Passenger Car Market in Canada

Currently, Canada ranks 16th in terms of units of passenger car production and is much below other countries like China, Japan, Germany, USA, India, Brazil, Spain, Russia, France and UK to name a few. However, the passenger car segment has been the largest contributor to the country’s trade balance in 2012 and generated Canada’s second largest surplus of USD 21 billion.

Definition / Scope

The Organization for Economic Co-operation and Development or OECD is a global economic body which encourages economy by providing a platform to countries for sharing their common issues, cultivate good practices and compare policies within, thereby helping the member nations to grow inclusively. This organization defines Passenger Car segment as “a road motor vehicle, other than a motor cycle, intended for the carriage of passengers and designed to seat no more than nine persons (including the driver)”.

Market Overview

Reports suggest that the global passenger car market was USD 803 billion as of 2011 and is expected to reach around USD 1 trillion by 2016, which is a growth by 37%. In terms of volume, the industry is expected to sell 87 million units of passenger cars by 2017.

Currently, Canada ranks 16^th in terms of units of passenger car production and is much below other countries like China, Japan, Germany, USA, India, Brazil, Spain, Russia, France and UK to name a few. However, the passenger car segment has been the largest contributor to the country’s trade balance in 2012 and generated Canada’s second largest surplus of USD 21 billion.

In 2013, Canada produced 0.97 million passenger cars from 1.04 million in 2012 which is a drop by 6.73%. In terms of unit sales, the country saw a dip in sales figures by 3.41% from 2013 to 2014 (refer to Table 1).

Table 1: Passenger Car Market in Canada; Production vs Sales (in million units)

	2012	2013	2014	% Change 2012-2013	% Change 2013-2014
Production	1.04	0.97	–	-6.73	–
Sales	0.76	0.761	0.735	+0.13	-3.41
– Domestic	0.47	0.493	0.475	+4.89	-3.60
– Imports	0.29	0.268	0.260	-7.50	-2.98
Domestic Sales as a %age of Production	45.19%	50.82%	–	–	–

The table mentioned above also states that as of 2013, domestic sales of passenger cars in Canada was just above 50% of the overall car production in the country. In such a situation we assume that a large percentage of the car volume is being exported to other countries after maintaining a small inventory within.

Flashback to the passenger car market: 1900 – Till Date’‘

The story of the Canadian car industry starts from the early 20^th Century. Remarkable incidents in the past and significant policy improvements have been major reasons for the country’s long run history. The passenger car market in Canada has witnessed several ups and downs; however, is now mature enough to offer competition to others. The overall period from 1904 till date can be structured into several phases.

The Early Dawn: 1904-1925

First Prime Minister of Canada, John A. Macdonald adopted the protected tariff theme of the National Policy in 1878 and introduced 35% tariff on vehicles manufactured outside the country
This forced American automobile companies to make Canada a manufacturing hub only to avoid the tariff. Ford Motor was the first company to set up a plant in 1904 followed by Studebaker, Chrysler and Packard
In 1896, Prime Minister Wilfrid Laurier started the Imperial Preference program which helped the Canadian companies to trade with the Empire nations. The Imperial Preference declared special benefits to the Canadian auto industry as the US based automotive companies used their Canadian manufacturing plants to export automobiles to other Imperial countries in the world.
By 1920s, Canada became one among the largest auto exporters in the world with around 80% of its auto exports being shipped to the Imperial nations.

World War I and the Revised Trade Policy: 1926-1929

Following the end of the first World War, the world moved into a state of economic recession thereby shutting down smaller automotive companies with the existence of the biggies
Though Canada still remained as the second largest producer of vehicles in the world, its per capita car ownership was much below than that of the USA; th 35% tariff wall soared prices of passenger cars in the country thereby increasing the price difference for same models of cars manufactured in Canada and the USA
With the West strictly against such a price barrier, James Robb, then Dominion Minister of Finance, under the coalition government of Mackenzie King took up the issue seriously and decreased the tariff to 20% for cars valued less than USD 1200 and 27.5% for cars priced over USD 1200
A new Canadian content scheme was also introduced as a way of protection, which gave an option to drawback 25% of the paid duties on foreign parts if at least 50% of the completed car was manufactured in Canada
This helped the expansion of the Canadian automotive parts industry and as a result reduced the prices of cars

The Economic Recession and Tariff Reversal: 1930-1938

The economic recession of the 1930s had plunged automobile exports from 102,000 units in 1929 to mere 13,000 units in 1932, following the collapse of the consumer demand
Furthermore, the government of R.B. Bennett introduced controversial measures that initially seemed to benefit Canada and increased tariffs from 27.5% to 30% on imported vehicles priced over USD 1200 and an additional 40% tariff was introduced on cars above USD 2100; this had an adverse effect on consumer spending resulting in drop of car sale numbers
Reacting to such an untoward situation, then finance minister, E.N. Rhodes put an enquiry in 1935 and the tariff board revised the tariff rates from 20% to 17.5% for vehicles priced less than USD 1200 and increased from 25% to 30% for vehicles priced more than USD 1200
Canada soon achieved the “most favoured trading nation status” and a new relationship between the USA and Canada was formed which led to long-term growth of the market

Automotive Products Agreement of 1965 and the Detroit Three

The early 1960’s saw the decline of the Canadian car industry due to issues related to economies of scale in car manufacturing and a change was needed
The big 3 auto giants namely: Ford, General Motors and Chrysler signed the Canada-United States Automotive Products Agreement or APTA under which an integrated market was put in place where a single plant for each of the companies manufactured automobiles for both the USA and Canadian market thereby achieving greater efficiency in scale

The Rise of the Canadian Car Market:1980-2009

Michigan in the USA was the closest competitor for Ontario in Canada in the 1980’s
Michigan and Canada produced cars for the Big 3 auto giants but the latter evolved to be a manufacturing hub for Japanese companies as well
Companies from Japan brought in advanced technologies like just-in-time (JIT) and lean manufacturing, making the rise of the Canadian car market inevitable and Michigan gradually witnessed a downfall

The Car Industry from 2010-Till Date

By the end of 2013, Michigan surpassed Ontario in terms of vehicle manufacturing among states and provinces
USA recovered well from the economic slowdown while Canada started to lose out of the competition
In 2013, average passenger car sales in Canada was down by 3.4% which could further go down if not addressed properly

High disposable income driving the market, recent increase in labour costs an area of concern for car manufacturing companies

Currently, Canada is one of the biggest producer of passenger cars, heavy vehicles and automotive components for North America. Though Michigan has recently overtaken Ontario in terms of number of unit car production, Canada still remains a destination of choice for a lot of companies.

There are several reasons for the success of the automobile market in Canada:

The country enjoys 6.4% cost advantage over the USA. Moreover, annual labor costs in the automotive manufacturing sector are lesser than in the USA; this as a whole reduces the overall price of the car inspite of companies gaining profit
Big auto giants (General Motors, Ford, Chrysler, Toyota and Honda) from the USA and Japan have their manufacturing plants in Ontario, which helps customers not to import cars from other countries to cater to the North American demand
Being a country with high disposable income, it becomes easier for passenger car companies to generate volume sales within Canada

However, everything is not great for the Canadian automobile market, specifically the car segment. Though the domestic car sales was on a record high in 2013, the market saw the number to fall down in 2014. Moreover, passenger car production in Canada was down by 6.73% in 2013 (refer to table 1). What’s worrying the companies in the country is the cost factor. Labor costs in the country is on a rise and as a result, companies are moving their bases to their shared centers recognized under North American Free Trade Agreement (NAFTA). It has been observed that since 2000, labor costs in the country have increased by 75% in comparison to that in the USA.

Passenger car sale dips down in spite of strong Canadian vehicle sales

In the month of September 2014, the passenger vehicle (includes passenger cars, trucks and crossover utility vehicles) sales were over 1.9 million units in Canada. Table 2 given below suggests that the annualized sales of passenger cars in 2014 would be around 735,000 which is a drop by 3.41% from the previous year’s sales number. One of the major reasons for such a drop is the weak job market in the country.

Table 2: Canadian Passenger Car Unit Sales, 1991-2014 (in thousand of units, annualized)

	1991-2005 (Avg)	2006-2011 (Avg)	2012 Avg	2013 Avg	2014* Avg
Passenger Cars	797	795	760	761	735
Domestic	583	489	470	493	475
Imports	214	306	290	268	260
Total (incl Light Trucks)	1,398	1,587	1,677	1,745	1,790

Table 3: Canadian Vehicle (includes passenger cars and light trucks) Unit Sales by Province, 2014 (in thousand of units, annualized)

	1994-2005(Average)	2006-2011(Average)	2012(Average)	2013(Average)	2014*(Average)
Canada	1,446	1,587	1,677	1,745	1,790
Atlantic	102	119	126	135	136
Central	936	987	1,034	1,061	1,094
Quebec	366	408	416	415	405
Ontario	570	579	618	646	689
West	408	481	517	549	560
Manitoba	42	45	50	54	55
Saskatchewan	36	45	55	58	58
Alberta	166	220	239	257	263
British Colombia	164	171	173	180	184

Table 3 shown above states that the overall vehicle sales, which includes passenger cars and light trucks, was the highest in Central Canada contributing to more than 60% of the overall country sales. Ontario is the epicentre of the overall market followed by Quebec with 405,000 units of vehicle sales.

Regulatory Trends

The Canadian vehicle manufacturers have to comply strictly with several regulations for cars produced and targeted for the domestic market.

Compliance Requirements:

All passenger cars manufactured for the Canadian market are required to comply with the Canada Motor Vehicle Safety Standards (CMVSS). The cars need to be designed, built and certified in such a way that get approved by the CMVSS committee before they hit the market. Most of these compliance requirements are being created as per the Motor Vehicle Safety Act (MVSA) which takes care of the safety concerns. A National Safety Mark (NSM) is being put on by the car manufacturer for every vehicle which is to be sold in the Canadian market. This NSM maple leaf logo is being issued by the Ministry of Transport which certifies that the car has been manufactured on safety and compliance parameters.

Environment Canada Vehicle Emission Requirements: As per the Canadian and the US Federal Emission Standards for passenger cars, vehicles sold at retail counters in the USA and intended to be used in Canada needs to:

use the National Emissions Mark
bear the symbol that shows that the vehicle or engine is being designed and developed as per the US Environmental Protection Agency (EPA)
bear the label that shows that the car conforms with the emission standards of the California Air Resources Board (CARB)
hold a proof of statement from the manufacturer or the representative that the car is manufactured following the rules mandated by EPA and CARB as mentioned above

Apart from the above mentioned regulation for passenger cars imported from the USA, given below is a set of Canadian emission legislation and regulations:

Canadian Environment Protection Act, 1999: Division 5 of the Act suggests pollution prevention, protection of environment and human health for sustainable development
Compliance and Enforcement Policy
On-road Vehicle and Engine Emission Regulations: This rule applies to all classes of on-road vehicles and helps lower air pollution for passenger cars including Sport Utility Vehicles (SUV)
Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations: The regulation applies to type of passenger cars manufactured and released after 2011

What make the big names in the passenger car industry excel? A strength-weakness-opportunity analysis

The Canadian passenger car market is vibrant with big names from the industry which include GM, Chrysler, Ford, Honda, Nissan and Toyota to name a few. Each of these companies enjoy a specific set of strengths, which is unique to others.

The Japanese majors seem to build on their market share in the last few years surpassing the names from North America. Most of the companies are aligning themselves to develop eco-friendly cars to remain in the competition. Toyota, Honda, Mazda, BMW, Nissan and General Motors combined together recalled around 0.2 million passenger cars in Canada in October, 2014 due to faulty airbags supplied by Japanese company Takata Corp.

Table 6 given below represents the strengths, areas of concern and opportunity areas for each of the market leaders.

Distribution Chain Analysis

While the automobile industry in Canada was a fragmented market earlier, this trend has changed recently and companies have started to consolidate their businesses including manufacturing. Currently, it works in a way where the entire process is divided and a decentralized approach is being adopted. Vehicle components are being manufactured at different units of the company or by other automobile parts manufacturers which as a whole is being assembled at the car company’s manufacturing unit before the cars hit the market. The figure given above describes the entire process of a passenger car manufacturing while given below is the step-by-step value chain of the car industry in Canada.

Production of vehicle components: After the final car design is finalized and a car prototype is put in place, the production work is initiated. The entire manufacturing process is fragmented among multiple stakeholders. This includes the original equipment manufacturers (like Delphi and General Electric), replacement parts manufacturers (like Cooper Tire & Rubber and Federal-Mogul), replacement parts distributors (like National Automotive Parts Association- NAPA) and rubber fabricators (Goodyear and Cooper).
Production of engine components: The various engine components are manufactured inside the company premises or by engine parts manufacturing companies. The car company submits its product specification document to the parts manufacturing company who develops the component as per the specified needs.
Chassis and Engine assembly: A caris being constructed from the ground up. The frame or the chassis of the car forms the base on which the body and other car component rests. Once all the engine components are being manufactured, the car frame moves to the component assembly area where front and rear suspensions, gas tanks, rear axle and drive shafts, gear boxes and braking system is being installed using robotic arms. Workers then connect the engine with the transmission system and finally with the radiator of the car.
Developing the car body; Stamping, Building and Painting: The body of the car is one of the most important components of the vehicle. It needs to be highly tensile so that it can withstand force and provide safety in events of collision. Body parts like the front and rear door pillars, roof and body side panels are either welded or bolted. Human intervention is quite less and most of the work is automated using robots. Prior to painting the car, each and every component of the car goes through rigorous inspection process and any defect identified is addressed. The car is then moved through a cleaning station where oil, dirt and contaminants are removed and electrostatically charged. E-coat paint is applied to every nook and corner of the car. Finally spray paint is put on the car in the right amount through an automated process.
Vehicle assembly: The painted car body proceeds through the vehicle assembly section where the body meets the chassis assemblies. Instrumentation, wiring systems, dash boards, lights, seats, door and trim panels, steering column and wheel, body weatherstrips, brakes, etc. are added to the car prior to fixing the windshield and window panes. Finally, car battery, tyres, anti-freeze and gasoline is attached before the car goes for a final quality control after which it is ready to be moved out of the manufacturing unit.
Marketing: Car manufacturing companies spend large amount of money on marketing their cars in Canada. General Motors for example had allocated USD 1.83 billion for its global advertising efforts, a considerable amount of which was used in the North American market. Most of these companies work closely with the auto dealers in promoting passenger cars. Ford runs a program (called as Ford co-op program) in North America where dealers need to spend 25% of the reimbursement-eligible advertising dollars for digital media.
Sales and Distribution: Passenger cars are shipped from manufacturing units of the company and sold in the Canadian market through authorized dealers. They sign-up with car manufacturing companies and offer discounts to increase sales. Dealers remain the single point of contact for customers for any issues pertaining to their products. Customer feedback often become fruitful in improving car features and performance.

Competitive Landscape

31% of the overall passenger car market in Canada is contributed by the top three Japanese majors while just 28% by “The Big Three”

The Canadian passenger car market is a mix of North American auto giants, Japanese companies and manufacturers from other countries. Currently, General Motors has the largest share of 8.5% among the USA headquartered companies followed by Ford and Chrysler. However, from August 2013 to August 2014, each of these companies have lost market share considerably (refer to Table 4) and are being challenged by some of the big names in the industry.

On the other hand, Japanese companies like Honda, Toyota, Nissan, Mazda, Mitsubishi and Subaru have significant market share. Honda and Toyota are the biggest names in the country and both of them perform much better in terms of unit production than their peer companies from the USA.

Given below is a list of the best performing companies in the Canadian market:

General Motors: GM Canada offers the best in class fuel-efficient passenger cars in the domestic market which includes Chevrolet, Buick, GMC and Cadillac. It has more than 23,000 employees working in the country and has one of the largest automotive dealer networks.

Ford: Situated in Windsor (Ontario), Ford has lost around 2% of the overall market share in the last one year. From being the largest automobile company in Canada in the 1970, the company is currently facing tough challenge from its regional and global competitors.
Chrysler: Chrysler Canada has its manufacturing unit in Ontario and has approximately 440 dealers in the country. It markets products under various brands like Chrysler, Jeep, Dodge, Ram, Fiat and Mopar. As of January, 2014 the company had an employee strength of 10,245 divided between 3 manufacturing facilities, 3 regional business centres, 3 parts distribution centres and 1 training and testing facility.
Honda: Having moved into the country in 1969, Honda built its first manufacturing unit in Alliston, Ontario before building its second site at the same place in 1998. Currently, the company enjoys a market share of 13.6% in the passenger car segment, highest among Japanese majors. It employs 19,000 people and manufactures products for the American, Mexican, Chinese and Latin American markets.
Toyota: In 2014, Toyota celebrated its 50^th year in Canada manufacturing more than 5 million vehicles in the country. It has its plants in Cambridge and Woodstock, Ontario and employs around 8,000 people. The company has been performing consistently over the years and sold 9500 units in August, 2014.

Table 4: Passenger Car Market Share by Manufacturers in Canada¹ , 2014 (in thousands of units, not seasonally adjusted)

	2013(Jan to Aug)	2014(Jan to Aug)	2013(Aug)	2014(Aug)
	Units Sold	% of Total	Units Sold	% of Total	Units Sold	% of Total	Units Sold	% of Total
Total	527.1	100.0	532.7	100.0	70.6	100.0	70.8	100.0
Big Three	120.5	22.9	137.6	25.8	16.6	23.6	14.0	19.8
General Motors	50.6	9.6	50.2	9.4	6.1	8.6	6.0	8.5
Ford	44.7	8.5	50.6	9.5	6.8	9.7	5.5	7.7
Chrysler	25.2	4.8	36.8	6.9	3.7	5.3	2.5	3.6
Japanese	196.5	37.3	215.6	40.5	30.5	43.2	31.8	44.9
Honda	68.1	12.9	63.8	12.0	10.3	14.3	9.6	13.6
Toyota	71.0	13.5	70.8	13.3	9.4	13.4	9.5	13.4
Nissan	36.0	6.8	28.6	5.4	3.9	5.6	5.0	7.1
Mazda	36.3	6.9	36.5	6.8	5.0	7.1	5.1	7.2
Mitsubishi	7.6	1.4	5.7	1.1	0.6	0.8	1.2	1.7
Subaru	9.3	1.8	8.8	1.7	1.2	1.8	1.3	1.8
Hyundai	66.7	12.7	69.5	13.0	8.6	12.1	9.2	13.0
Volkswagen	36.0	6.8	36.0	6.8	4.7	6.7	5.2	7.4
Kia	36.4	6.9	36.5	6.8	5.3	7.5	5.2	7.4
BMW	13.1	2.5	13.9	2.6	1.8	2.5	2.1	2.9
Mercedes-Benz	13.8	2.6	12.6	2.4	1.8	2.5	1.8	2.5
Others	44.1	8.3	11.0	2.1	1.3	1.9	1.5	2.1

Of the various car manufacturing companies present in Canada, listed below are few of the major passenger car models manufactured by them.

Table 5: Passenger Cars models made in Canada by major companies, 2014

Buick Regal	Dodge Charger	Honda CR-V
Cadillac XTS	Dodge Challenger	Lexus RX 350
Chevrolet Camaro	Dodge Grand Caravan	Lexus RX 450h (Hybrid)
Chevrolet Equinox	Fiat Lancia Thema	Lincoln MKT
Chevrolet Impala	Ford Edge	Lincoln MKX
Chrysler 300	Ford Flex	Toyota Corolla
Chrysler Cargo Van	GMC Terrain	Toyota Matrix
Chrysler Town & Country	Honda Civic	Toyota RAV4 and RAV4 EV

Central Canada: The hotbed of the passenger car market, Ontario is the heart of the country

While Canada is one among the most attractive destinations for the passenger car market, Ontario is home for a lot of the automobile giants. Though the overall sales of cars in Canada is just below 10% of the overall North American market, it remains a target destination for car companies globally. The country ranks second in the North American region in terms of unit sales and much below USA, China, Brazil, Russia, Germany and India among major countries.

Ontario: Located in the central region of the country, Ontario enjoys a special honour to its name and is often referred to as the “Automobile Capital of Canada”. It is home to the biggest names in the industry: Chrysler, Ford, General Motors, Honda and Toyota in the passenger cars segment and has 12 manufacturing units collectively. Skilled work force is one of the major driving factors for the success of this region, and is also involved in active R&D. Automobile research for passenger cars are being carried out in several educational institutes in the region which includes McMaster University, University of Waterloo, Queen’s University, University of Ontario Institute of Technology and few more to follow. Ontario’s proximity to the USA has been yet another reason for excellent sales figures. Consistently over the last 5 years, it produces 16% of North America’s light vehicle segment.
Quebec: Quebec is the second biggest destination for passenger car sales in the country after Ontario. It is estimated that as of 2014, the state would have 405,000 unit sales of vehicles which includes passenger cars and light trucks. Quebec has specifically drawn eyeballs due to manufacturing and sales of ‘little’ cars from the state. Auto experts believe that the state accounts for around 26% of the total vehicle sales in Canada with a whopping 42% share in the sub-compact and compact car segment. Fiat 500 has been a success story for its kind from the region.
Alberta: Alberta has been one of the major target markets for most of the passenger car companies. It experienced an increase of 7.5% growth from 2012 to 2013 and is expected to enjoy additional 2.3% by end of this year. The region has a large number of small automobile component manufacturers and is involved in assembling.
Western Canada: The west of Canada contributes to around 31% of the overall market sales. Though it has states like British Colombia, Alberta, Saskatchewan and Manitoba their individual contributions has been significantly less. Lesser population in comparison with larger provinces like Ontario has been the major reason for smaller unit sales.

Competitive Factors

Table 6:Strength-Weakness-Opportunity-Threat Analysis for Passenger Car Companies operating in Canada

	Strength	Weakness	Opportunity	Threat
General Motors	Manufactures passenger cars like Chevrolet, Buick, GMC and Cadillac for the domestic marketLargest pool of skilled resourcesRecord sales for ChevroletLargest market share among the Big Three in CanadaStrong R&D through collaboration with Universities	Has one among the highest cost structures among its peer groupOften find fault in cars after hitting the market, has a poor reputation for car recallsOften loses to its competitors like Honda, Toyota and HyundaiConsistently lost market share	Could focus on developing eco-friendly cars: hybrid and electric	Increased competition, an area of concern for General MotorsLower sales of passenger cars in Canada in the last 1 year
Ford	Ranks 2^nd among automobile companies with headquarters in North AmericaSpecial focus on developing eco-friendly vehiclesStrong and sound financial healthThe company’s “One Ford” approach help design cars that suites different regional tastes and regulations and not customized vehicles for different geographies	Lost market share of over 2% in the last one yearThe company’s manufacturing plants are often criticized for causing excessive air pollutionGenerous employee compensation and pension plans adding up to high cost structure for the company, though this could benefit in the longer run	Could look to deep-dive further in developing eco-friendly and hybrid cars	Increased competition from the Japanese majorsNeed to address the consistent loss of market share in the Canadian market
Chrysler	Has the reputation of developing the V-8 Hemi enginesStrong brand value in Canada	Poor market share in the Canadian market though high on brand valueHigh on car recall	Need to focus more developing eco-friendly passenger vehicles	Could further lose out on the Canadian market share if not addressed properly
Honda	Largest market share holder in the passenger cars segment in CanadaStrong and competent on innovation and R&DHas one of the largest employee base of over 19,000 in CanadaHigh on revenue and profit marginsHonda Civic is the best selling car in Canada consistently for the 17^th year in a row	Often criticized for being over pricedModerately high on car recall	Could invest in developing mid-segment economical carsManufacture low emission passenger vehicles in Canada	High price points could be an area of concern with growing competitionDevelop eco-friendly cars that would take care of emission factors
Toyota	Double digit market share and close competition with the market leaders, HondaLeader in “Green” cars productionigh brand reputation in CanadaWorld-class engineering and R&D capabilities	High product recallsLow Return on Equity (RoE) and Return on Assets (RoA) compared to others in market like Honda and Nissan	Should look to benefit from the long-term Toyota-BMW strategic partnership signed in 2012Could possibly look to concentrate more on developing cars in the hybrid segment	Tough competition from Honda
Hyundai	Stable market share in CanadaIncreasing brand recognition	Car recalls in 2013 has been a dent for the image of the company in Canada	Develop fuel efficient eco-friendly cars for the Canadian marketIncrease the market share through introduction of new cars in the various car segments	Growing competition and lower profitability in the Canadian marketDecrease in passenger car sales in Canada
Volkswagen	· Gained considerabl market share in the last 1 year· With in-built German technology, the company has gained reputation in the country· Large mix of cars distributed across major segments· Diesel cars of Volkswagen, a major success in Canada	· Poor on environment friendliness· Production facilities often as issue for the company	· Could explore and engage with Canada based car manufacturers· Continuous improvement in cars like fuel efficient and eco-friendly engines	· Lower profit margins for the company if cost reduction techniques are not been adopted· Too much focus on larger segment of cars could be a reason for fall in sales number in economic doldrums
BMW	· Has gained market share in the last 1 year in Canada· Strong brand image specially in the elite car segment	· Smaller brand portfolio with only three brands: BMW, MINI and Husqvarna· Lacks in the economy car segment	· Could look to diversify on the product portfolio	· Competition from the bigger names in the market
Mercedes-Benz	· Strong brand value· Though low on overall market share but consistent over its target customer segment· High importance on innovation and R&D	· High maintenance cost· Fierce competition from BMW	· Need to focus more on developing hybrid cars· Could possibly target the upper middle class in Canada and not focus exclusively to the business and high income group	· Competition from BMW and Audi

From manufacturing Power Train systems till providing safety belts; Canada is a one stop destination for auto parts supply

A strong ecosystem of car parts manufacturing has been the driving factor behind the success of the industry. As of 2012, Canada exported auto parts valued at USD 65.3 billion up by 56.59% from the last year (refer to table 7 given below). Post the economic depression of 2008, Canada has started to recover and is coming back on track. However, higher labour costs have made companies to re-think on alternative locations like Mexico to avail the low-cost advantages.

Table 7: Auto Parts Export from Canada (in USD billion)

	1995-2000	2009	2012
Export Amount	92.7	41.7	65.3

Several auto parts are being supplied by specialists within Canada and this reduces the cost and effort of importing materials from other countries. These suppliers have their manufacturing units near the car production plants thereby cutting down on the time-to-move. In a recent trend it has also been observed that few car parts are also being developed by the car manufacturers themselves rather than outsourcing it to other vendors.

Listed below in Table 8 are the various car parts manufacturers and suppliers catering to the need of the Car manufacturing units.

Table 8: Passenger Car Part Manufacturers and Suppliers in Canada, 2014

Plastic Parts Manufacturing
Aar-Kel Moulds Ltd.	ABC Group Inc.	Action Fiberglass & Manufacturing Ltd.
Body Manufacturing
Carlisle Tire and Wheel	Tufport Industries Ltd
Parts Manufacturing
ABS Friction Inc.	Smartrend Supply	Accessoires ACTA Inc.
Gasoline Engine and Engine Parts Manufacturing
AFS (Alternative Fuel Systems Inc)	Autoline Products Ltd.	CE Williams
Electrical and Electronic Equipment Manufacturing
Aurora Electronics Ltd	DCCDPRO Inc.	Dixie Electric Ltd.
Steering and Suspension Components
Dendoff Springs Ltd	TRW Automotive	General Kinetics Engineering Corp.
Brake System Manufacturing
Alco Brakes	ATL Industries	Ecobrex Parts Canada
Transmission and Power Train Parts Manufacturing
Bull Power Train	Morgan Brake & Clutch Company	Euro-Drive Clutches Inc
Seating and Interior Trim Manufacturing
Amobi	Autoskin Corporation	Darby Manufacturing (Sudbury) Limited
Metal Stamping
Accurate Machine & Tool Ltd	DBG Canada Limited	MTD Metro Tool And Die Limited
Other Car Parts Manufacturing
Berger Precision Ltd	Cancore Industries, Inc.	Fischer Canada Stainless Steel Tubing

Chrysler acquisition by Fiat increases job security for 8000 workers in Canada

Turin (Italy) headquartered company, Fiat, acquired USA based company Chrysler in January 2014 for USD 4.35 billion. Fiat bought the remaining 41.5% stake in Chrysler from a retiree healthcare trust affiliated with the UAW after it had accumulated 58.5% of the shares since 2009. Chrysler was badly affected by the recession of 2008 and through the joint efforts of the USA-Canadian government the company was seeking rescue.

But this acquisition was a “blessing in surprise” for workers in the Chrysler Canadian plants. Senior executives at Fiat believe that the deal would increase efficiency level of the Chrysler employees there and a joint effort by both the companies would offer better results. It is also expected that Canada as a whole could see higher job creation due to this acquisition. Fiat now would like to position itself as a global automaker which is truly unique with a mix of experience, perspective and know-how.

In the car dealership market, AutoCanada Inc, the largest publicly traded dealer group in the country, is on a hunt for acquiring smaller car dealers in Canada. The company plans to acquire dealers in a process of 2 years with few dealer groups already in talks with them. The car dealership market in the country is in a phase of transformation thereby changing the nature of retailing in Canada.

Turbulent market coupled with fierce competition

The Canadian automobile market has experienced economic turbulence in the recent past. Though there has been a increase in unit sales for overall passenger vehicles across Canada, the North American car manufacturers have been losing ground to Japanese companies for quite some time now. Japan’s auto export comprises of 16.4% of the overall manufacturing shipments (highest within its exports category), good enough to drive the passenger car industry globally. Moreover, Canada has come under pressure from low-cost foreign sites like Mexico where labour costs are still cheaper. Businesses are moving their investments to better locations in order to extract continual belt-tightening from employees, suppliers and government. Trade inflows from countries like Mexico, Japan, the European Union and South Korea has transformed the once proud car industry to a regional depression.

Government support in the form of action is necessary at this point in time to protect the glory of the overall Canadian automobile industry. Well planned policies and strategies needs to be put in place for better outcomes. A 5 point to-do list may include:

Formulate and integrate a National Auto Policy
Run a transparent auto investment program
Think on creating Canadian OEMs
Revised Automotive Trade Policy
Investing on human capital and physical infrastructure

The aforementioned policies would help in regaining its market share, increase unit sales of passenger cars, attract investments and create jobs.Automobile companies need to work closely with the government departments, suppliers, car dealers and market organizations to reach a common goal. The country deserves a better attention before its too late to attend.

Appendix

Table 1: Passenger Car Market in Canada; Production vs Sales (in million units)

Table 2: Canadian Passenger Car Unit Sales, 1991-2014 (in thousand of units, annualized)

Table 3: Canadian Vehicle (includes passenger cars and light trucks) Unit Sales by Province, 2014 (in thousand of units, annualized)

Table 4: Passenger Car Market Share by Manufacturers in Canada, 2014 (thousands of units, not seasonally adjusted)

Table 5: Passenger Cars models made in Canada by major companies, 2014

Table 6: Strength-Weakness-Opportunity-Threat Analysis for Passenger Car Companies operating in Canada

Table 7: Auto Parts Export from Canada (in USD billion)

Table 8: Passenger Car Part Manufacturers and Suppliers in Canada, 2014