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Canadian auto parts makers concentrate on home market

Published by Steve Coleman on April 25, 2012

The rush to fuel-efficient vehicles is driving up vehicle sales across Canada and the US, but a Scotia Economic report says Canadian auto makers are losing ground outside of their North American and European comfort zones.

The bank's new Global Auto Report says Canadian assembly plants have slipped from producing one-quarter of the world's new vehicles in the mid-1990s to just 10 per cent of new vehicles on the road.

Most of the growth in the automobile industry, these days, is selling vehicles to developing countries with growing middle classes. Canadian sales, on the other hand, are mostly to the United States or sold at home to automakers with Ontario assembly lines.

An estimated 96 per cent of Canadian auto parts either stay at home or cross into the United States. It's been that way for the last decade, Scotiabank says.

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 plants operating in these countries," writes Scotiabank economist Carlos Gomes. "This compares with roughly $1,500 of Canadian-made parts in each vehicle assembled in North America."

In 2007, Canada was the world's sixth-largest auto parts producer. Numbers slipped during the recession and Spain, Korea and China moved Canada into ninth. Last year, the Czech Republic overtook Canada after concentrating on the western European market.

On the home front, Canadian parts makers are still shipping most of their product to Michigan and Ohio and haven't made inroads in the southern US where automakers have started building new production plants.

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