Exporting is absolutely vital to the long-term success of most companies in Canada. The share of exporting in our economy has grown rapidly over the years, and is expected to continue.
Exporting is absolutely vital to the long-term success of most companies in Canada. The share of exporting in our economy has grown rapidly over the years, and is expected to continue.
If you’re not exporting, you’re missing out on a lot of growth potential, and increasing the long-term risk to your business. Why? Because we’re in a global marketplace. Canadian businesses – including those in the transportation industry – are competing with sophisticated international companies not only around the globe, but also in Canada. Whether you want to start exporting or you already are, now is a great time to diversify into more markets. Current trends in the transportation industry, from fuel costs and innovation to cost reduction and record production in the aerospace industry, are generating opportunities around the globe that could position your business for future growth.
Many studies have confirmed that businesses that export do better than businesses that don’t. They experience 20% greater sales growth, are 30% more productive, and 25% more innovative. Exporting makes you better, stronger and bigger.
Here’s another reason to believe exporting helps build business. Consider that the average 3-year cumulative returns following an initial public offering are just 15% for non-exporters, compared to 45% for exporters. That’s a big gap, and further evidence that exporting is good for business.
And because exporters have less concentration risk - they’re not dependent on one market or one business cycle – they also have 20% lower volatility, or ups and downs in their business. Studies from numerous countries have clearly shown that exporting increases both business survival and longevity.
In an increasingly connected global marketplace, exporting is vital to long-term growth and success. Transportation industry exporters like XYZ Tooling Inc, Woodbridge, Av&R and many others have told us how important exporting is to their growth.
As Daniel points out, exporting is essential for his company, as it is for the entire Canadian transportation sector. It’s a fact, Canadian companies that export do better on several fronts. And, export markets are growing faster.
Exporting is extremely important to Canada’s transportation industry. There are currently 1,200 companies exporting more than $72 billion a year. Transportation, as a sector, includes companies from a wide variety of industries, including aerospace, automotive and heavy trucks, marine, rail, and specialty vehicle. As many global markets are expected to grow, there are more opportunities than ever to diversify into new markets and find new customers.
Let’s take a look at Canada’s top transportation export markets.
Currently, Canada’s transportation sector relies heavily on a handful of markets, particularly the United States. In the Defence sector for example, the United States is the destination for 76 percent of exports. We all saw what happened when we had too heavy a reliance on a single market during 2008. But diversifying not only protects a business—it also brings new opportunities. China, for example, is the biggest automotive market in the world, and Europe is the second-largest aerospace manufacturing market.
Let’s look at some of Canada’s current successes and opportunities as it relates to the top exports.
For the aerospace sector, Canada is the fifth-largest market in the world with over 700 companies, $28 billion in direct revenues, and 80% of goods exported. Canada also provides a wealth of supply chain opportunities for SMEs.
Canada is currently the number-one exporter worldwide in civil flight simulation and civil engine productions, with recognized expertise in turboprop and helicopter engine production. We are also third worldwide in aircraft production backed by Boeing and Airbus, and driven by growth in air traffic and the middle class in Asia.
In the defence subsector which includes over 2,000 Canadian companies, global revenues are expected to return in 2016 to a value of $13 billion dollars, as governments equip their armed forces with modern defense weapons platforms and next-generation technologies, including cyber, intelligence gathering, defense electronics, and precision strike capabilities. (Deloitte Defence Outlook 2016)
As you can see, Canada has a wide variety of expertise when it comes to defence transportation. From physical to digital and everything in between, Canada has in recent years made significant strides in the defense subsector. And those who export globally have seen strong growth.
Canada is home to major OEM assembly operations, such as Ford, GM, Chrysler, Honda & Toyota, as well as a strong Canadian parts sector and sub-supply chain suppliers. Over 500 Canadian automotive companies contribute to exporting $60 billion dollars in automotive products, including 1.9 million vehicles.
While the Canadian vehicle assembly sector is at approximately 75 percent of pre-crisis levels and is unlikely to recover to full previous levels, Canadian suppliers may find growth opportunities in new markets such as Mexico. Export opportunities are out there for parts manufacturing companies, tool, die & mould, commodities, and automotive technology companies.
As you can see, Canada’s transportation industry is built for exporting. And as the global market becomes more competitive and unpredictable, companies are well-advised to continue finding new customers and breaking into strategic markets.
As the Deloitte Defence Outlook 2016 suggests, now is the time to think about finding new customers and diversifying into new markets.
When we ask businesses why they don’t export, or why they don’t export more, the reasons they give us are generally concerned with the need for more market information, mitigating risks, making connections and financing.
Exporting has a very positive impact on Canadian companies and the Canadian economy – exports amount to more than 30 percent of Canadian GDP. In 2015, EDC supported business in 170 countries, facilitating $104 billion in global business transactions, contributing $66.8 million to the GDP and supporting 530,839 jobs across Canada.
We have helped businesses all across Canada grow all over the world – and we can help you.
EDC has been the catalyst for Canada’s exporting for many years. We have offices and representatives across Canada and around the world, and operate within a trade ecosystem: We work in partnership with the TCS, the Business Development Bank of Canada (BDC – where we have different but complementary roles), the Canadian Commercial Corporation (CCC) and other public- and private-sector institutions. The point of our collaboration is to make it easier for companies like yours to grow internationally and succeed.
EDC has helped many businesses in the transportation industry. In the aerospace sector, we have facilitated over $7.4 billion in exports for 142 companies, including $5.6 billion in financing, $2.4 billion in risk mitigation, and over $1 billion in receivables insured for the MRO sector.
In the automotive sector, EDC has facilitated almost $5 billion dollars in exports for 455 companies to help with risk mitigation, helped tool and die makers find supply chain financing solutions, and introduced over 100 Canadian suppliers to international customers through our matchmaking meeting initiatives.
Our work with transportation industry companies has provided a first-hand demonstration of some of the exporting challenges you face, and we can help you overcome them.
Now let’s take a look at some success stories from EDC’s customer base of transportation exporters.
ABC Company is a global leader in machining and assembly of metal components.
They needed equipment that was being manufactured overseas, but couldn’t get financing from banks. They asked EDC for help. EDC provided a line of credit to cover expenses, Accounts Receivable Insurance and Contract Frustration Insurance to provide coverage for the down payment to the manufacturer. This allowed Aero-Superb to ship new goods on time, allowing the bank to margin the insured receivables and finance the equipment before it gets to Canada.
XYZ Tooling is a mould maker selling to Tier 1 parts manufacturers in the automotive industry.
Although sales were growing, they had reached their lending limit with their bank. XYZ had just landed a new contract with a company in Mexico, but since terms were PPAP, they wouldn’t get paid for up to 18 months. They asked EDC for help. EDC provided Accounts Receivable Insurance to insure their sales, allowing the bank to increase margining on their exports. And a direct loan from EDC to the customers helped them finance the purchase. The result? XYZ landed the contract, plus their bank gave them a larger operating line so they could continue to grow.
How does EDC help businesses export?
Our products and services are designed to help businesses overcome hurdles to exporting, reduce risk, free up cash flow, and expand their global business.
We provide financing support for select overseas customers. Our trade creation efforts focus on introducing relevant Canadian capabilities where the demand for them exists. And, our Export Guarantee Program helps you secure financing through your sales cycle. If you need to understand more about where the demand is for your products and services, we can help with that too.
We also offer a wide range of insurance, credit and bonding and financing, including direct lending and buyer financing. These are available directly or in partnership with private financial institutions. We all work together.
EDC helps Canadian exporters with financing guarantees. We’ve helped Michel and his team at Precision SF Tech, and we can help you.
So now is the time to start thinking about how your business fits within the global market, and figuring out what your global strategy is in order to grow your business. Keep in mind that, whether you need help making connections, or with financing or mitigating risk, EDC can help.
EDC is here to help companies in all sectors, all across Canada, grow their exporting business. That includes yours. Please get in touch with us and find out how we can help expand your business all over the world.
Thank you.