Canada’s auto sector must challenge old business models and lead the charge on auto-tech innovation
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:
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.
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For more information, please contact:
Nancy J. White
KPMG in Canada