The automotive industry is vital to the Canadian economy. As cliché though this frequently repeated observation might appear, it remains a powerful truth.

According to the Canadian Vehicles Manufacturers’ Association (CVMA), the automotive industry not only contributes significantly to our nation’s manufacturing GDP, it generates tens of thousands of direct and indirect jobs. Specifically, as the CVMA states: “For every auto assembly job, 7 to 9 other jobs are created in the economy.”

Statistically important though the above finding is, we have asked ourselves – and put to the test – an important additional question. What would the economic impact be if we expanded automotive vehicle assembly and parts production by 20%?

The results of this statistical exploration are in and, in a recently published Automotive Industry Labour Market Analysis entitled The Economic Impact of Expanding Automotive Production, we have arrived at some exceptionally positive conclusions. What follows is a summary of our findings.

Our approach

Using Statistics Canada Input-Output (IO) data, we drilled down beyond the obvious auto assembly and parts manufacturing segments and subjected the entire automotive production supply chain to forensic analysis. In doing so, we identified connections to industries that have not been traditionally included in automotive activity – a significant expansion of the automotive industry’s reach.

The extent of this expansion was measured using two simulations to the IO model. The first tracks changes in automotive assembly production. The second tracks changes in exports of parts. As we report in our market analysis, our findings are broken down into four areas of impact:

1. Direct impacts measure the first-round labour requirements and purchases from supplying industries needed to produce the needed output of a given industry.
2. Indirect impacts measure the changes due to inter-industry purchases among successive suppliers as they respond to the new demands.
3. Induced impacts measure the changes in the production of goods and services in response to consumer expenditures induced by the households’ jobs and incomes (i.e., wages) generated by the production of the direct and indirect requirements.
4. Total impact is equal to the sum of the direct, indirect and induced impacts.

As we state in our market analysis:

“Forecasts show that increased production mandates for automotive assembly in Canada would greatly benefit the Canadian economy and its workforce and that changes in trade conditions in order to open new opportunities for parts exports into the broader North American automotive market would bring similar benefits.”

The results

The results of our investigation are both unequivocal and inspirational. As we report in our market analysis, all of Canada’s industries are implicated in the change. Results differ by industry and region. Changes in employment linked to rising automotive production are:

• Large relative to total employment in other industries and employment
• Variable depending on changes to imports and exports
• Spread far into industries outside the core assembly and parts industries
• Critical determinants for the supply and demand for occupations

Consider the following specifics:

20% increase in vehicle assembly: A 20% increase in vehicle assembly would produce a very substantial number of new jobs: 17,200 jobs in the Canadian automotive manufacturing supply chain and an additional 17,500 jobs in other industries, for a total of 35,000 jobs across the Canadian economy. The following chart explains the picture in more detail:

20% increase in parts exports: A 20% increase in parts exports would result in similar gains: 12,350 jobs in the Canadian automotive manufacturing supply chain and an additional 10,500 across the broader economy. The following chart explains the picture in more detail:

Conclusion

Combined, auto assembly and parts manufacturing are the second biggest exporting industries accounting for approximately 13% of Canadian exports. CVMA members export roughly 97% of the vehicles produced, making our industry a key source of foreign exchange. Reports CVMA: “The industry is progressive and continuously improving and provides Canadians with high-wage, high skilled manufacturing jobs.”

By taking a more holistic, all-embracing approach to tracking the true dimensions of our industry, we have demonstrated that the economic impact of our industry is measurably more significant than was once thought.

Find out more from FOCAL

The Future of Canadian Automotive Labourforce (FOCAL) Initiative is a collaboration of the Canadian Skills Training and Employment Coalition (CSTEC), the Automotive Policy Research Centre and Prism Economics and Analysis. 

Funded by the Government of Canada, you can find out more about us on our website and follow us on Social Media – LinkedIn, Facebook, Instagram and Twitter – and through our newsletter.