The Ford plant in Oakville, Ont., is shown in a file photo. Canada’s share of North American vehicle production is falling as new plants in Mexico increase production.Peter Power/The Globe and Mail
In the space of 10 days, Ford Motor Co. has demonstrated how the global auto industry is being transformed.
Ford said Thursday it will close its last assembly plant and an engine plant in 2016 in Australia – a stagnant auto market burdened with a high currency. That followed news last week that a joint venture Ford shares in Russia will add a third vehicle and open a new engine plant there in 2015 to take advantage of the growing market.
The trend is clear, not just for the No. 2 Detroit auto maker, but for the industry as a whole: Low-cost, growing markets are getting billions of dollars in new investments, while operations in stagnant markets with high costs, punishingly strong currencies and little ability to export are in deep trouble.
The BRIC countries of Brazil, Russia, India and China are at the top of the list for investment, said Bank of Nova Scotia economist Carlos Gomes.
"As incomes in those countries continue to rise to a point where a middle-class family can aspire to own its first vehicle, that is what will continue to drive demand for the global auto industry," Mr. Gomes said.
"Look at the impact it's having even in North America," he said. "In the 1990s, we used to account for roughly one-third of all global vehicle production and now our share has fallen to about 18 per cent because of the rapid growth of the emerging markets."
Vehicle ownership statistics underline why the world's auto makers are pouring investment into emerging markets with room to grow, he added. In China, the world's largest market, there are about 70 cars for every thousand people. In India, there are about 20. There are 702 cars for every 1,000 Australians, a little less than the leader, the United States, with 793 vehicles for every 1,000 people.
The U.S. and Australian numbers effectively amount to saturation. The difference is that Americans buy about 15 million new vehicles every year, while Australians buy about 1.1 million.
Australia is among the most competitive markets in the world with 65 manufacturers selling 365 models, Ford Australia president Bob Graziano said in a statement announcing the closing.
"Given the fragmented marketplace and the low model volumes that result, we decided that manufacturing locally is no longer viable," Mr. Graziano said. The rise in the value of the Australian dollar has also sent costs of locally manufactured vehicles soaring and prices of imported vehicles down.
On the surface, the Ford closing in Australia might appear to have some parallels to Canada because of the high currency and markets that are relatively close in size. The differences between the two countries are stark, however.
Auto makers produced 2.45 million vehicles in Canada last year in an industry that is geared heavily to export with about 80 per cent of the vehicles made in Ontario shipped to the United States or elsewhere. Canadians bought 1.675 million cars and trucks.
In Australia, vehicle companies assembled just 221,000 vehicles last year, down from a peak of 408,000 in 2003. That represented about 20 per cent of sales.
The biggest worry for Canadian policy makers is Mexico, among the hottest spots for auto investment in part because of its access to the big Brazilian market and other growing economies in Latin America.
Auto parts makers in Mexico have surpassed Canada as the largest suppliers to vehicle manufacturers in the United States and Canada's share of North American vehicle production is falling as the new plants in Mexico increase production.
Canada's share of new auto investment has fallen to single digits since the 2008-2009 crisis from its once steady level of about 15 per cent.