The CEO of the Canadian auto parts giant Magna International, Swamy Kotagiri, said on Tuesday that the country’s auto sector cannot effectively deal with today’s economic and geopolitical challenges without greater policy clarity.
Speaking at an auto industry forum in Toronto, Kotagiri noted that the sector still does not understand which specific problems policymakers are trying to address — making it difficult for companies to plan and respond effectively.
“If we misdiagnose the problem, I think we will confidently deploy the wrong solution and then, we have to live with the consequences for many, many years to come,” Kotagiri stated.
His comments come as Canada’s auto industry faces pressure from multiple directions — escalating US tariffs, competition from Chinese automakers, and a mandatory review of the US-Mexico-Canada Agreement approaching on July 1.
Two Problems, Two Paths
Kotagiri laid out what he described as fundamentally different framings of the same challenge — each leading to a different set of policies.
According to the CEO, if the goal is to sustain the existing auto sector and keep workers employed, it becomes a legacy asset protection problem.
Solutions would then focus on targeted subsidies, employment incentives, and transitional support for incumbents.
“However,” he warned, “we should be honest about the results. Even with sustained support, employment in Canadian auto manufacturing has been flat to declining in recent years, while growth has shifted downstream in a different path.”
He cautioned that this path is not a growth strategy — and that pretending otherwise carries the real risk.
“And the real risk is not about choosing this path, the real risk is choosing this path and pretending it leads somewhere else,” Kotagiri added.
If, instead, the focus is on making vehicles affordable for consumers, the solution shifts to a cost-of-living problem — lowering prices, expanding choice, and enabling access to innovation.
A new vehicle in Canada now costs an average of C$63,439, according to AutoTrader — 30% higher than pre-pandemic levels.
“If affordability is the priority, then policies and structures need to reinforce scale, efficiency and competition and not work against them,” the Canadian manufacturer’s chief said.
To him, “the reality is unavoidable trade-offs within how markets are structured and the outcomes they deliver. When supply chains are constrained, there’s no question costs tend to rise, regardless of what the intent is.”
Resilience Over Picking Sides
The Magna CEO also argued that Canada should invest in skills rather than individual factories.
“The objective in this case, I would say, is to keep Canada essential, reduce dependency on any single system or regime,” he said.
He called for systemic thinking rather than siloed policy-making.
“How do we build infrastructure that is fast, predictable and reliable? How do we ensure dependable cost-competitive energy?,” he asked, adding, “And how do we structure capital so risk is shared and it’s not concentrated?”
Kotagiri admitted, however, that this approach is not without uncertainty.
“And that’s the point, because we are living in a world where security cannot be taken for granted,” he concluded.
The Political Divide
Kotagiri’s remarks land in the middle of a heated political debate over how to rebuild the country’s auto industry.
Earlier this year, Prime Minister Mark Carney’s government unveiled an auto strategy that includes a C$2.3 billion EV Affordability Program and a trade deal with China.
The deal allows up to 49,000 Chinese-built EVs into Canada annually at a 6.1% tariff — replacing the 100% surtax Ottawa imposed in late 2024. The annual quota is set to rise to 70,000 vehicles by 2030.
Chinese automakers are encouraged to pursue joint ventures or local manufacturing within three years.
On the other side, the Conservative Party under Pierre Poilievre has proposed a tariff-free auto pact with the United States built around a dollar-for-dollar production-to-sales matching rule — modeled on the 1965 Canada-US Auto Pact.
The plan would scrap the Chinese EV quota, ban Chinese-connected vehicle software, and align Canadian tariffs on China with Washington’s.
Magna’s Position
Industry Minister Mélanie Joly has pointed to Magna International as a potential partner for Chinese EV companies looking to manufacture in Canada.
However, Magna has steered clear of that path domestically.
CFO Pat Fracassa said in February that the company’s approach “has always been to be a neutral global partner to our OEMs,” adding that Magna tries to “avoid a structure that could appear exclusive or tied to any individual customer.”
The position contrasts with the company’s operations in Europe.
At its Magna Steyr plant in Graz, Austria, the Canadian-headquartered supplier currently assembles vehicles for two Chinese automakers: XPeng, which produces the G6, G9, and P7+ at the facility, and GAC’s Aion brand, which builds the Aion V and Aion UT there.
Both partnerships allow the Chinese brands to sidestep the European Commission’s additional tariffs on imported Chinese EVs.
USMCA in Focus
The USMCA’s mandatory review under Article 34.7 must be convened by July 1.
The three signatory countries must decide whether to extend the deal for another 16 years, negotiate revisions, or allow it to enter annual review until its 2036 expiration.
Automotive products account for roughly 22% of total USMCA trade — the single largest category — and components in a finished North American vehicle may cross the Canada-US border seven or more times during production.
Since Trump imposed 25% tariffs on the non-US content of Canadian-made vehicles, the five major automakers producing locally — GM, Stellantis, Ford, Honda, and Toyota — have been forced to reassess their Canadian operations.
Between 90 and 96% of vehicle production in Canada historically went to the US under the deeply integrated North American supply chain.
At the same forum, Ontario’s Minister of Economic Development Vic Fedeli said reinstating North American free trade is the only viable path forward.
“There is only one solid approach forward and that is to have North American free trade at the onset. Period,” Fedeli said. “That is going to be the ultimate goal.”
Ontario is home to several major automakers and auto parts companies and contributed C$75 billion in exports in the vehicle manufacturing and parts sectors in 2023.
The province’s auto sector employs nearly 100,000 people and contributes C$13.3 billion annually to the national economy.
