Canadian auto production fell in 2025 as tariffs and other uncertainty took a bite

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Canadian auto production in 2025 declined for a second consecutive year to 1.2 million vehicles, down seven per cent from 2024, according to DesRosiers Automotive Consultants Inc.

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Auto-sector executives attributed last year’s decline to a number of factors, including the 25 per cent tariffs imposed by the United States last March and the uncertainty caused by the electric vehicle transition.

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The next few months will be crucial, they said, as the Canada-U.S.-Mexico Agreement (CUSMA) is up for review and U.S. President Donald Trump must signal by July whether his country intends to withdraw from the agreement, as he has at times hinted.

“This is a pivotal year and the next few months are really going to dictate what our sector could look like,” said Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, a lobby group representing U.S.-based automakers.

Vehicles that comply with CUSMA are exempt from the U.S.’s 25 per cent tariffs, but not all vehicles were certified as exempt and the policy caused logistical challenges for automakers.

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At least three U.S.-owned assembly plants in Canada are currently not producing vehicles. Kingston said what happens next may hinge on what happens in trade negotiations and whether the U.S. insists upon putting tariffs on Canadian-made vehicles, thereby cutting off the main export market.

“You can’t make a major investment in Canada without clarity on the trade situation and the tariffs,” he said.

Among the three U.S.-based automakers, Stellantis NV produced 161,000 vehicles, or about 13 per cent of the total, General Motors Co. produced 136,000 and Ford Motor Co., which is in the process of retooling its only assembly plant and is expected to resume production later this year, produced 249 vehicles.

By contrast, Japanese-based automakers accounted for the vast majority of production in Canada. Toyota Motor Corp. produced 537,518 and Honda Motor Co. Ltd. produced 400,585 vehicles, together accounting for 76 per cent of all vehicles.

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But David Adams, president of the Global Automakers of Canada, which represents Honda, Toyota and other automakers, said the U.S. tariffs formed the main obstacle to auto production.

“We knew it was going to be lower just because of the challenges to get vehicles across the border into the U.S.,” he said.

Overall, production in Canada has dramatically declined in the past decade. Canadian automakers produced around or more than two million vehicles per year between 2016 and 2019, but that dropped below 1.5 million vehicles in 2020 as the pandemic affected production.

A semiconductor shortage and other supply chain problems caused further declines in the following years. Production appeared to rebound in 2023, but fell in 2024 and again last year.

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During that period, GM switched to producing an electric delivery van, known as the BrightDrop, at its plant in Ingersoll, Ont., that never reached anticipated sales levels and was cancelled last year. GM also slashed a third shift at its Oshawa, Ont., plant, which produces popular pickup trucks.

Stellantis last year halted a multibillion-dollar retrofit of an assembly plant in Brampton, Ont., which is still idled. It added a third shift at its assembly plant in Windsor, Ont., in recent months, which slightly boosted production.

Ford barely produced vehicles in Canada in 2025 because it is retrofitting its Oakville, Ont., assembly plant to produce super-duty pickup trucks. Production is expected to resume later this year.

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Overall, DesRosiers characterized the Canadian auto sector as facing a long-term structural decline. Some of the recent declines have been attributed to greater production in Mexico, which benefited from the original North American Free Trade Agreement, as well as greater imports from countries such as South Korea.

Earlier this year, Prime Minister Mark Carney struck a deal that allows China to send 49,000 electric vehicles into Canada on a duty-free basis, with the number escalating by six per cent every year. That represents less than three per cent of the overall sales market, but about 30 per cent of the EVs sold in Canada.

• Email: gfriedman@postmedia.com

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