Presentation on theme: "The Canadian Automotive Sector Overview and Competitive Advantages"— Presentation transcript:
1The Canadian Automotive Sector Overview and Competitive Advantages Jerry SuyavongPresident, M.E. International Inc.Vice President, Linear Transfer Automation Inc.ProExport Colombia Seminar July 23, 2013
2TABLE OF CONTENTS Canada Automotive Industry Overview Competitive AdvantageAutomotive R&D CentreNext Generation VehiclesOutlook, Challenges and Opportunities
3Snapshot of Canada’s Auto Sector Manufacturing – Canada produces passenger and commercial vehicles, auto parts and systems, truck bodies and trailers, as well as machines-tools-dies-moulds (MTDM) and tiresAutomotive is the largest manufacturing sector in Canada In 2012 it accounted for:10% of manufacturing GDP$80.4 billion in revenues115,025 in direct employment21% of merchandise trade16% of NAFTA vehicle production (2.45 million units)Highly concentrated in Ontario; also in Quebec, Manitoba and B.C.Very export intensive (three-quarters of annual output)
4Snapshot of Canada’s Auto Sector Assembly: 19 passenger and commercial vehicle plants, 37,155 employed87% exported,16.5% of North American vehicle production over the last 5 years2.45M vehicles produced in 2012Auto parts: ~10% of North American parts shipments~350 automotive parts plants, including leading Canadian parts supplier and large Multinationals~300 Tool, Die and Mould makers1,240 facilities, 64,305 employed, $27.5 billion revenues, 46% exportedKey Inputs & Services: Reliable access to raw materials, such as, steel, metals, plastics, alternative materials, as well as business services and automotive sales and service
6Assembly Plants in Canada ParentPlant / LocationProductsChrysler[FIAT]Brampton Assembly Plant (Brampton ON)Chrysler 300/300C; Dodge Charger and Challenger; Lancia ThemaWindsor Assembly Plant (Windsor ON)Chrysler Town & Country; Dodge Grand Caravan; Lancia Voyager; Ram Cargo VanFordOakville Assembly Complex (Oakville ON)Ford Edge and Flex; Lincoln MKX and MKTGMCAMI Automotive (Ingersoll ON)Chevrolet Equinox (2010MY) and GMC Terrain (2010MY)Oshawa Car Plants 1-2 (Oshawa ON)Buick Regal and Regal eAssist; Cadillac XTS; Chevrolet Camaro, Equinox and ImpalaHondaHCM Plants 1-2 (Alliston ON)Acura MDX and ZDX; Honda Civic and CR-VToyotaNorth and South Plants (Cambridge ON)Toyota Corolla and Matrix; Lexus RX 350West Plant (Woodstock ON)Toyota RAV4 and RAV4 EVLight VehiclesParentPlant / LocationProductsBlue BirdMicro Bird (Drummondville PQ)Type A school busesHino [Toyota]Hino Motors Canada (Woodstock ON)Class 4-7 trucks (CKD)Lion BusLion Bus Inc. (St. Jerome PQ)Type C school busesMCIMCI International (Winnipeg MB)intercity busesNew FlyerNew Flyer Industries Canada (Winnipeg MB)urban transit busesPACCARPACCAR of Canada (Ste. Therese PQ)Class 6-7 trucksVolvo BusNova Bus Corporation (St. Eustache PQ)Prévost Car (Ste. Claire PQ)Heavy Trucksand Buses
7J.D. Power Plant Quality Awards Exceptional Quality and ProductivityThe J.D. Power & Associates Initial Quality Awards are the auto industry’s benchmark for new vehicle quality manufacturingCanadian assembly plants have won one-third of all J.D. Power plant quality awards for North America, which is double Canada’s share of regional productionTwenty-one J.D. Power & Associates Initial Quality Awards have been presented to Ontario plants since 1990The only Toyota plant outside Japan to produce Lexus vehicles is in CanadaAlso home to the production of luxury vehicles by Acura, Cadillac and Lincoln.J.D. Power Plant Quality Awards1990Toyota Cambridge (Gold)19911992Toyota Cambridge (Silver)1993Toyota Cambridge (Bronze)1994Ford St. Thomas (Silver)19951996Toyota Cambridge (Gold), Honda Alliston (Silver)1998Ford St. Thomas (Gold)1999GM Oshawa 1 (Bronze)200020012002GM Oshawa 2 (Gold)2003GM Oshawa 1 (Gold)2005GM Oshawa 2 (Gold), GM Oshawa 1 (Silver)2006GM Oshawa 2 (Gold), Chrysler Windsor (Silver)2007GM Oshawa 2 (Silver)2009GM Oshawa 1 (Silver)20102011Toyota Cambridge (Platinum)2012Toyota Cambridge (Gold) + Woodstock (Bronze)
8Canadian Vehicle Production Country200720082009201020112012NORTH AMERICA15,102,75212,616,9168,626,38411,954,84313,153,24015,449,563Canada2,542,1502,045,5391,479,1622,062,6532,145,2412,453,969Mexico2,006,8712,060,9211,526,2572,257,6172,551,7712,874,460United States10,553,7318,510,4565,620,9667,634,5738,476,22810,121,034OEM200720082009201020112012GM964,239589,323347,363529,568661,884683,058Chrysler534,774479,046314,504475,382496,081585,923Toyota302,749287,395319,547458,729412,829519,215Honda390,580383,011259,796278,366254,051409,849Ford349,808306,764237,952320,608320,396255,924Total2,542,1502,045,5391,479,1622,062,6532,145,2412,453,969
9Ontario has been NAFTA’s Leading Sub-National Jurisdiction for Vehicle Assembly since 2004 MichiganOhioIndianaKentuckyAlabamaSource: Wards Automotive
10Part of a Huge North American Market Canada is part of a fully integrated North American market with annual sales of 20 million units, normallyAlthough the U.S. market collapsed in , sales have started to recover and should return to peak levels by 2013Lost production is being restored, and North America should remain one of the world’s largest and most lucrative automotive marketsThe N.A. Free Trade Agreement (NAFTA) ensures duty-free trade for originating goods throughout the regionMotor Vehicle Sales in North America(in millions of units)ForecastSource: Industry Canada, from IHS | CSM WorldwideNote: Figures include passenger and commercial vehicles
11Top 15 Countries Light Vehicle Production & Global Ranking Source – Wards/AMIP/AutomotiveCompass (Brazil, Russia, India, China)
12Top 15 Global Brands Light Vehicle Production & Global Ranking Source – Wards/AMIP/AutomotiveCompass
14Part of an Integrated North American Market Los AngelesDetroit/WindsorChicagoAtlantaSeattleMiamiMexico City800 km400 kmCANADAU.S.A.MEXICOMontrealTorontoThe N.A. Free Trade Agreement integrates Canada into a market with annual sales of 20 million vehicles.No tariffs on OE parts imported into Canada (vs 2.5% tariff in the U.S.)Canada and the U.S. are actively expanding border capacity.
16139 Million Consumers within a Day’s Drive Daily Two-way Goods Trade between Ontario-USA for 2011 Valued at C$716 millionOntario-US, (imports + domestic exports) / 365, C$715.5 Million, US$723.4 Million.Source: Industry Canada, with data from Statistics Canada, Accessed on October 1, 2012.US Population estimates (2010)US – 400kmCount: 162 ; Sum: 23,642,124US – 800kmCount: 835; Sum: 117,876,450US kmCount: 1,523 ; Sum: 161,780,414Note: One day’s drive defined as 800kmMethodology:Using ArcGIS software Radii were created with Toronto, Ontario as the center. Three Radii were set - 400km (1/2 day drive), 800km (1 day drive) and 1200km (1.5 day drive) - from the center. Radii are based on as the crow flies not drive time. All US counties falling completely or partially within a radius were included in the population counts.Population estimate for select Provinces (Source Statistics Canada, July 1, 2010)Ontario: 13.2 millionQuébec: 7.9 millionLast update for notes on two-way goods trade: October 1, 2012Sources: Industry Canada, Statistics Canada and US Census Bureau16
17Low Import Tariffs $ millions Average Applied MFN Tariffs On $100 Million In Imports$ millionsThis slide illustrates how much cost savings global firms can achieve by locating in Canada rather than in the EU countries or the U.S.After Canada eliminates all tariffs on Machinery and Equipment and goods imported for further manufacturing, average applied manufacturing tariffs on $100 million in imports will be:$4.3 million in the EU, $3 million in the U.S. and zero in Canada for Transport Equipments$2.8 million in the EU, $1.7 million in the U.S. and zero in Canada for Electrical Machinery$1.9 million in the EU, $1.2 million in the U.S. and zero in Canada for Non-electrical MachineryTransport equipmentElectrical machineryNon-electrical machinerySource: Finance Canada. The Federal Budget, and World Trade Organization. Trade Profiles.
18Competitive Corporate Taxes on Manufacturing 2010 Combined Federal and State/Provincial18
19Corporate Income Tax Rates on Manufacturing 20112012Federal16.5%15.0%Ontario10.0%Combined26.5%25.0%
20Accelerated Capital Cost Allowance Manufacturing and Processing Equipment (M&P):Since 2007, the depreciation rate for eligible M&P equipment has been temporarily increased to a 50% straight line rate (Class 29 as defined by the Canada Revenue Agency) for eligible machinery and equipment purchased after March 18, and before 2014.Companies who locate in Ontario can take advantage of this generous rate of write-off for capital expenditures in manufacturing or processing machinery and equipment each year up to the end of 2013.ACCA claims can be deferred indefinitely to subsequent years.Source: 2011 Ontario Budget paper: Chapter I: Ontario's Plan for Jobs and Growth: Section A, March 29, 2011Last Update: April 2011
21Accelerated Capital Cost Allowance Asset ClassEligible AllowanceDepreciation RateDepreciation Method“Half-Year” Rule43Capital Cost Allowance (CCA)30%Declining BalanceYes29Accelerated Capital Cost Allowance (ACCA)50%Straight LineACCA BenefitsAllows business to completely depreciate qualified capital cost over a three year period.Provides additional cash flow in the three years following the capital expenditure by reducing the taxable income.Provides higher return on capital in the long term.Source: 2011 Ontario Budget paper: Chapter I: Ontario's Plan for Jobs and Growth: Section A, March 29, 2011Last Update: April 2011
22Training Tax Credits in Ontario The Ontario government offers Training Tax Credits to encourage employers to hire and train apprentices and workers in specific skilled trades.Ministry of Training, Colleges and Universities:Apprenticeship Training Tax Credit: Maximum $10,000 per apprentice over 48 months.Employer Signing Bonus: $2,000 signing bonus if a new apprentice is registered.Employment Ontario: Wage incentives and other recruitment support.Ontario Youth Apprenticeship: School to work transition program.Ministry of Finance:Co-op Education Tax Credit: Refundable tax credit of up to $3,000 per placement.
23Tax Rates & Other Support for the Auto Industry Corporate Tax Reform: The government’s comprehensive tax package is providing $4.8 billion in overall tax relief over three years, including CIT cuts that started July 1, 2010:- The general Corporate Income Tax (CIT) rate was lowered from 14 per cent to 12 per cent- The CIT rate for manufacturing and processing was lowered from 12 per cent to 10 per centInfrastructure Investment: Support for Detroit-Windsor gateway, including the Detroit River International Crossing and the Windsor-Essex Parkway to ensure people and goods move safely and efficiently through the US-Canada border
24For example, Ontario Attracts Investors from Many Countries Foreign direct investment projects in Ontario, by source country, 2011Notes: 135 FDI projects into Ontario in Source: fDi Intelligence, Review of FDI Trends into N. America with a focus on Ontario in A report prepared by fDi Intelligence on behalf of Ontario Ministry of Economic Development and Trade. MarchUpdated: October 1, 2012.Source: FDI Intelligence, March 201224
25AND ... Ontario is Home to the Majority of Foreign-Controlled Head Offices in Canada Foreign Head Office Distribution in Canada, 2011Source: Statistics Canada – July 2011Last update: October 2011Source: Statistics Canada25
26Canada has Suppliers in Every Product Category AUTOMOTIVE INTERIORSABC GroupAGS Automotive SystemsAisin CanadaArcelorMittal TubularBend AllBrose CanadaCanadian General-Tower LimitedCommercial Spring and Tool Co.DBGEnstel Manufacturing Inc.Exco Technologies LimitedFalcon Tool & Die (1979) Ltd.Freeway Washer LimitedH. Paulin & Co. Ltd.Hayashi Canada Inc.Hematite ManufacturingInvotronicsJYCO Sealing TechnologyLear CanadaMagna International Inc.Martinrea International Inc.Marwood Metal FabricationMatcor Automotive Inc.MetriCan Stamping Co. Inc.Mitchell PlasticsOmron Dualtec Automotive Inc.Papp PlasticsPlasmaTreat North America Inc.Salflex Polymers Ltd.Samuel AutomotiveSchukra Of North America Ltd.Sealed Air (Canada) Co./Cie.Stahlschmidt Cable SystemsThe NARMCO GroupThe Woodbridge GroupTierconTG Minto Corp.Toyota Boshoku CanadaTS TechVan-Rob Inc.Vari-FormVelcro Canada Inc.Windsor Mold GroupWoodstock Stampings Inc.PRODUCTION HANDLINGABB Inc.ODG GroupPanasonic Canada Inc.Schaefer Systems Inc.Schenker DB LogisticsSEW EurodriveValiant Tool & Mold Inc.AUTOMOTIVE EXTERIORS3MAmino North America Corp.Essar Steel Algoma Inc.ArcelorMittalCanadian General-Tower Ltd.Delhi-Solac Inc.F&P Manufacturing Inc.Flex N GateHenkel Canada CorporationKSR International Inc.Lanex Manufacturing Inc.Maxtech Manufacturing Inc.PPG CanadaQuality Safety Systems CompanySinterisThe Butcher Engineering LimitedTrimont Manufacturing Inc.Warren IndustriesWEGU ManufacturingHVACBurlington Technologies Inc.DANA CorporationLinamar CorporationNichirin IncorporatedCOMFORT & CONVENIENCEQNX Software SystemsPRODUCTION CONTROL EQUIPMENTAUTOMATION & DESIGNAltair Engineering Canada, Ltd.Applied Precision Inc.Armada Toolworks Ltd.Cannon Automotive SolutionsCentrelineClover Tool Mfg. Ltd.Engineered Solutions Corp. (ESC)FANUC Robotics Canada Ltd.Giffels Associates Limited/IBI GroupHusky Injection MoldingHuzura Manufacturing Ltd.LogikorOES, Inc.Omega ToolPricewaterhouseCoopers LLPRWDI AIR Inc.Sanyo Canadian Machine WorksSiemens PLM Software (CA) Ltd.Solarsoft Business SystemsTech Con AutomationTutelar TechnologiesCHASSISCanadian Autoparts Toyota Inc.DYNA-MIG Manufacturing Inc.Electromac GroupGlobal TechnologiesJefferson Elora CorporationKautex-TextronKumi Canada Corp.MMSC CanadaMusashi Auto Parts Canada Inc.Sanoh Canada Ltd.Showa Canada Inc.Toyotetsu Canada Inc.Wescast Industries Inc.Windsor Machine & StampingWoodbine Tool & DieBRAKINGCTS SystemsCOMMUNICATION& INFORMATIONPOWERTRAIND & V Electronics Ltd.ElectrovayaF&P Manufacturing Inc.Freudenberg-NOK Inc.NTN Bearing Mfg CanadaUltraFit ManufacturingZenn Motor CompanyAIR INTAKE / EXHAUST SYSTEMSHuarong Purification Inc.THE NARMCO GROUPENGINE MANAGEMENTTRAININGHumberCollegeOntario Centres of ExcellenceThe PIC GroupECONOMIC DEVELOPMENTCanada's Automotive CorridorCanada's Technology Triangle Inc.City of BrantfordCity of HamiltonDurham RegionGreater Toronto Marketing AllianceLondon Economic Development Corp.Municipality of Chatham-KentNiagara Economic Development Corp.Regional Municipality of HaltonSarnia-Lambton Economic PartnershipSouth Western Ontario Marketing AllianceWindsorEssex Economic DevelopmentEDUCATION & RESEARCHAdvanced Design &Manufacturing Institute (ADMI)AUTO21 Inc.CON*NECTConestoga CollegeGeorgian CollegeHumber CollegeMcMaster University-MAC AutoMohawk CollegeSeneca College of Applied Arts & TechnologyUniversity of Waterloo - WatCARUniversity of WindsorMANUFACTURING MACHINERY,TOOLS & EQUIPMENTJ.P. Bowman LimitedAnchor DanlyNachi Robotic Systems Inc.Yaskawa Motoman Canada Ltd.TRWENGINE COOLINGDenso ManufacturingBODY SYSTEMSMultimaticYachiyo of Ontario ManufacturingSAFETYIntertec SystemsQuality Safety Systems Co.Tyco Electronics Canada Ltd.ELECTRICAL & ELECTRONICSD&V Electronics Ltd.Denso Manufacturing CanadaDigital DashKasai Canada Inc.Spatial View
27Canada Supply Base is Second to None Top OEM Supplierswith Plants in CanadaGlobal Rank 2011#2Denso (Japan)#3Continental (Germany)#4Magna International (Canada)#5Aisin Seiki (Japan)#6Faurecia (France)#7Johnson Controls (U.S.)#10Delphi (U.S.)#12TRW (U.S.)#13Lear (U.S.)#17Toyota Boshoku (Japan)#20Autoliv (Sweden)#22Visteon (U.S.)#35Toyoda Gosei (Japan)#37Brose (Germany)#54Nemak (Mexico)#56Flex-n-Gate (U.S.)#76Linamar (Canada)#78Martinrea (Canada)Source: Automotive NewsMany of the largest global suppliers have facilities in Canada, along with steel and other material producersSome of the biggest and most capable suppliers are Canadian-based including ABC Group, AGS Automotive, Linamar, Magna, Martinrea, Multimatic, Valiant, Wescast and Woodbridge FoamOther Canadian companies – such as Ballard, QNX Software and Westport Innovations – are recognized global leaders in their fieldAssemblers and Tier 1s in Canada also have access to supply chains in the U.S. and Mexico
28For Example, Ontario is a Significant Player in the NAFTA Auto Parts Industry Share of NAFTA Parts Shipments, 2009Ontario parts firms are leaders in the development of innovative components, such as, stampings, modules and systems, & lightweight and composite materialsSource: Statistics Canada, US Bureau of Economic Analysis
29Areas of Automotive Expertise Metal ProcessingAdvanced casting of light metalsCutting and machiningSheet and tube formingWelding and joiningPowder metallurgyInformation and Communications TechnologySoftware engineeringNavigation and positioningWireless technologies and networksMicrochip design, system-on-chip, engineeringSemi-conductor technologies (MEMS, RF)Telematics, communicationsMicromachiningIntelligent systemsPhotonics and optoelectronicsNanotechnologyEnhanced synthetic visionAdvanced MaterialsLightweight materialsNano-materialsBio-materialsAdvanced Design, Visualization and ManufacturingInspection and vision systemsLaser imagingTooling and roboticsStereo-lithography, laser depositionVirtual designAdvanced TechnologiesMechatronicsPowertrain engineeringClean dieselsHomogenous charge compression ignitionFuel cells, hydrogen and alternative fuels
30Canada Has Highly Educated and Multicultural Workforce Canada ranks #1 in the OECD for its college completion rates (23.6% of working-age Canadians have graduated from college)1Canada ranks #2 in the G7 in terms of the availability of qualified engineers in its workforce, according to the IMD 3We know that global business leaders want to work with capable and creative workers who can help them gain a competitive advantage in today’s economy.Canada's highly skilled and multi-cultural workforce is one of the main reasons cited by global companies when asked why they choose Canada over other jurisdictions. Canada has a culture of learning that begins with publicly-funded early childhood education programs. Canada also has a flexible tertiary education system that focuses not only on university education, but also on technical trades.Canada ranks #1 in the OECD for its college completion rates (23.6% of working-age Canadians have graduated from college).Canada ranks #8 among member countries of the Organisation for Economic Co-operation and Development (OECD) for its high school completion rates (87.1% of working-age Canadians have a high school diploma).Canada ranks #7 in the OECD for its university completion rates (25.2% of working-age Canadians have a university degree).All of these rankings are complemented by the world-class engineering and management education available in Canada.The WEF ranks Canada third in a 139-country study on the quality of management schools.Canada ranks second in the G7 in terms of the availability of qualified engineers in its workforce, according to the IMD (2010).Sources:1 OECD. Education at a Glance 2010.2 International Institute of Management Development. World Competitiveness Yearbook 2010.3 World Economic Forum. Global competitiveness report,The WEF ranks Canada #3 in a 139- country study on the quality of management schools 21 OECD. Education at a Glance 20092 International Institute of Management Development. World Competitiveness Yearbook 2010.3 World Economic Forum. Global Competitiveness Report
31Ontario has a Highly Educated Population Post-secondary Educational Attainment (%), Select Markets, 2010(Age 25-64)Overall, 64% of Ontario’spopulation has completedpost-secondaryeducationUniversity: 30%College: 27%Apprenticeship: 7%Sources: Educational Indicators in Canada: An International Perspective, Statistics Canada Education at a Glance 2012, OECD Indicators, OECD 2012.Ranking based on OECD membership (34 countries).MOF Note: Total post-secondary education is defined as completed college or university education. For many jurisdictions, including Canada and Ontario, this includes college- based apprenticeship and short training programs that do not lead to a post-secondary certificate or diploma. In many European countries, apprenticeship training is part of the secondary education system and is not included in the post-secondary education category. In some other key countries (e.g. U.S.), apprenticeship training is reported under the secondary category due to methodological differences across national statistical agencies.Data was released in 2012 but pertains to 2010 for the countries indicated.Last update: September 2012Note: Not all jurisdictions count apprenticeship as post-secondary educationSources: Statistics Canada and OECD, 201231
32Overall People-Risk Rankings, 2012 Ontario is a Leader in Recruiting and Retaining a Highly Skilled WorkforceOverall People-Risk Rankings, 2012Out of 131 global cities examined, Toronto ranked second for low risks associated with employment and redeployment.Canada’s strengths are derived from strict enforcement of equal opportunity laws, clear government-mandated health and retirement benefits, low levels of corruption, and the high quality and broad availability of training facilities.RankCity1New York City2Toronto3Singapore4MontrealLondon6Los Angeles7Boston8Chicago9VancouverCopenhagenHong KongNotes:People Risk™ Index Ratings that provides an overview of risks associated with recruitment, employment and relocation in 131 cities worldwide. The 131 cities were selected based on population size, population growth rate, the level of foreign investment and geographic spread.The index evaluates employers’ abilities to recruit and retain workers through risks associated with recruitment, employment, restructuring, retirement, and retrenchment using twenty-five variables categorized into five areas of people-risk:- demographics- government support- education- talent development- employment practices.Companies operating in low-risk cities are less likely to be blind-sided by unexpected changes in government policies on employment, health care, and retirement. They face fewer difficulties finding and retaining educated and experienced talent. Plus, they have more flexibility to restructure their operations without the fear of incurring significant unanticipated costs or obstructions.Government-related factors were found to be most significant in affecting overall people risk. Cities with the lowest risk were found to have governments which were transparent, non-confrontational, and dealt with employment issues fairly.Last update: May 2012Source: AON Consulting, 201232
33Canada is a Great Place to Live! Among major auto producing nations*, Canada:has the highest quality of life;has the second lowest cost of living and the lowest apartment rents;is among the safest places to live and do business; andis among the least afflicted by pollution.Other Canadian advantages include:high-quality, low-cost education;universal health care;cosmopolitan cities; andMulti cultural societyWorld Rank - Quality of Life Factors8th25th15th12th10th2019th17th54th18th27thSource: IMD, World Competitiveness Yearbook 2006US=1.00* US, Canada, UK, France, Germany, Spain, Korea, Japan, Mexico, China
35Snapshot of Automotive R&D in Canada Expertise in light weighting, biomaterials and composites, advanced safety systems, software and the “connected car”, alternative fuels (particularly EVs), vehicle testing, and moreFocus on private and collaborative R&DSource: Statistics CanadaAutomotive R&D Expenditures(in CAD$ millions)average$450M/yearClimatic wind tunnel at UOIT-ACEAnnual R&D spending in the motor vehicle and parts industry averaged $450 million in the last decadeOver 1,400 auto-related patents granted to inventors based in Canada.
36Automotive OEM R&D Centres Ford Motor Company of Canada Ltd.Ford Manitoba Extreme Cold Weather Test Facility (Thompson MB)Ford Powertrain Engineering Research & Development Centre (Windsor ON)Chrysler Canada Inc.Automotive Research & Development Centre (Windsor ON)General Motors of Canada Ltd.GM Canadian Regional Engineering Centre (Oshawa ON)GM Cold Weather Development Centre (Kapuskasing ON)Honda R&D Americas Inc. (Canada)Environmental testing laboratory (Dartmouth NS)Toyota Canada Inc.Toyota Canada Cold Weather Research Centre (Timmins ON)
37Generous R&D Tax Credits/Programs Scientific Research & Experimental DesignSR&ED is a generous federal tax credit which encourages businesses in all sectors to conduct R&D in CanadaSR&ED is worth $3 billion/year for the manufacturing sectorIndustrial Research Assistance ProgramIRAP helps support innovative R&D and commercialization of new products and services by small- and medium-sized firmsAutomotive Partnership CanadaAPC is a five-year, $145 million program that supports collaborative university-industry in four areas: environmental performance, the cognitive car, next-generation manufacturing, and social sciencesAutomotive Innovation FundAIF is a 10-year, $500 million program designed to lever large ($75M or more) investments in vehicle assembly, powertrain and R&D operations that focus on innovation and environmental technologies
38World-class R&D Institutes/Universities National Research Council - AutomotiveNetwork of 20 research institutes, many specializing in automotive-related disciplines such as light materials, aerodynamics, alternative propulsion, sensors and telematicsCanmetMATRIALSNational laboratory (Hamilton and Calgary) run by Natural Resources Canada for metals, materials and processing research in support of manufacturing innovationAUTO21National network of centres of excellence for automotive R&D, regroups 200 researchers from 46 universities to conduct applied R&D in partnership with private companiesMagna-NRC Composites Centre of ExcellenceResearch centre to develop coEmposite technology for the Canadian and global automotive industries
39World-class R&D Institutes/Universities Fraunhofer Project WesternResearch centre and industrial-scale test facility focused on composite technologies for weight reduction at Western University (London ON)MacAUTOMcMaster University Institute for Automotive Research and Technology (Hamilton ON): The University’s numerous automotive-related research institutes and centres work with industry, government and academic partners in developing and commercializing new technologies and materials that will ensure the global competitiveness of Canada’s auto industry.UOIT-ACEAutomotive Centre of Excellence at the University of Ontario Institute of Technology (Oshawa ON)WatCARUniversity of Waterloo Centre for Automotive Research (Waterloo ON)University of WindsorAutomotive engineering specialization and research partnerships, such as AUTO21 and Chrysler’s ARDC
40Government Supported R&D Centres Located throughout Ontario National Research Council Canada (NRC): Institute for Scientific and Technical Information (Ottawa), Canadian Hydraulics Centre (Ottawa), Canadian Photonics Fabrication Centre (Ottawa); Canadian Neutron Beam Centre (Chalk River), Centre for Surface Transportation Technology (Ottawa), Imaging Network (Ottawa), Industrial Research Assistance Program (Ottawa), Institute for Aerospace Research (Ottawa), Institute for Chemical Process and Environmental Technology (Ottawa), Institute for Microstructural Science (Ottawa), Institute for National Measurements Standards (Ottawa), Institute for Research in Construction (London), National Bio-products Program (Ottawa); Genomics and Health Initiative ( Ottawa); Institute for Biological Sciences (Ottawa); Institute for Molecular Science (Ottawa)Ontario Centres of Excellence (OCE): Centre for Commercialization of Research (Toronto), Centre for Communications and Information Technology (Ottawa), Centre for Earth and Environmental Technology (Toronto) , Centre for Energy (Toronto), Centre for Materials and Manufacturing ( Mississauga) Centre for Photonics (Ottawa; Mississauga), Automotive Centre of Excellence (Oshawa), Centre of Excellence for Mining Innovation (Sudbury), Research Centre (Atikokan); Other: Centre of Excellence for French-Language and Bilingual Postsecondary Education ( Toronto)Networks of Centres of Excellence (NCE): Auto21 NCE (Windsor), Advanced Food and Materials Network (Guelph), Allergy Genes and Environment (Hamilton), Canadian Arthritis Network (Toronto), Canadian Stroke Network (Ottawa), Canadian Water Network (Waterloo), Stem Cell Network (Ottawa), Bioindustrial Innovation Centre (Sarnia), Canadian Digital Media Network (Kitchener), Centre for Commercialization of Regenerative Medicines (Toronto), Centre for Imaging Technology Commercialization (London), Centre for Probe Development and Commercialization (Hamilton), Centre for Surgical Invention and Innovation (Hamilton), GreenCentre Canada (Kingston), MaRS Innovation (Toronto), Green Aviation Research and Development Network (Ottawa)Others: The Stiller Centre (London), Waterloo Accelerator Centre (Waterloo), McMaster Innovation Park (Hamilton)Note:1. OCE is operating under the NCE to help bridge the gap between research and the marketplace -- bringing universities, industry and government together to help in the application of new science and technology to successful business endeavours.2. The Ontario Network of Excellence (ONE) is not listed above, but it is a collaborative network of organizations across Ontario. ONE provides educational programs, advisory services, industry- academic programs, customer development and financing supports to businesses, entrepreneurs, researchers, and innovators. The OCE is a key partner of ONE.Last update: September 201140
41Ontario’s R&D Cost Advantage After-Tax Cost of $100 R&D Expenditure, Small and Medium Sized Manufacturers, 2012R&D expenditure(general)(at eligible Ontario research institutes)Gross expenditure$100.00Actual after-tax expenditure$51.57$40.11Ontario has a 9.1% cost advantage relative to the USNote: data as of April 13, 2012.Sources: Ontario Ministry of Finance and Canada Revenue AgencyR&D Cost AdvantageKPMG – Measures the combined impact of 26 significant cost components that are most likely to vary by location (salaries and wages, statutory benefits, other benefits, transportation, utilities etc) as applied to 19 different business operations over 10 years commencing in 2012.KPMG national cost comparison is based on cost information collected primarily between July 2011 and January Taxes reflect tax rates in effect on January 1, 2012, and also incorporate any announced changes at that time to take effect at specified later dates.National results are based on the average results for comparable cities within each country, reflecting R&D cost of major metropolitan regions of each country. The Canadian average is calculated using Toronto and Montréal, the two major Canadian cities.The KMPG report does not provide an average for Ontario. The R&D cost index score for Ontario was calculated internally by MEDI using data from the KPMG Competitive Alternatives cost model. MEDI estimate follows the methodology used to estimate national averages. Ontario city basket is Toronto and Ottawa, Ontario’s largest cities. To estimate the R&D overall, three R&D operations are used: Biomedical R&D, Clinical Trials Management and Electronic System Development / Testing.R&D Tax CreditsOntario Tax Credits:Ontario Innovation Tax Credit (10%)Ontario Business-Research Institute Tax Credit (20%)Ontario Research and Development Tax Credit (4.5%)Federal Scientific Research and Experimental Development (SR&ED) Tax Incentive Program (Note: The 2012 federal budget proposes to reduce the federal ITC rate from 20% to 15% after 2013)Federal Investment Tax Deduction (16.5%)Ontario Investment Tax Deduction (10%)Small size corporations have taxable income of less than $500,000 and taxable capital of less than $10 million for the federal benefits or $25 million for the provincial ones. This type of corporation qualify for 100% of the tax credit calculated on a $3 million limit of qualifying SR&ED Medium-sized companies qualify for a less generous tax credit than the small size corporations, up to the point when they have taxable income of less than $800,000 and taxable capital of less than $50 million. Once this limit has been reached, the tax credit is $0.Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario.Non-refundable tax credits can be carried back three years or forward for 20 yearsTable presents a potential after-tax cost based on assumptions regarding R&D expenditures, tax incentives and tax rates that may not apply to your business. This information does not constitute tax advice. Please consult your tax advisor to determine the after-tax cost of R&D expenditures for your business.Confirmed by MOF April 13, 2012.Last update: April 2012.SourceCanada Revenue AgencyOntario Ministry of RevenueSource: MEDI analysis, prepared using CompetitiveAlternatives.com Cost Model, 2012 version, accessed on March 30, 2012.
42Benefits of Collaboration Mitigates the risk of innovationAllows the inclusion of expertise outside a companies historic strengthsWidens the reach of expertiseProvides access to a wider scope of fundingTakes advantage of embedded relationships and contactsExpands the scope of available facilities and equipmentBoth sides benefit from new ideas
44Position to Take a Leading Role in the Development of the Next Generation of Vehicles Automakers are developing a broad spectrum of alternative, environmentally friendly vehicles, especially electric vehicles (EV), among other technologies i.e. advanced hybrids, CNG, fuel cells etc.The government has partnered with a number of firms in order to position the province to take a leading role in vehicle electrification and lightweighting, including:$16.7 million for Electrovaya of Mississauga (Ontario) to develop and manufacture lithium-ion batteries$48.4 million for Magna International and Magna E-Car to develop advanced lightweighting technology, electrification of vehicle components and battery development.$2 million for Dana Canada to develop ‘Thermal Management Systems’ for hybrids and electric vehicles$70.8 million to Toyota Motor Manufacturing of Canada on a spectrum of initiatives, including production of the RAV4 EVAn analysis of J.D. Power’s recent report, Drive Green 2020, indicates cumulative BEV and PHEV penetration for Ontario of approximately of 31,700 vehicles by 2020 (23,500 in 2015).
45At The Forefront Of Next Generation Vehicle Technologies Research Researchers in Ontario’s network of universities and specialized institutions are conducting leading research in advanced manufacturing and alternative energy:McMaster Automotive Resource Centre (MARC) is leading hub of advanced automotive research and development. Ali Emadi, director of MacAUTO is the holder of the $10- million Canada Excellence Research Chair in Hybrid Powertrain and is one of the world’s foremost developers of electric and hybrid powertrain technologiesAUTO21 partners with the public and private sectors and supports more than researchers across Canada in a variety of auto-related research projectsWatCAR, an automotive research centre at the University of Waterloo, is focused on leading-edge studies to enhance automotive innovation and competitivenessUniversity of Ontario Institute of Technology’s General Motors of Canada Automotive Centre of Excellence is a state-of-the-art research facility (including a climatic wind tunnel) created to further R&D in the Canadian automotive industryMagna-NRC Composite Centers of Excellence, supports the Canadian automotive industry in developing next-generation vehicles with lighter, more durable parts, that are safe, affordable, environmentally friendly, and fuel efficient
46Government Actively Supports the Auto Industry Ontario has made important investments to support the auto sector and to improve the overall business environment in the province, including:Strategic Investments: In 2011 Ontario invested $121.2 million in innovative automotive initiatives with Dana, Magna International, Magna E-Car and ToyotaOntario Automotive Investment Strategy (OAIS): A $500 million, 5-year fund leveraged about $7.8B in total investment in the sectorRestructuring of GM and Chrysler: Ontario committed $4.8 billion to the restructuring of GM and ChryslerNext Generation of Jobs Fund: Provided support to a number of automotive firms, such as Ford, Electrovaya, Mitchell Plastics and Alcohol Counter Measures
47Government Commitments Commitment to fight climate change and improve air qualityThe Ontario government aims to have one out of every 20 vehicles driven in Ontario to be electrically powered by 2020, this would support the greenhouse gas emissions target for 2020 set out in our Go Green Action plan. Contribution may be up to 0.6 MT (600,000 tonnes) of GHG savings by 2020Reducing the environmental impact of the Ontario government’s operationsCommitment to purchase 500 electric vehicles for the Ontario Public Service (OPS) passenger fleet by 2020Contributes to the OPS goal of an annual 5% reduction in fuel consumptionSupporting alignment and direction of Ontario’s auto sector‘Greener’, more sustainable and more competitive with a strong focus on high value- added development and production of innovative auto parts and technologiesSupporting the government’s research and innovation agendaPrograms applicable to the research, development and commercialization of electric vehicles and their components parts
48Commitment to Getting Electric Vehicles (EVs) on the Road The Government of Ontario has been active in encouraging consumer adoption of Electric Vehicles (EVs).Developments include:Consumer Incentives: Rebates of $5,000 - $8,500 offered to consumers to purchase electric vehiclesEV Infrastructure Fund: On May 4th 2012, Ontario released a Request for Information (RFI) on electric vehicle infrastructure, including home and public charging. The RFI closed on June 4th The RFI results are currently being analyzedAccess to High Occupancy Vehicle (HOV) Lanes: EVs are provided “green” license plates for EVs to drive in commuter lanes (HOV) with one occupantOntario is establishing a series of charging locations at GO commuter train stations in the Greater Toronto Area (Aurora, Lincolnville, Whitby in 2011 and Ajax, Erindale, Oakville, Burlington in 2012)
50Light Vehicle Sales Canada and NAFTA, 1990 - 2013 Unit Sales (Mil)Canada % of NAFTA:19-20 mil. unit NAFTA market for new light vehicle sales; 8% of NAFTA LV sales:Canada outperformed NAFTA as overall sales collapsed; 11% of NAFTA light vehicle demand:Recovery and organic growth (Mexico and Canada)Source – Wards/AMIP/AutomotiveCompass
51Light Vehicle Production Canada and NAFTA, 1990 - 2019 Unit Production (Mil)Canada % of NAFTASource – Wards/AMIP/AutomotiveCompass
52NAFTA LV Production by Jurisdiction Ontario, Michigan, Mexico Volume Trends (Mil), 2000-2019 Unit Production (Mil)Mexico (2008+) and Michigan (2014+) auto output (new investment driven) growing sharply as Ontario declinesMexico B-car/CUV growth from Ford, GM, Nissan, Honda, Toyota, Mazda; C-car and CUV from VolkswagenMichigan B/C/D/E/F/S, CUV and SUV growth from GM, Ford, ChryslerSource – Wards/AMIP/AutomotiveCompass
53Top 10 Auto Supplier Trends 6. Supply-Chain Transformation1. Customer Facing FocusIncreasing the Valueof the Business10. Core Competencies9. Systems & Modules8. Globalization7. Resource Pressure2. Growth3. Cost Reduction4. Technology5. Brand Management
54Sources of Automotive Growth ProductsKey Sources of GrowthRecoveryGeographyNew/Replacement ProductsNew/Replacement ProcessesVertical IntegrationM&A JVsMarketingGlobalCrises
55Megatrends New NAFTA Environmental Regulations Smaller, lighter vehicles, with upgraded fuel-efficient powertrainsWill people want to drive much smaller vehicles? Will vehicle profit be high enough to justify investment?standards require a 65% improvement in fuel economy over current levels.Higher consumer ownership and operating cost.Will consumers accept paying more … possibly much more … for transportation?How do we as suppliers support global platforms and still look after local business opportunities?
56NAFTA Auto Outlook Key drivers, enablers and constraints 2013 2014-16 Employment/Income GrowthDriving Age Population GrowthAge of FleetOwnership and Operating CostAffluence/Financial StabilityTechnologyFuel Economy RegsSupply Chain ConstraintsSource: AutomotiveCompass
57Challenges for Canada High Exchange Rate Low investment in new production facilitiesFiscally conservative governments at all levelsHigh infrastructure costs – energy, environmentA Southern production migrationAdaptation of global platformsA conservative attitudeLack of overall confidence
58Canadian Advantages Health care costs Stable, business-oriented environmentProductivityQualityResourcesInfrastructureTax structureHighly skilled labour/well-educated workforce; positive work ethicStrong product and technology mixStrong supply-baseModern and flexible manufacturing facilities
59Bridging the Innovation Gap Innovation is the key to long term successApplies to products, processes, tooling, systemsIt implies a commitment to product excellenceOEM pulling technology rather than suppliers pushingKey Organizations that make it happen (private, associations & government)A commitment that the Automotive Industry is an essential and critical industry that always receives primary attention
60Collaboration with Academia Unprecedented amount of technical change in the next yearsIndustry cannot get there on its ownCollaboration is the only alternativeMust have access to advanced research capabilitiesIt will create an unprecedented demand for HQP (highly qualified personnel) and Technological CapabilityOpportunities for new manufacturing processes and procedures are abundantManufacturing shapes our future!!!
61Challenges for Industry Protecting Intellectual PropertyProtecting manufacturing and product “secret sauce”The publish or perish imperativeAdhering to automotive industry timing requirementsAdhering to cost containment issuesLocation of facilities in proximity to manufacturing or engineering sites
62Episode IV – A New Hope Innovation must be our priority Encouraging progress that supports this initiativeMARC Engineering CenterCANMET HamiltonWatCAR Engineering CenterUOIT Wind Tunnel and FacilitiesEmbrace a new model that encourages public private partnerships (P3) that will drive innovationBe open to learning from around the worldBe great partners – the commitment to excellenceA unique Canadian Identity