BUSINESS

Michigan Beats Ontario, Despite Canada's 'Auto Loan Bubble'

10/11/2013 01:07 EDT | Updated 10/11/2013 01:10 EDT
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Ontario is no longer the number-one jurisdiction for auto production in Canada and the U.S.

Economically embattled Michigan has reclaimed the spot, taking away bragging rights that Canada’s largest province had enjoyed every year since 2004.

Michigan is on track to produce 2.45 million cars this year, compared to Ontario’s 2.34 million, the Globe and Mail reports, citing research from Wards Auto and AutomotiveCompass.

Michigan has seen auto production surge 9 per cent this year, while Canada’s overall production has shrunk by the same percentage.

AutomotiveCompass President Joe McCabe told an industry conference earlier this month that Canada can expect to see a 28-per-cent decline in auto production by the end of the decade, thanks in large part to a strong loonie hurting the sector’s exports.

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North America's Worst Traffic

“Michigan, the southern U.S. and Mexico are winning at the expense of Canada,” McCabe said.

BMO Capital Markets recently noted that Canada produced one million more cars in 2005 than did Mexico, but over the past year Mexico has produced 700,000 more vehicles than Canada.

CAR LOAN BUBBLE?

At the same time, auto sales in Canada are on track to hit a record high this year.

That’s not good news to the ears of GM Canada CEO Kevin Williams, who told the Globe and Mail earlier this week he’s worried Canada could be facing an auto-loans bubble similar to the U.S. housing bubble.

He pointed to the proliferation of eight-year, interest-free loans being offered by some car companies as evidence there may be irresponsible lending and borrowing going on in the market.

According to TransUnion, auto loan debt in Canada jumped 9 per cent this year from a year earlier, and the average Canadian consumer is carrying $19,435 in car debt.

“Is it sustainable when a consumer base is leveraged as much as the Canadian consumer base is today?” Williams asked.