Auto parts industry expected to post record growth in 2012

After posting record growth in 2012, Canadian auto parts production is forecast to expand at a more modest but still strong pace in 2013, according to The Conference Board of Canada’s Industrial Outlook: Autumn 2012 for the motor vehicle parts manufacturing industry.

“The Canadian auto parts industry has been in recovery mode since output fell by a staggering 43 per cent between 2007 and 2009,” said Michael Burt, director, Industrial Economic Trends, in a statement. “The parts industry continues to benefit from a turnaround in North American vehicle sales, which are on track to post their best results since 2007. Demand for parts has been so strong, that some parts manufacturers are running six days a week in an effort to keep up with the automakers.”

Canadian auto parts production is forecast to increase by an impressive 22.4 per cent in 2012. Beyond the recovery in North American sales, production has been boosted by the return of Japanese automakers Honda and Toyota to normal operating conditions following last year’s production disruptions caused by the earthquake and tsunami. Looking beyond this year, the two Japanese auto giants will continue to represent a big opportunity for Canadian parts manufacturers. Japanese automakers are actively looking to move more production to North America in order to limit the impact of a strong yen and improve the durability of their supply chains.

Industry revenues are expected to rise 22.7 per cent this year—the largest one-year increase on record. Revenues will advance more moderately beyond 2012, but parts manufacturers will continue to benefit from healthy sales growth until North American vehicle sales fully recover. Revenues are forecast to increase by 11.4 per cent in 2013 and 7.4 per cent in 2014.

Due to record growth in production and revenues, profits surged by an estimated 37 per cent in 2012, to $1.4 billion. However, profit growth is expected to be more muted in the coming years. Lower-cost economies, such as Mexico and China, are capturing market share in North America and will place pressure on industry profits and margins.