The Lexus NX luxury SUV is made at the Toyota Cambridge plant in Ontario. The province’s FDI appeal relies heavily on the automotive industry. (Photo by Lars Hagberg/AFP via Getty Images)

The automobile and parts manufacturing sectors have long been the largest recipients of foreign direct investment (FDI) into Canada’s Ontario province. The region was once known as one of North America’s most significant automotive manufacturing hubs.

Investment into the sector had been trending downward since the 2008 recession, however. Ontario’s automotive industry suffered from increasing access to cheap labour in Mexico, as well as protective business practices by the US, which meant companies relocating their manufacturing facilities back south of the border. General Motors closed its Oshawa plant in the province in 2019, moving production to Indiana.

However, significant inward investment from large automotive manufacturers and parts makers including Japan’s Toyota Motor Corporation and Hong Kong’s Johnson Electric have helped to reverse this downward trend. Toyota has invested more than $1.53bn in Ontario since 2015, and Johnson Electric invested $275m in a project in December 2017. Fiat Chrysler, Ford and General Motors also have manufacturing operations in the province.

The Toyota Motor Corporation, through its divisions Toyota and Lexus, has maintained a presence in southern Ontario since 1986, which has grown significantly since. Toyota operates four plants within the province, in Cambridge and Woodstock, employing more than 8,000 people. In May 2018, Toyota announced an $840m investment to upgrade the four plants and a further $152m over ten years to support automotive research and development (R&D) in Canada.

Ontario FDI project numbers on the rise

According to fDi Intelligence’s 2020 fDi Report, Ontario attracted 153 FDI projects in 2019. This represented a 3% rise on the previous year’s project numbers and compares with an overall 14% rise in FDI projects across North America. When measured by capital investment, the report found that Ontario received $3.4bn of inward investment in 2019, which represented a 3% overall share of the North American market.

Going forward, automakers are expected to invest heavily in R&D as the industry moves towards developing autonomous and electric vehicles. In August 2020, the Ontario government launched the next round of applications for its Ontario Automotive Modernisation Programme, a $10m initiative to provide auto parts companies with funding to invest in new, innovative technologies.

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While the automobile and parts sectors surpass all other sectors for inward investments in Ontario, the province has seen four deals in the industrial engineering sector since 2015, with a combined valued of approximately $1.22bn.