October 17, 2025 | Canadian Auto Industry Faces Creative Destruction

The Canadian auto industry is in deep trouble. Donald Trump’s new tariffs threaten cross-border trade — and U.S. automakers are already moving production south.

Here’s the kicker: Canada’s auto sector isn’t even Canadian. Toyota and Honda build three-quarters of the cars assembled here. American brands make the rest. And those are being moved south:

“In a major blow to Canada’s automotive sector, Stellantis announced plans on Tuesday to move production of the Jeep Compass to Illinois from Brampton, Ontario. Stellantis had about 3,000 workers there.” October 14, 2025

But the real threat isn’t political — it’s technological. The global shift to electric vehicles (EVs) is rewriting the rules of manufacturing. Chinese EV makers, led by BYD, are flooding world markets with advanced, low-cost cars that look more like iPhones on wheels than traditional vehicles.

Is there any way for Canada to keep its car industry alive?

This is the moment Joseph Schumpeter warned us about — creative destruction.
In his 1942 classic, Capitalism, Socialism and Democracy, the Austrian economist described capitalism as “a process of creative destruction … never stationary.”

And destruction is exactly what’s happening in Ontario’s auto belt.

A Canadian economist, Peter Howitt, who just received the Nobel Prize in Economics for his work on innovation-driven growth, once put it bluntly in The Globe and Mail:

“People need to leave jobs in dying or less productive industries … If Canada is to revive growth, we must recognize that job loss and business failure are part of the process.”

Painful words — but true.

Toyota and Honda’s Ontario plants churn out the RAV4, Lexus RX, and Honda CR-V — none of them pure EVs. Roughly 80% are shipped to the U.S. market. Together, automakers and parts suppliers employ 130,000 Canadians — less than 1% of the national workforce.

So, should we spend billions propping up an obsolete industry?

EVs are cheaper to build, simpler to assemble, and cleaner to run. An electric car has twenty moving parts versus two thousand in a combustion engine. The only complex piece — the battery — is dropping in cost every quarter.

Chinese firms like BYD are years ahead in this technology. Tesla is the only Western brand that keeps pace. Both are profitable, global, and growing.

Instead of fighting the future with tariffs, Canada should open the door — invite BYD, Tesla, and others to build EV plants here. We have what they need: critical minerals, skilled workers, and a stable market. In exchange, Canadians get affordable EVs and a stake in the future of mobility.

Trying to protect the past is a losing game.

As Schumpeter taught us, creative destruction is not a tragedy — it’s the engine of progress.

Canada should stop subsidizing obsolescence and start competing for the next wave of innovation.

Hilliard MacBeth

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Hilliard MacBeth October 17th, 2025

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