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The Rise of Nearshoring and Growth of Manufacturing in Canada

A nearshoring revolution is happening across North America, and Canada is emerging as an excellent option for companies looking to relocate their manufacturing closer to home.


In this article we delve into what nearshoring is, predictions for the Canadian manufacturing market, and the key drivers of growth in Canadian manufacturing and advantages nearshoring brings. 


Canada manufacturing industry is growing 


In the last few years manufacturing has experienced new challenges due to geopolitical events, lack of natural resources and the global pandemic which affects the global supply chain. Nevertheless, Canadian businesses are confident about the prospects for their companies and expect to see their earnings increase by between 2.5% and 9.9% (KPMG, 2023). 


Their optimism is substantiated. Manufacturing is a core element of the Canadian economy as demonstrated by the following statistics: 

  • Manufacturing accounts for $174 billion (10%) of Canada’s total GDP

  • Manufacturers export more than $354 billion each year

  • Manufacturing industry provides over 1.7 million full-time jobs across Canada. (KPMG, 2023)


Key drivers for manufacturing growth in Canada 


Canada is becoming a top investment destination for nearshoring projects. Supported by government investments and policies, alongside infrastructure enhancements, Canada's manufacturing sector is becoming more efficient. Access to abundant natural resources and sustainability initiatives further strengthen its appeal for long-term growth.


Government funding and economic incentives 


Innovation investment is a key driver in Canadian manufacturing and an incentive for economic growth. One of the strands of Canadian government’s investment into manufacturing is ‘The Strategic Innovation Fund (SIF)’, which in 5 years of its operation has contributed $8.2 billion in contributions (Strategic Innovation Fund Impact Report, 2024) . Some of the recent investments are in biomanufacturing and life sciences, as well as auto and batteries industries. 


Some of the latest projects founded include: 


  • E-One Moli Energy (Canada) - Construction of Canada's largest factory for high performance lithium-ion battery cells

    • Primary Sector: Auto and Batteries

    • Secondary Sector: Advanced Manufacturing

    • Location: Maple Ridge, British Columbia

    • SIF Funding: $204,500,000

    • Total Project Cost: $1,000,000,000

    • Jobs Created: 350


  • Manikheir Canada Inc. - Establishment of a facility to develop and produce up to one billion medical-grade nitrile gloves annually

    • Primary Sector: Biomanufacturing and Life Science

    • Location: London, Ontario

    • Project Type: Business Innovation and Growth

    • SIF Funding: $42,000,000

    • Total Project Cost: $168,000,000

    • Jobs Created: 135


  • PowerCo (Volkswagen) - Volkswagen's largest electric vehicle battery manufacturing plant to date, producing batteries for up to one million electric vehicles per year.

    • Primary Sector: Auto and Batteries

    • Secondary Sector: Advanced Manufacturing

    • Location: St. Thomas, Ontario

    • Project Type: Business Innovation and Growth

    • SIF Funding: $700,000,000

    • Total Project Cost: $7,000,000,000

    • Jobs Created: 3000


Infrastructure and sustainability 


Nearshoring boosts supply chain resilience by shortening distances, reducing lead times, and facilitating rapid responses to demand changes and supply chain disruptions. This proximity fosters better communication and collaboration among stakeholders, enhancing risk management and transparency.


Additionally, nearshoring promotes sustainability by cutting long-haul shipping, curbing energy consumption, and reducing carbon emissions. This aligns with the focus on environmental, social, and governance (ESG) performance driving Canadian government investment grants.


Moreover, nearshoring drives demand for regional rail transportation and infrastructure, spurring investment in rail projects like the Go Expansion – ON-Corridor Works and the Eglinton Crosstown LRT. Railroads play a pivotal role in facilitating nearshoring through initiatives like mergers and new services, bolstering trade flow, economic integration, and supply chain reliability across North America.


Natural resources 


Nearshoring in Canada is driving demand for construction materials like cement and steel, powering infrastructure and residential projects and spurring job creation and economic growth. Canada's abundant natural resources, including water, minerals, and renewable energy sources, form a solid foundation for sustainable manufacturing. Leveraging these resources responsibly can strengthen economic growth and environmental resilience. Nearshoring in Canada presents an attractive opportunity for manufacturers and investors to enhance supply chain resilience, adopt sustainable practices, and stimulate regional economic growth. By bringing production closer to home, companies can mitigate risks and foster innovation, collaboration, and growth towards a more resilient and sustainable future.


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