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Canada's Auto Industry to Witness Strong Profits From 2007
May 03, 2007

Increased foreign investments in Canadian Auto Industry could lead to stronger production growth & improved profits in future.

Canada's auto & auto parts industry is all set to enjoy high profits in 2007, boosted by increased investments by Japanese & North American producers, CBC (Conference Board of Canada) said.

Industry profits are likely to increase to US$ 1.14 Billion in 2006, after decreasing to US$ 775 Million last year. Next year, board is expecting profits of US$ 1.8 Billion.

Auto manufacturers are making investments worth billions of dollars in new & upgraded plants & equipment, which shows that the Canadian auto Industry is not struggling, says Louis Theriault of CBC. The industry is witnessing strong structural changes, which will eventually result in strong output growth & improved profitability.

Experts say, the fact that Canadian dollar is weaker than American dollar gives a cost advantage in production. Also, in past 10-15 years, positive public policy has resulted in a strong auto industry. Industry-specific policies in the country have also encouraged investments.

The nation offers tremendous opportunities for a company to expand its production capacities, auto part production, in-vehicle assembly & options to conduct proper R&D.

High car-ownership level indicates high-income & high-dependence levels on cars. Increasing population has been a major factor in boosting demand. Also, majority of recent migrants haven't yet brought cars for themselves, but a rise in their incomes will see them buying cars.

"Despite these positives, there are still some challenging business conditions in the country's auto industry. Continuous excess capacity, fast consolidation of key manufacturers, sluggish vehicle demand, appreciating currency, political instability & rising energy costs are the major hindrances in front of Canadian Auto Industry," said an analyst at
RNCOS.

CBC estimates that overall gains of the industry will grow till 2010, however still remain lower than the figures posted in late 1990s.

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