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Canadian Parts Makers Await Enactment of USMCA

Keith Nuthall, Wards Auto
June 19, 2020

OTTAWA – Canada’s Automotive Parts Manufacturers’ Assn. (APMA) is optimistic that the U.S.-Mexico-Canada Agreement (USMCA) will deliver more sustained work to the country’s supply chain once the deal comes into force July 1.

It replaces the North American Free Trade Agreement (NAFTA) in place since 1994. A key change with the new agreement is that Canadian (as well as American and Mexican) automakers may have to increase their USMCA-bloc sourcing to ensure 75% of a vehicle’s parts are made a signatory country, up from the current 62.5% under NAFTA; and that 40%-45% of auto content be made by workers earning at least $16 per hour.

This will have an impact, although an increase in costs will be reined in, predicts APMA President Flavio Volpe. He thinks Canada’s high-tech manufacturing and research hubs, which are developing expertise in industry 4.0 tech such as artificial intelligence and machine learning, will enable parts makers to keep costs down.

“We see a 25% increase in Canada” regarding parts sourcing, and while there would not be a similar increase in jobs, “there will be more work and there will not be 25% more costs. Maybe 5% across all vehicle costs,” he says.

This would not be enough to force automakers to raise prices, especially given the focus on purchasing volumes over revenues in the sector, Volpe tells Wards.

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