The Canadian automotive industry does not exist in isolation. It is extremely dependent on the global economy and a complex supply chain that cuts across continents. Therefore, any issue that disrupts the global supply chain also affects the Canadian auto production sector. Here is a rundown of some major global supply chain issues and how they are influencing the auto industry in Canada and elsewhere in North America.
The COVID 19 Pandemic
Although the pandemic seems to be behind us, its impacts on the global supply chains are still affecting the Canadian auto sector and the manufacturing sector in general. Lockdowns had the effect of reducing or stopping the flow of raw materials, creating backlogs that are still affecting the automotive industry in Canada. Besides, global inflation has persisted following the pandemic-related economic shutdowns, and this has significantly increased the cost of producing vehicles in Canada.
Semiconductor Shortages
The demand for electric vehicles has been growing exponentially. It is expected that over 35% of all vehicles produced in North America by 2030 will be EVs. Unfortunately, this has led to a rapid rise in demand for specific EV parts, the semiconductor being the most notable. It is, therefore, not surprising that the ongoing shortage of semiconductors is sending shockwaves across the global automotive industry. The shortage is so severe that some Canadian automakers have been forced to slow down production and cancel shifts for some workers.
Dependency on Overseas Suppliers
The Canadian auto industry heavily relies on overseas suppliers for essential components and raw materials. While this has the effect of making the industry more efficient, it also makes it more vulnerable to supply chain disruptions caused by issues like geopolitical tensions and natural disasters. For instance, the current geopolitical tension in the Middle East has made navigation more dangerous and costly. This disruption to the supply chain has reverberated through Canadian assembly plants, resulting in significant production delays and bottlenecks.
Tariffs and Trade Uncertainties
The Canadian automotive industry is heavily reliant on international trade. Unfortunately, this makes it quite vulnerable to fluctuating tariffs and ever-changing international trade policies. Tariffs and trade wars seem to increase the cost of producing vehicles, making Canadian products less competitive. For instance, uncertainty surrounding trade relations with key Canadian trading partners like the US and Mexico due to shifts in local and regional politics makes it extremely difficult for Canadian car manufacturers to plan their supply chain strategies.
Environmental Regulations
When people discuss environmental sustainability, the automotive industry is usually at the centre of the debate. This explains why the automotive industry in Canada is facing immense pressure to adopt eco-friendly production methods and reduce its carbon footprint. Unfortunately, complying with stringent environmental regulations developed by the federal government has the effect of increasing the cost of production in the short run, making the Canadian automotive industry less competitive in the global markets.
Despite all the supply chain challenges the Canadian automotive industry is facing, FFUN does its best to stock Canadians’ favourite automotive makes and models. Visit our dealership in Saskatoon for high-quality vehicles from top local and international automakers.
