A recent report highlights the stark contrasts in the Canadian automotive landscape, revealing that while the production of vehicles in Ontario has plummeted, Japanese manufacturers such as Honda and Toyota have managed to maintain their foothold. As the Detroit Three scale back operations amid rising tariffs and shifting market dynamics, the resilience of Japanese firms underscores a significant shift in the sector.
Decline of Canadian Auto Production
According to the Trillium Network for Advanced Manufacturing, a think tank based in London, Ontario, auto production in the province is projected to decline from 2.3 million vehicles in 2016 to just 1.2 million by 2025. This downturn is largely attributed to a steep reduction in output from legacy manufacturers Ford, General Motors, and Stellantis. The report notes a notable shift; while four automakers each produced over 400,000 cars annually in 2016, only Honda and Toyota are expected to reach that milestone by 2025, collectively accounting for a staggering 77 per cent of Canadian production.
Employment figures reflect this decline as well, dropping from 32,700 workers in assembly plants in 2015 to an anticipated 23,700 by 2024. This count does not even factor in potential job losses stemming from the tariff-related decisions anticipated for 2025.
Stability Amidst Tariffs
Despite the backdrop of U.S. tariffs imposing a 25 per cent levy on non-U.S. content in Canadian-made vehicles, Honda and Toyota’s operations have remained relatively stable. Brendan Sweeney, managing director of the Trillium Network, attributes this stability to a strategic approach that prioritises long-term investment over short-term profits. Toyota’s production of the RAV-4 hybrid and Lexus RX in Cambridge and Woodstock, along with Honda’s manufacturing of the Civic and CR-V in Alliston, exemplify this commitment to advanced technology and higher-value vehicles.
On the contrary, the Detroit Three have significantly retrenched their presence in Ontario. Ford’s Oakville plant has been shuttered for retooling since 2024, Stellantis has halted operations at its Brampton facility, and General Motors closed its BrightDrop electric van plant in Ingersoll, resulting in the loss of 1,150 jobs. Recent cuts at GM’s Oshawa Silverado factory have further compounded the industry’s woes.
Cultural Differences in Business Strategy
Sweeney points out a fundamental difference in corporate philosophy between Japanese and American automakers. Japanese firms tend to view their operations within a broader context of their global networks, whereas their American counterparts often focus on immediate profitability. This outlook allows Honda and Toyota to weather economic storms without the same pressure to deliver quarterly results.
“They are not as concerned about short-term outcomes,” Sweeney explained. “Their focus is on long-term returns rather than responding to the whims of an American president.”
However, it is worth noting that Toyota has labelled the Trump-era tariffs as detrimental to the sustainability of manufacturing in Ontario, and Honda is also taking steps to shift some production away from Canada to mitigate tariff impacts.
Future Uncertainties and Opportunities
The Canadian auto industry is poised for further changes, particularly with the impending influx of 49,000 Chinese electric vehicles following an agreement with Ottawa. This development, alongside the upcoming release of the federal government’s auto strategy in February and a review of the USMCA scheduled for July, could reshape the landscape.
Sweeney expresses cautious optimism regarding the potential for a shift in U.S. tariff policies, especially given the financial strain that American automakers are currently facing. “The situation isn’t particularly rosy for them right now,” he remarked.
The Trillium Network proposes several strategies to bolster the Canadian auto sector, including incentives for companies that manufacture locally and support for the development of Canadian technology. These measures could help rejuvenate the industry, which has not seen such supportive policies in decades.
Why it Matters
The resilience of Japanese automakers amidst a declining Canadian automotive sector highlights a critical juncture for the industry. As traditional manufacturers retract, the ability of Honda and Toyota to adapt and thrive under challenging conditions underscores the importance of strategic long-term planning in manufacturing. The future of Ontario’s auto industry hinges on adapting to these market dynamics, embracing technological advancements, and potentially redefining trade relationships, which will ultimately determine the sustainability of jobs and production in the region.
