Geopolitical trade uncertainty, tariffs and cost pressures are driving significant operational changes across Canada’s automotive industry, according to a January 2026 outlook published by KPMG Canada.
The report draws on a survey of 263 automotive business leaders conducted between August and October 2025. Geopolitical trade disputes and tariffs rank among the most disruptive forces facing the sector, with approximately three-quarters of respondents expressing concern about ongoing trade instability.
Supply chain management has emerged as a dominant theme. 82% cent of OEM and supplier respondents indicate they are actively adjusting supply chain strategies, reflecting attempts to mitigate tariff exposure, manage sourcing risks and respond to broader regionalization trends. Securing supply chains and raw materials ranks as the leading business priority for the next three years, followed by boosting productivity and optimizing costs.
Pricing and product decisions are also being reshaped. 63% of OEMs and suppliers report increasing prices in response to the tariff environment, while 62% indicate they have substantially altered their product mix to reduce trade-related risk. 70% report exploring international markets, signalling an increased emphasis on geographic diversification.
Despite persistent economic and policy uncertainty, confidence levels remain relatively high. 40% of OEM and supplier respondents state their organizations are expected to emerge from current disruptions stronger than before. Fewer than 10%% anticipate significant struggles or potential failure.
Technology adoption continues at pace across the industry. 71% of OEM and supplier respondents report having achieved or surpassed innovation and technology targets. Artificial intelligence investments are frequently associated with measurable productivity improvements, with nearly one-in-five respondents citing gains exceeding 25%.
Cost management strategies feature prominently in the findings. Respondents most commonly cite supply chain optimization, stronger cost controls, expanded recycling and circular economy initiatives and increased use of advanced technologies as key levers for improving profitability and resilience.
