KPMG: Canada’s automotive industry restructuring
After a year of aggressive tariff policies from its largest trading partner, the Canadian auto industry is looking to improve its internal operations and find new markets, according to a KPMG report.
Such sentiments are of course, easier said than done. The supply chain relationship between auto industry firms in Southern Ontario and Michigan/Ohio is tighter and more heavily interdependent than any other domestic or international chains. The critically intertwined supply chains of the Great Lakes region, well-established over more than a century, are nonetheless being severely tested by the American turn to palingenetic ultranationalism and the economic isolationism and political aggression therein.
“The implications down the supply chain and across the economy will be significant, but the industry, especially the more established players, have dealt with high levels of disruption before,” said Dave Power, partner and national automotive sector leader at KPMG Canada. “From our recent survey and in conversations with automotive leaders, parts suppliers, and dealers, it’s clear significant activity is underway to optimize their operations and explore new markets, partnerships, and opportunities.”
Seventeen percent of OEMs and parts suppliers and manufacturers say they will be “completely transformed” over the next three years, 12% believe they will be acquired or consolidated, and 9% say they are at risk of failure.
Nineteen percent of respondents say they have been minimally affected thus far.
Amid the major uncertainty, Canadian auto firms are prioritizing operational stability – with reinforcing supply chains and securing raw materials ranking as the top priority in the next three years, followed by boosting productivity and optimizing costs.
KPMG’s report found that 82% of manufacturers and suppliers are adjusting their supply chain strategies, while 70% are exploring international markets.
Sixty-three percent have increased prices in response to tariffs and 62% have substantially changed their product mix to reduce tariff exposure.
On the tech front, 69% are investing heavily in AI and other emerging technologies, with 20% reporting AI-related productivity improvements of more than 25%.
“Canada’s automotive industry is under intense cost pressure from US tariffs on car parts, steel and aluminum. The leading auto sector players aren’t just managing disruption on the U.S. border; they are also looking to new markets that can offer greater trade certainty,” said Joy Nott, partner trade & customs, KPMG Canada.
“It’s worth remembering that Canada has 15 free trade agreements with 51 countries covering 1.8 billion people and 60 per cent of the world’s GDP,” she added.
