Are you looking for a stock?
Try one of these
Despite a recent rebound in the auto industry, Canada's auto parts manufacturers have fallen from the ranks of global top 10 exporters because they failed to diversify their markets, an economist said on Wednesday.
Canada's auto parts sector is losing global market share because it has not found a way to tap into the rapid growth in low-cost geographies, Scotiabank economist Carlos Gomes said in a report.
"The inability to make inroads in the fast-growing markets of Asia and Latin America is undermining Canada's position as a major auto parts producer," Gomes said.
Until 2007, Canada was the world's sixth-largest auto parts exporter, but was overtaken by Spain, Korea and China during the economic downturn, the report said. Last year, Canada lost its top 10 exporter spot to the Czech Republic.
The United States takes 57 percent of all parts shipped from Canadian plants, but the U.S. share of global vehicle assemblies has slipped to 10 percent from about 25 percent in the mid-1990s, the report said.
Another 39 percent of Canadian parts remain in Canada to supply local vehicle assembly plants, the report said. Canada and the U.S. now represent about 13 percent of global vehicle production, down from 30 percent in the late 1990s.
Canadian auto parts shipments, employment and profitability are bouncing back on stronger vehicle production across North America, a trend expected to buoy volumes for several years, Gomes noted.
However, the sector still does not have a strategy to benefit from rapid growth outside mature auto markets in North America and Europe, the report said.
In the opening months of 2012, Canadian auto parts shipments posted a double-digit gain, lifting volumes to an annualized pace of $20 billion, the highest level since 2008 before the global economic downturn, Gomes said.
Canadian exports outside the U.S. declined to 4 percent of output last year from 5.4 percent in 2007. Only 1 percent of Canadian-made parts are shipped to high-growth emerging markets of Asia and Latin America.
"We estimate that each vehicle produced outside of North America and Europe contains less than $40 of auto parts supplied by Canadian producers, either from their North America operations or from Canadian-owned plans operating in these countries," Gomes said.
"This compares with roughly $1,500 of Canadian-made parts in each vehicle assembled in North America."
Canadian parts producers are also slow to diversify shipments to the U.S., the report by Gomes said. Nearly 65 percent of exports go primarily to the states of Michigan and Ohio even though their share of overall U.S. vehicle assemblies has fallen to 35 percent from more than 40 percent in the late 1990s, the report said.