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Canada’s automotive sector, a historical cornerstone of the national economy, is currently facing a “perfect storm” of challenges. Massive investments in electric vehicle (EV) infrastructure are being met with unexpected U.S. tariffs and a global cooling of consumer demand for EVs.
In a recent podcast, Allan Rutman, President of the Axis Consulting Group and Partner at Zeifmans, shared his insights on how these boardroom decisions are reshaping communities and what they signal for the future of global manufacturing.
The Double Threat: Tariffs and EV Slowdown
While many immediate automotive parts remain exempt under current trade agreements, the looming 2026 renewal of the USMCA (United States-Mexico-Canada Agreement) is creating significant instability. Rutman notes that automotive manufacturing is driven by volume. When tariffs increase the cost of Canadian exports, Canada loses its primary competitive advantage: the balance of labor quality and cost.
This pressure is compounded by a dramatic collapse in EV forecasts. “The immediate impact is in EVs,” Rutman explains. “You’ve got a drop in EV production without compensating for an increase in alternate productions… you’re basically caught with your pants down in that type of situation.” Because planning cycles for new vehicles are five to six years long, manufacturers cannot simply pivot back to internal combustion engines overnight.
A Shift in the Boardroom
Decisions by industry giants like General Motors, Stellantis, and Honda to delay investments or move production to the U.S. are increasingly common. These are not just operational choices; they are strategic responses to the “America First” political momentum.
“The boardroom thinking might be, ‘Hey, we’re politically better off by investing in the US, given the Trump pressures currently.’ But the reality is, in the long term, whoever replaces Trump will be really not that different… rebuilding US production… doesn’t bode well [for Canada].”
The Human Toll
The consequences of these shifts are felt most acutely in manufacturing towns like Brampton and Ingersoll. When a plant closes or retooling is shelved, entire communities lose their rotation point. Rutman highlights the Brampton facility, which has been closed for two years while waiting for EV production that may never arrive.
“Entire generations of families work at an automotive facility,” Rutman notes. “It’s very difficult to find alternate jobs in the same industry. Some will relocate… but others will have to face buyouts from the OEMs.”
Lessons in Vulnerability
Canada’s current vulnerability stems from a lack of export diversification and a reliance on the U.S. market. To reverse this trend, Rutman advocates for an “entrepreneurial” resurgence.
“We need to be more entrepreneurial. They’ve got to reduce corporate tax rates and encourage investment by allowing for write-offs against taxes… and to ensure that those new technologies stay in Canada.”
Rutman warns that this complacency is not unique to Canada; much of Europe faces a similar lack of competitive instinct compared to the U.S. and emerging markets. For the automotive industry to survive the transition to 2026 and beyond, countries must shift from asking what the government can do for them to fostering an environment where innovation and risk-taking can thrive.
Webinar
Canada has invested extensively in electric vehicle manufacture but is now facing tariffs to sell to the US market. These tariffs were not expected and are having a huge impact on Canadian business, government and communities. Tune into this webinar where Allan Rutman delves deeper into the topic here: Nexia TRI: The Effect of Tariffs to Canada – YouTube
Have a question for Allan? Contact him directly or email us at info@zeifmans.ca.
