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Auto Sector Can Drive Ontario’s Economy Forward Again

By Jan De Silva, President & CEO of Toronto Region Board of Trade 

Flavio Volpe, President of the Automotive Parts Manufacturers’ Association

For Ontario to thrive in a competitive and dynamic global economy the Toronto region must lead the way. Toronto is not only Ontario’s global champion, it is Canada’s.

To succeed, our region needs a robust business climate comprised of a mix of industry clusters, including automotive. Fortunately, both the federal and provincial governments are putting forward funding to support regional businesses clusters.

With annual sales of two million vehicles and annual production of 2.4 million units, automotive is Canada’s largest manufacturing sector by GDP and a global top-ten producer. With the majority of this industry located in Southwestern Ontario, auto is a critical input to the province’s economy.

It’s also a foundation of Toronto’s economy—this is not talked about nearly enough. The Greater Toronto Area is responsible for almost half of the annual vehicle production in Canada. It hosts four vehicle assembly plants and hundreds of auto parts suppliers, employing almost 65,000 people directly and thousands more indirectly who supply and serve the industry.

The issues impacting the auto and parts cluster—trade, talent and energy—are crucial inputs to the success of this cluster, and most other parts of the province’s economy.

The U.S. government’s intention to renegotiate NAFTA is causing concern for all business, but has a particular impact on the automotive industry due to the deeply interconnected supply chain.

A vehicle’s components can cross the border multiple times before it is complete and is the final product of collaboration between companies on both sides of the border. Two-way automotive trade between Canada and the U.S. is worth more than $130 billion per year. In an age where tweets can impact international relations, the sector is deeply aware of the precarity of this important relationship.

Changes to NAFTA have the potential to be major roadblocks and could be harmful for both the U.S. and Canadian auto industries. The business community must work with government and our U.S. counterparts to ensure trade continues unimpeded.

While trade issues remain a concern, we are glad to see a renewed focus by both the Federal and Ontario governments on workforce and skills development. Southern Ontario is a hub of world-class automotive R&D. It is home to an ecosystem of innovation teeming with leading scientists, private enterprises and research facilities, in the Toronto Waterloo Innovation Corridor and Windsor. Critically, these are all underpinned by our skilled workforce.

With nine universities and 24 colleges offering programs in these fields, Ontario is a leader in educating today’s workforce with the skills they will need as the auto sector continues to evolve. Forty-three per cent of our auto workers have a post-secondary education, higher than any other jurisdiction.

This is essential. Advanced technology is increasingly becoming the genetic structure of vehicles. Autonomous vehicles, electric vehicles, connected cars and powertrain technologies are just some of the many areas where our auto sector is leading. A new car now has more lines of code than a modern airliner.

Our workforce makes us competitive, but rising energy prices erode our advantages.

According to a report by the Automotive Policy Research Centre at McMaster University, electricity rates have increased by 107 per cent over the past decade while U.S. rates have remained relatively stable. Ontario has the highest electricity rates in the Great Lakes automotive cluster, hampering the province’s reputation as an automotive global leader. The threat of reduced corporate taxes in the U.S. could further harm our competitiveness.

Undoubtedly, Ontario’s energy system is complicated. The Industrial Conservation Initiative (ICI) allows large consumers to shift electricity consumption to off-peak periods to reduce costs. The ICI may reduce some electricity bills for automakers, but it is complex and inconvenient, and many small and medium parts manufacturers aren’t even eligible. If the province truly wants to ensure the competitiveness of the sector it should work to level the playing field with competing jurisdictions.

As we seek to further support and grow our region’s economy, we need to examine the factors that are impacting our industry clusters. That’s why the Toronto Region Board of Trade will be taking a deeper look at automotive with industry insiders at an event on June 2.

Our region has the potential to benefit from an exciting jobs story in Ontario’s automotive industry, but to take advantage and be truly competitive, policymakers and governments need to address our cost competitiveness and market access challenges.

Automotive will continue to drive our region’s economy forward, but we need to keep our foot on the gas pedal.

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For those looking to attend an event discussing this issue, click here to register.

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