Lowest Cost Leader
Canada is the most cost competitive place to produce for the North American market. According to KPMG’s study on automotive production costs, Canada finishes first in North America for starting up and operating an auto parts manufacturing unit with a 6.4 per cent cost advantage over the United States (Table 1 & 3).
Canada leads in all categories for Tier 2/3 suppliers
Leading North American vehicle manufacturers outsource much of their parts production to
- Large Tier 1 suppliers, who in turn often subcontract production to smaller Tier 2/3
- Tier 2/3 manufacturers are typically called upon to produce:
- Category 1: metal components (75 per cent)
- Category 2: plastic components (15 per cent)
- Category 3: electronic components (10 per cent)
Canada´s edge in all three categories reflects the strength of the Canadian automotive industry . Source: KPMG study
Lower capital and operating expenses
A comparison with the United States shows that, in Canada (Table 2):
- 8 per cent lower Construction costs
- 15 per cent lower Office lease costs, including utilities, taxes and insurance
- 28 per cent lower Transportation costs for manufacturing industries
- 22 per cent lower Electricity costs for industrial users
Substantial labour cost savings (Table 4)
Compare Canada’s wages to the United States:
- 22 per cent lower wages for auto assembly wages
- 21 per cent lower wages for auto parts
- Lower Benefits due largely government-funded health care
Lower corporate tax rates
The average (federal-provincial) Canadian corporate tax rate, including capital taxes, is now lower than that in the United States. And by 2008, the average Canadian corporate tax rate will be more than three percentage points below the average U.S. rate. (Source: Federal Budget, March 2004)
Canada – The best place to do business!
The Economist Intelligence Unit rates Canada´s business environment as the best in the world. Canada achieved high scores for the quality of its infrastructure, its open regime for foreign trade and capital, and favourable market environment.
Canada´s strong conditions for growth include:
- Budget surplus
- Competitive tax regime
- Low inflation
- Low interest rates
- Liberal trade policy and market access
- Strong commitment to innovation
- Programs in areas such as training, R&D;
Related Link
- KPMG
Review the details of KPMG’s automotive production cost study
|
Table 1: Business Cost Advantage by Type of Operation |
|
Type of Operation |
Canada
(Cost Index) |
U.S.A.
(Cost Index) |
|
Overall* |
91.0 |
100.0 |
|
Auto Parts Manufacturing |
93.6 |
100.0 |
|
Precision Manufacturing |
91.8 |
100.0 |
|
Research & Development |
79.0 |
100.0 |
|
Source: KPMG Competitive Alternatives G-7 Edition, 2004
*Overall rank covers business operations over 12 industries. |
|
Table 2: Comparison of Selected Business Costs*
(Index: U.S.=100.0) |
|
Business Cost |
Canada
(Cost Index) |
U.S.A.
(Cost Index) |
|
Electricity |
77.8 |
100.0 |
|
Transportation |
72.3 |
100.0 |
|
Lease |
84.7 |
100.0 |
|
Construction |
92.4 |
100.0 |
|
Source: KPMG Competitive Alternatives G-7 Edition, 2004
*For more information about other location-sensitive business costs, visit http://www.competitivealternatives.com/ |
|
Table 3: Transportation Equipment Manufacturing, 2002
(In $US per week) |
|
Locations |
$US per week |
|
Canada |
686 |
|
Tennessee |
799 |
|
South Carolina |
813 |
|
Georgia |
859 |
|
Kentucky |
929 |
|
Alabama |
960 |
|
Ohio |
1064 |
|
Michigan |
1212 |
|
Source: Statistics Canada and US Bureau of Labor Statistics (NAICS 336)
Based on exchange rate: $CDN 1 = $US 0.72 |
|
Table 4: Statutory and Employer-sponsored Benefits
(Percentage of Wages) |
|
Country |
% of Wages |
|
Canada |
29 |
|
United States |
32 |
|
Source: KPMG Competitive Alternatives G-7 Edition, 2004 |