IS CANADA PREPARED FOR FUTURE AUTO REVOLUTION?
North America has hit ‘peak car’ while plants still make thousands of vehicles
As Oshawa grapples with General Motors’ plans to stop production at its century-old assembly plant, part of a larger restructuring so the automaker can instead invest in electric and connected vehicles, attention turns to Canada’s remaining seven auto plants in Ontario.
Given GM’S willingness to shutter eight plants, including four in the United States, and bet $6 billion in annual savings on “future” technologies, industry watchers are questioning whether Canada’s auto production sector is prepared for a future in which electric or self-driving cars overtake traditional vehicles.
GM’S plant in Oshawa, Ont., accounted for 5.6 per cent of total Canadian auto production of just under two million and, despite its stature as an automotive hub, produced the smallest number of cars among the eight plants in Canada.
“Curiously, out of all of the announced closures, the Oshawa plant is the only one with flex capabilities (that is, the ability to manufacture both cars and trucks on the same line), something that would have seemed ideal were a manufacturer to shift its strategy towards light trucks and electrified vehicles,” said BMO in a report published Tuesday.
The remaining facilities still produce thousands of cars, not just the larger SUVS and trucks that today’s consumers prefer.
Honda of Canada Mfg.’s Alliston, Ont., plant which makes the Civic and CR-V, accounts for 21.5 per cent of all Canadian auto production. Civic has been the bestselling passenger car in Canada for 20 years, according to Honda spokeswoman Laura Heasman, noting that the company recently invested $492 million to modernize the plant.
Toyota Canada Inc. builds Corollas in Cambridge, Ont., while Fiat Chrysler Automobiles plant in Brampton, Ont., makes the nonsuv suite of Chrysler 300, Dodge Charger and Dodge Challenger.
As for Canada’s position in electric vehicle manufacturing, three of the remaining seven plants in Ontario build hybrid vehicles, including FCA’S plant in Windsor and Toyota’s plants in Woodstock and Cambridge.
FCA spokeswoman Louann Gosselin said it makes the only plug-in hybrid minivan on the market, a van Alphabet’s Waymo intends to use for its self-driving fleet.
Barry Cross, an operations professor at Queen’s University’s Smith School of Business, believes North America has reached “peak car.” Fewer young people are rushing to get their driver’s licences, ride-sharing is more popular and self-driving technology is improving, he said. Households that previously needed two or three cars may cut back to one.
“There’s a huge wake-up call associated with this right now,” Cross said. On top of this, electric engines are “on the cusp of accessibility,” he said. To remain relevant in a world in which people are buying fewer cars, companies will have to build something “better, faster or cheaper” in order to survive, he said.
Still, Flavio Volpe, president at the Automotive Parts Manufacturers’ Association, is cautious about betting on electric vehicles.
When he worked at Ontario’s economic development ministry from 2007 to 2011, he said they chased “every single lead we could” on vehicle electrification. Back then, GM made a big bet on the Chevy Volt, which it decided to build in Detroit-hamtramck. Yet that plant is one of the eight facilities slated for closure.
“Right now, the market for electric vehicles doesn’t support an assembly plant, let alone various assembly plants,” Volpe said.
He pointed out that even Tesla, the darling of the electric vehicle world, nearly went under last year.
“Until the price of lithium comes down, the cost of the batteries makes the cost of the vehicles out of reach for the majority of consumers,” he said.
Volpe believes it’s better for Canada to pursue expertise in connected vehicles, the technology that makes features such as telematics, weather, connectivity or advanced driver assistance. Canada is well-positioned to lead in this with thousands of tech companies in Ontario alone.
“The bet is connected technology,” Volpe said.
Canadian companies including Blackberry Ltd.’s QNX division are pursuing connected technology.
Meantime, BMO economist Doug Porter also questions how quickly electric vehicles will take off in the next 20 years.
He said it’s possible that we are at peak car thanks to longer-term factors such as ride-sharing and more people living in the downtown core. But sales numbers still show consumers’ strong desire to own their own vehicles, Porter said. “There’s still quite an appetite for motor vehicles,” he said.
Out of all of the announced closures, the Oshawa plant is the only one with flex capabilities.