March 14, 2006

Automotive capital expenditure estimates positive for 2006, analyst says

Richmond Hill, Ontario – Total new and repair expenditures are forecast to increase by over $300 million in 2006 and exceed $4.8 billion, says industry analyst Dennis DesRosiers. The figures cover vehicle assembly, automotive parts, and truck body and trailer manufacturing.

“Only during the building boom of the late 1990s when Honda, Toyota and Suzuki were adding plants into Canada and GM, Ford and DCX (DaimlerChrysler) were retrofitting plants were expenditures higher,” DesRosiers says. “Capital expenditures this decade are averaging about $4.5 billion per year, versus $3.6 billion per year in the 1990s. This is further indication that the Canadian automotive sector is not in crisis.”

DesRosiers reports that almost all of the investment is in Ontario, with some supplier investment in Quebec. “This means that Ontario should be able to continue its record of being the number-one geography in North America for the production of new vehicles. Ontario out-produced Michigan for the first time two years ago and will be less affected than Michigan by the restructurings announced by Ford and GM.”

Vehicle production by “new domestic” manufacturers – overseas suppliers who build assembly facilities in North America – is expected to exceed eight million units by the end of the decade, up from about six million units 2005. About a hundred overseas suppliers have also moved their base of operations to Canada to supply the “new domestic” plants.

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