Canada's share of North American light vehicle production is at an all-time high.

According to Toronto auto analyst Dennis DesRosiers, Canada now accounts for 17.3 per cent of North American vehicle production, which is up slightly from pre-recession levels of about 16.8 per cent. However, this industry record is being threatened by automotive powerhouse, Mexico.

"We're holding our own," he said. "But Mexico is cleaning up everybody's clock around the world. Mexico is outperforming Canada, outperforming the U.S., outperforming Japan and Europe," he said.

Mexico has seen its share of North American auto production double over the last decade to about 19 per cent, a trend that will continue as the global auto recovery gains steam and car makers look to cut costs and boost profits.

"They have, through NAFTA, access to the largest market in the world, relatively low labour costs, a non-union work environment and tax incentives that have lured some of the best capital in the world," said DesRosiers.

"Mexico is a magnet for vehicle production at this point." While Canadian production, on the other hand, has likely peaked.

In a speech last week in Toronto, Kevin Williams, president and CEO of General Motors Canada, raised the alarm about challenges facing Canada's auto sector. "With the very high Canadian dollar, high commodity costs, high labour costs and, in some cases, non-harmonized regulatory approaches, Canada has some real challenges ahead to remain competitive on the world stage," Williams said.

In addition, labour rates in Mexico are at least 17 times lower than those in the U.S. and Canada, which is a major factor in Mexico's favour. North American auto makers are not able to compete with $5/hour wages - nor should they have to - so Governments will have to play the incentives game to preserve Canada's auto sector.

Overall, it's looking like Canada will not lose a lot of current production, however, new dollars will make their way to Mexico in terms of investment in future growth and production.

[Source: AUTONORTH]