A great many things must go right for Canada to keep, much less expand, its auto assembly sector.
That sector, concentrated in Ontario, is radically shrinking. It turned out just 1.2 million passenger vehicles in 2025, down about 33 per cent from 2019.
The Detroit Three automakers — GM, Ford and Stellantis (Chrysler, Jeep, Fiat) — have de-prioritized their Canadian branch plants for years.
And the Trump administration’s 25 per cent tariff on non-U.S. content in exports of Canadian-made vehicles has dealt a hammer blow to an already weakened auto industry.
Plant closures and cancelled product lines since the tariffs went into force last year have resulted in more job loss in the Canadian auto sector than at any time since the Great Recession.
Ottawa’s strategy to revive the sector, unveiled in February, doesn’t fully address that question. Focused on consumers rather than producers, it restores electric vehicle (EV) rebates that were suspended early last year and invests about $1.5 billion in an expanded EV charging network. It is vague on financial support to automakers and auto-parts manufacturers.
Mélanie Joly, the federal industry minister, has been direct about the goal of the strategy, which is to “build the best cars in the world, for the world.”
RBC Economics, for one, thinks that improbable outcome is possible.
The Windsor-Montreal corridor can boast award-winning assembly plants, one of the auto world’s most highly skilled workforces, more than 700 suppliers, and a corps of engineers specialized in AI, autonomy and electronics.
That provides Canada with an end-to-end auto supply chain with few equals. Indeed, it has potential to someday claim the status of the auto industry’s “Silicon Valley of the North,” says RBC.
That will seem an impossibly upbeat forecast for observers of an industry that has been in decline for years.
But there is a way for Canada to double its auto production, to about two million units, by 2040, says RBC in an extensive May report on how to revive the auto sector.
To succeed at that, Canada needs more than restored tariff-free access to the U.S. market of 16 million annual vehicle sales, though that’s essential.
Canada must also bolster its acumen in the advanced technologies that global automaking now relies on. And it needs to increase its production of both cheap, clean electricity and of critical minerals like aluminum, lithium, copper and graphite.
With U.S. automakers on the sidelines of a nascent Canadian auto industry renaissance, Canada needs more non-U.S. companies to open assembly plants in Canada, joining Toyota and Honda, which now account for about three-quarters of Canadian vehicle production.
Joly has been visiting auto capitals abroad to promote Canada as an ideal location for new world-class auto assembly plants. It has been a tough sell, with no takers so far.
Effectively denied access to the U.S. market, newcomers to Canadian vehicle manufacturing would have to sell their production in the global market.
But the global market has become intensely competitive. And it is gradually shrinking due to aging populations and rapid urbanization.
World auto sales were 92 million units last year, down from 95 million in 2017.
“Canada’s long-term production outlook now hinges on its ability to attract and retain globally competitive automakers capable of operating profitably even under adverse trade conditions,” BMO senior economist Erik Johnson wrote in a report on the industry at the time of Ottawa’s auto strategy announcement.
Given the U.S. tariff barriers and heightened competition in a world market increasingly dominated by low-cost producer China, “the threshold for a successful new entrant [in Canada] is exceptionally high,” Johnson wrote.
Canada could restrict access to its large domestic market of 1.9 million annual vehicle sales, which RBC calls “a powerful, underutilized asset.” Tariffs could be calibrated to a foreign automaker’s commitment to Canadian manufacturing, R&D and software development.
Ottawa could provide more support for the development in Canada of light-weight materials, autonomous vehicles, AI-powered cyber-security systems and advanced battery technology.
And foreign automakers setting up shop in Canada would have their choice of underutilized auto assembly plants to acquire without having to build from scratch.
That more comprehensive strategy amounts to protectionism and state intervention of a high order to protect 500,000 jobs supported by the auto industry.
But even free-market purists might tolerate those policies, mindful that China’s remarkable dominance in global automaking traces to heavy state subsidies.
And those measures needn’t be permanent. Subsidies and higher tariffs on imported vehicles can be unwound once domestic automakers have gained a solid foothold.
The odds are long against getting all those pieces in place. But it could be done with sufficient patience and persistence.
Canada has been building cars for 121 years. It has adapted to wave after wave of innovation. Now is no time to stop. If it so chooses, Canada can be at the forefront of the technological advances that will define a new era of automaking.
