The Conference Board of Canada report anticipates that production of vehicles and parts by Canadian automakers will grow by 2.5 per cent this year.
That's despite a slow start to the year as Ford's plant in Oakville, Ont., and Fiat Chrysler's plant in Windsor, Ont., were retooled to prepare for the production of new models.
The Ottawa-based think-tank estimates Canadian auto manufacturers' profits will rise to $2.36 billion this year — the highest level since 2002, when profits hit an estimated $2.56 billion.
It says low gas prices, loose credit conditions and strong underlying economic conditions are fuelling demand for vehicles.
Economist Fares Bounajm says 80 per cent of vehicles made in Canada are exported to the U.S., which makes the lower loonie a "boon" to the industry's bottom line.
"The lower exchange rate means that cars made in Canada fetch a higher price in Canadian dollars when they are sold in the U.S.," Bounajm said in a statement from the Conference Board.
Canadian auto sales volumes hit record highs in each of the last two years, with 1.89 million new vehicles sold in 2014.
But the report says sales could be reaching a "saturation point," as Canada's labour market has been "relatively weak" recently and the impact of lower oil prices on Western Canada is expected to dampen sales.
Meanwhile, production is expected to decline in 2016 and 2017, after General Motors shifts production of the Camaro from Oshawa, Ont., to Michigan.
GM has already announced that it will lay off 1,000 workers at its Oshawa plant as production moves south of the border in November, but further layoffs are expected next year.
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