close
Share with your friends

Bold moves needed for Canada’s auto industry: KPMG

Bold moves needed for Canada’s auto industry: KPMG

Canada’s auto sector must challenge old business models and lead the charge on auto-tech innovation

1000

Related content

Canada's auto sector must challenge old business models and lead the charge on auto-tech innovation if it wants to continue to be a player in the global auto industry, today and in the future, says KPMG.

KPMG in Canada has released "The State of Canada's Auto Sector: Recalculating the Route Ahead", detailing an industry undergoing dramatic transformation, as the effects of shifting markets, increased global competition, and new technology and consumer trends take hold. These insights draw on KPMG's 20th Global Automotive Executive Survey (GAES), an annual survey of 3000 auto exec and consumers on what's next in the automotive industry.

 

Confluence of factors causing disruption for Canada's auto sector

Turbulence in the global auto sector and changing consumer tastes are pushing Canadian car makers for more cost-effective production, lower labour costs, and greater tech innovation.

"General Motors' decision to close its Oshawa plant marks an inflection point for the Canadian auto industry," says Peter Hatges, Partner, National Sector Lead, Automotive Markets, KPMG in Canada. "We've reached a crossroad, triggered by the onset of new business pressures. While Canada's auto sector is no stranger to disruption, we're seeing the effects of a shift in global sales and increased competition from lower-cost markets, as the industry explores new frontiers in electric and autonomous driving. These factors are reshaping the roles of car makers, both original equipment manufacturers (OEMs) and their suppliers, within an evolving supply chain."

 

The Canadian Advantage

Despite GM's withdrawal, there is reason to remain confident in Canada's auto sector.  Hatges notes that the sector continues to have many strengths, including a skilled, available labour force, a mature supplier network, and ongoing government support, through manufacturing, production and R&D tax credits and incentives. Canada's auto industry contributes $19 billion to GDP, making it one of the country's largest manufacturing centers.  

"The Canadian government has done its part to nurture our domestic auto industry, and, critically, defended the sector when negotiating the U.S.-Mexico-Canada Agreement (USMCA)," says Hatges. "Ottawa needs to continue to maintain a vigilant watch south of the border, as USMCA further reshapes supply chains, pricing and investment strategies in North America. Ultimately, it's up to industry to read the future and grab onto emerging opportunities."

Currently, there is no clear consensus on which auto technologies will power the cars of the future. In fact, the majority of execs surveyed believe multiple technologies will co-exist in the future, including internal combustion engines (ICEs), hybrids, battery electric vehicles (BEVs) and fuel cell vehicles (FCEVs).  ICEs remain popular and hybrids are a top choice for consumers looking to buy their next car.  BEVs are an important manufacturing trend, although one in three consumers agree that price is the biggest barrier to buying a fully electric car.

 

Five considerations for Canada's auto sector:

  1. Be bold: As global competition increases, Canada's auto sector – OEMs, suppliers and auto-tech innovators – need to move beyond following trends and set the standard for industry innovation.  This means coming to market with more effective ways to design, engineer and manufacture leading-edge automotive materials and technologies.
  2. Be the best supplier: Despite worries about protectionist sentiment in the U.S., today's auto supply chain is highly integrated and global. For Canadian suppliers to stand out, they must contribute quality improvements, technology advances and cost savings to leading manufacturers. Being the supplier of choice means helping these companies manage new risks and contributing to profitability.
  3. Be visionary: The future of mobility in Canada is complex and likely to encourage cross-industry partnerships. Industry will need to rethink old business models and cooperate to create a mobility ecosystem - one that addresses the unique perspectives of millennials who are less reliant on cars. Government will shape transportation and electricity infrastructure, influencing the type of cars Canadians will drive in the future.  FCEVs, considered a breakthrough for e-mobility, could solve the infrastructure challenges of Canada's vast geography and current battery limitations in cold weather conditions.
  4. Build Canadian tech alliances: While car manufacturers and suppliers are developing internal capacity to meet the demands of the industry's tech revolution, more can be done to tap into Canada's world-leading tech hubs. Ontario's auto and tech industries are particularly well-positioned to meet these new demands. Arguably, cooperation and strategic alliances with the tech sector, rather than competition, will feed success.
  5. Be connected: Brand is no longer as key for consumers as previously, while digitization, seamless connectivity, and data security are gaining importance. As vehicles increasingly continue to connect to the roads, systems and apps around them, catering to those needs and providing the most integrated customer experience will be a competitive advantage.

 

To read more insights on "The State of Canada's Auto Sector: Recalculating the Route Ahead," please visit https://home.kpmg/ca/en/home/insights/2019/02/the-state-of-canadas-auto-sector.html

 

About KPMG in Canada

KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) is a limited liability partnership, established under the laws of Ontario, and the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG has over 7,000 professionals/employees in 38 locations across Canada serving private and public sector clients. KPMG is consistently recognized as an employer of choice and one of the best places to work in the country.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

 

For more information, please contact:

Nancy J. White

KPMG in Canada
Toronto, Ontario
T 416-777-3306
M 416-876-1400 
nancywhite@kpmg.ca

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal