The commoditisation of automotive assembly: Canada as a cautionary tale

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Abstract:

For generations, automotive manufacturing has made an outsized contribution to the Canadian economy. The industry's growth was supported by active industrial policy, including an evolving combination of incentives: low-cost, high-quality labour, access to the largest market in the world, and investment inducements; and deterrents: market access and trade-related levers and threats. In recent years, many of the advantages Canada made for itself have eroded. The rise of new competitors, shifting philosophies surrounding trade, cost pressures, and a new paradigm with respect to investment incentives have challenged policy-makers. Several attributes previously considered the preserve of advanced countries like Canada are now evident in lesser developed jurisdictions, a phenomenon that this paper terms the commoditisation of automotive assembly. It is the result of standardised production processes and the automotive industry's ability to recruit top tier talent, particularly in less developed countries. This phenomenon is evident in the convergence of quality results and capital intensity across geographic boundaries and economic strata, expanding production in lesser developed countries, the emergence of luxury vehicle production in those countries, and stagnation of final assembly production in developed countries. © 2017 Inderscience Enterprises Ltd.