes engines in southwestern Ontario that go into heavy-duty pickup trucks built in Louisville, Kentucky. 

“If you put tariffs on Canada, you’re putting tariffs on Ford to send big engines to Ford,” Brendan Sweeney, Trillium’s managing director, said in a phone interview. “By extension, you are likely increasing the cost of an iconic vehicle, the F-250, the F-350, that is very desired by the American consumer.”

Independent Canadian parts manufacturers such as Magna International Inc and Martinrea International Inc have a large number of plants in the US, Mexico and Canada, and depend on the ability to easily ship goods across borders.

The disruption created by Trump’s return to power is a chance for Canada and the US, as higher-wage countries, to demand reforms from Mexico, Sweeney said. “It’s an opportunity to say, OK, Mexico, we can keep you in the tent and we’re going to ask you to change,” he said. But, he added, the auto industry is so tightly integrated that “we’d throw Mexico under the bus at our peril.” 

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