Conference Board Says Canada's Auto Sector Expecting Solid Year

The Canadian Auto Sector is facing 3 key factors in 2018, but overall should expect a similar outlook as in 2017.

The Conference Board of Canada has released its annual look-ahead to how vehicle manufacturing should perform in the coming year.

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Conference Board of Canada logo (courtesy CBOC)

Economist Sabrina Bond has identified the US economy, Demographic change and trade uncertainty as the main factors.

She says trade uncertainty could have an impact, but it's still murky what that will be.

"The forecast we conducted assumes a continuation of NAFTA but we've also taken into account potential impacts associated with a border adjustment tax" says Bond  "that would have similar tariff value to some of the rule of origin changes that we've seen coming out of the administration south of the border"

She says demographics mean people will hold on to vehicles longer.

"There's going to be a slowdown in terms of the number of vehicle consumed by Americans over the next 5 years" explains Bond "Where historically we saw US vehicle sales at 17-million units per year, we're now looking at a norm closer to about 16 once you account for fleets"

She says younger buyers are looking at vehicle ownership differently.

"The combination of economic factors and the proliferation of ride sharing has created an environment where American Millennials are less likely to own a vehicle than they have in the past over previous similar aged generations" says Bond "And they're only going to be consuming at half the rate of prime age population members"

Bond says the industry has peaked as far as sales are concerned and she expects a softening in 2018.

But she also believes this is a return to normal sales numbers, not a cyclical crash.

Overall Bond believes Canada's auto sector is well positioned for sustainability with a heavy percentage of light truck manufacturing, including Windsor's minivans.