COVID-19 pandemic alters future of auto industry
Wednesday, May 27, 2020
The Windsor Star/Dave Waddell
Trillium Network of Advanced Manufacturing managing director Brendan Sweeney believes the COVID-19 pandemic has pushed the Canadian automotive sector to a pivot point that will reshape the future of the industry.
Despite a new Trillium study showing declining vehicle assembly numbers, a negative automotive trade balance and Canadians now buying more vehicles than we produce, Sweeney also sees opportunities for Canadian firms.
“I think we’ll be talking about a pre-COVID and post-COVID world in the auto industry in the same way we do of the border crossing experience pre- and post-9/11,” Sweeney said in reviewing the study released Tuesday of the last 10 years of the Canadian auto industry.
“This study really looks at the industry between two crises — (the 2008-09 recession and COVID-19).
“The assumptions we’ve had about the automotive industry aren’t true or are certainly less true than before.”
Sweeney said after the pandemic exposed the weaknesses in the nation’s supply chain and the importance of having a flexible, innovative manufacturing base, he’d be surprised if a new era of economic planning by governments with a more focused industrial policy doesn’t emerge.
“I think we’re going to see a sea change,” said Sweeney, noting NAFTA’s higher domestic content rules and the desire to reduce risk in the global supply chain also present opportunities that need to be grasped.
“Maybe we’ve been wasting our time on looking for a coordinated approach when we’ve needed the collaborative approach of the past two months that has produced such great results.”
The study’s findings show what a daunting challenge Canada’s auto industry faces.
The gross domestic product (GDP) value of vehicle assembly and parts production dipped to $9.4 billion in 2009, but climbed back to $15.37 billion in 2019. That’s still far short of the nearly $19 billion in 2005.
The value of vehicle assembly dipped by $725 million from 2016 to $6.5 billion in 2019, and will fall further this year due to the closure of GM’s Oshawa plant in late 2019 and the COVID-19 pandemic.
The past 10 years were also the first decade since the Second World War that an original equipment manufacturer (OEM) hasn’t constructed a greenfield plant in Canada. Annual capital investment has slipped to $2.08 billion from $3.28 billion in 2000-09.
While assembly operations were shrinking, parts production has grown by nearly 30 per cent to $9.02 billion.
“One of the big challenges Canada has for some reason is settling on being the best supplier and playing second fiddle to our cousins south of the border,” Automotive Parts Manufacturers’ Association chief technical officer Colin Singh Dhillon said of the declining capital investment and lack of a domestic OEM.
“We don’t want to be just suppliers. We want to be on the front end of decision-making.”
Just how tenuous the industry can be is illustrated in the rapid shrinkage of GM’s presence in Canada.
In the span of a decade, GM has gone from Canada’s top producer of vehicles to the smallest of the five OEMs operating in Ontario.
In 2019 Toyota was Canada’s leading manufacturer followed by Fiat Chrysler Automobiles (FCA), Honda and Ford.
Sweeney said the Japanese automakers produced 47 per cent of the vehicles in Ontario in 2019 and are expected to move past 50 per cent in 2020 depending on the COVID repercussions.
Though the study, which includes data up to the end of 2019, is a look at the industry’s recent past, it’s intended to be a data-enriched tool to help plot the future.
Sweeney said that future is in defining Canada’s role in developing and manufacturing electric vehicles and related technology.
Existing Ontario plants have already proven they can produce such vehicles and the province is home to the fastest growing tech sector in North America.
The challenge is displaying those capabilities to capture more investment and attract or create non-traditional manufacturers or startups. Sweeney cites the APMA’s Project Arrow as an excellent example of how to do that.
“Automation, collaboration and investment will be the keys,” Sweeney said.
Automakers have already recognized the Canadian talent pool by making research and development investments that have grown by 65 per cent in five years to $329-million. GM, Ford and FCA all have extensive and expanding research facilities in Ontario.
“Automation and AI were already being adopted, but COVID-19 will increase the pace dramatically,” said Automate Canada chair Shelley Fellows.
“There’s a lot of incentive now because returns to shareholders, quality and performance have been joined by health and safety concerns and dealing with the ability to maintain operations with potential employee illness.”
Fellows said she expects to see more collaborative robots working alongside humans allowing for more distancing between employees.
Remote monitoring, predictive monitoring and AI will provide big data on plant operations to improve the flow of work and free employees for more important tasks.
Fellows added the fear automation will wipe out employment opportunities is overblown.
“We have 58,000 people working in the industrial automation sector now; that’s more than the 44,000 in the assembly plants,” Fellows said.
Southern Ontario, particularly the Windsor region, is home to over half of Canada’s industrial automation firms positioning it well to capitalize on opportunities.
“Windsor Essex may be ahead of the curve here because our strengths match up with the emerging areas of manufacturing and Industry 4.0,” Fellows said.
“The key in our region is we already have a vibrant cluster in advanced manufacturing and automation. The WindsorEssex Economic Development Corporation is creating all kinds of mobility partnerships across the border.
“It’s a smart strategy.”