PRESENTATION TO THE AREA DEVELOPMENT

FDI FORUM OCTOBER 31, 2016

RAY TANGUAY AUTOMOTIVE ADVISOR TO THE

GOVERNMENTS OF CANADA AND ONTARIO

CANADA: READY TO COMPETE

• After 19 years in electronics, joined Toyota Motor Manufacturing Canada and held several executive positions: – Senior Vice President of Toyota Motor America,

– Chief Risk Officer and Chief Quality Officer for Toyota North America,

– Became a Managing Officer of Toyota Motor Corporation in 2005,

– First non-Japanese to become a Senior Managing Officer in 2011.

• TMMC was recognized with 14 J.D. Power IQS awards, only one plant in Japan has more. These include global best Platinum Awards in 2011 and 2014.

• Was instrumental in bringing the first Lexus manufacturing plant outside of Japan to Ontario.

Ray Tanguay: Canada’s Auto Advisor

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• Crafted the company’s Global Vision, providing a framework for a sustainable future.

• Named the Automotive Advisor to the Governments of Ontario and Canada in June 2015.

The Canadian Automotive Eco-system

Canada’s automotive industry contributes to a strong and innovative economy.

• 10% of manufacturing GDP (or C$17.5 billion)

• 15.1% of merchandise exports

• 125,400 Canadians employed directly in assembly and

parts manufacturing (and growing at 2.2% per year)

Source: 2013 Business Register, Statistics Canada.

One of the highest job

multipliers of any industry

Canada produces

1 car every

14 seconds

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Key Metrics 2015

Sales C$94 billion

Exports C$79 billion

GDP C$17.5 billion

Production 2.3 million

The automotive sector contributes

significantly to the economy

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Ontario: home to 5 automakers

that make popular sellers with

a reputation for quality

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Key Supplier Indicators

Over 670 parts suppliers 500+ tool, die and mold

facilities Annual employment: 84,000

workers C$32B in Canadian-made

automotive parts 92% of exports go to the U.S.;

4% to Mexico

Canada’s Automotive Supplier Base

Windsor/Detroit ------ .

. ------------Toronto

Waterloo ------- . Highlights

Licensed skilled trades Strong supply chain One of 5 global clusters for

tool, die and mold making

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OVER 670 PARTS SUPPLIERS including major international companies

The Great Lakes Super Cluster

Sizeable consumer market:

• within a day’s drive from over 141 million consumers

Prosperous region:

• Contributes USD$213 billion to US-Canada trade

Proximity to R&D Centres:

• Majority of automotive R&D and purchasing offices located in the Great Lakes region

• More than 330 R&D centres in Michigan alone (source: CAR)

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A mega marketplace in the North American and global economy

Canada within a Great Lakes Super Cluster

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While Mexico and the southern United States have experienced impressive investment, the Great Lakes region remains the heart

of the industry in North America.

Great Lakes: 8,193,819 units

Mexico: 3,192,998 units

Southeast: 5,263,224 units

Sources: CAR and Ward’s Infobank

The craftsmanship and quality of Ontario’s skilled labour force has led to Ontario assemblers winning one third (29) of all JD Power awards for initial assembly quality in North America.

Ontario’s automakers make 7 of the top 10 brands (Lexus, Buick, Toyota, Cadillac, Honda, Lincoln, Chevrolet) ranked by the 2016 JD Power Vehicle Dependability Study.

“More so than any other region, Ontario’s production facilities continue to lead in assembly quality where it counts – in the hands of consumers.”

J.D. Power & Associates

Quality Matters

Toyota’s Cambridge North Plant- won the 2015 Gold Plant Quality award

7

4

7

11 15

29

Mexico Ohio Michigan Kentucky Ontario

JD Power Initial Quality Plant Awards 1990-2015

How does Canada Rate?

Source: KPMG 2016, Tax Foundation, OECD 8

KPMG Competitive Alternatives Report (2016): • Lowest overall business costs

in G-7 • 8% advantage vs the U.S. for

auto parts manufacturing • 28% cost advantage vs the

U.S. for product testing R&D Other indicators: • Much lower corporate tax

rate Canada 26.5% U.S. 40%

• Favourable access to foreign markets Zero tariffs on parts

imports • Accelerated depreciation on

capital

Ontario US

Wages and salaries

Materials

Overhead 55% Not Eligible

Contract expenses 80% 65%

R&D Cost Advantage

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More Costs Qualify for Tax Credits • 28% cost advantage relative to the US for product testing R&D, including incentives.

• Canadian tax credits can generate up

to 40% to 60% savings on R&D expenditure.

• Investment dollars go farther because Canadian universities can leverage R&D support programs:

• Investment in U.S. = 1 Ph.D

• Investment in Canada = 6 - 7 Ph.Ds

• Canada is ranked highest in the G-7 for availability of qualified engineers.

• Over 200,600 practicing professional engineers in Canada

Sources: Canada Revenue Agency, Internal Revenue Service, McMaster University, Swiss-based Institute for Management Development

World Class R&D Clusters Across Canada

BC: leader in

hydrogen fuel

cell research

Quebec: significant

capacity in EV research,

bolstered by $420 million

in provincial funding to

promote electric

transportation

Canada’s automotive industry is well-positioned to capture future growth

through R&D and supplier innovation.

Ontario: largest IT region in

North America outside of Silicon

Valley with expertise in cloud

computing, digital displays,

robotics, satellite technologies,

security, software development and telecommunications

Over 670 traditional parts suppliers,

including several global suppliers

Canada has a highly

educated workforce*:

64% of Canadians hold

post-secondary degrees

and 18.6% in STEM fields

*Source: National Household Survey 2011 10

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Global Best

World-leading Innovation: • MaRS: world’s largest urban innovation hub, based in Toronto.

• Communitech: world-leading collaboration and innovation incubator.

• Waterloo’s Accelerator Centre, catalyst for commercialization: 250+ companies supported; 93% survival rate; 1,500+ jobs created; $2B corporate value created.

• Catalyst 137 is one of the world’s biggest hubs for software-enabled devices and the Internet of Things under one roof.

Cutting-edge research and applications: • D-Wave Systems is the world’s first commercial quantum computing

company (clients include: Lockheed-Martin, Google, NASA and USC)

• Majority of the world’s fuel cell R&D spending occurs in British Columbia.

• High-tech firms such as Apple, Google, Cisco, Microsoft & Oracle have already discovered the benefits of locating in Canada.

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Global Best

Global best academic / research programs: • Canadian universities rank in the top 100 in the Annual World

University rankings*: – University of Toronto

– University of British Columbia

– McGill University

• Canada Excellence Research Chairs - $43M/year: – 27 world-renowned research chairs endowed with up to $10M/ 7 years to

establish ambitious research programs at Canadian universities.

– Including Dr. Ali Emadi, Hybrid Powertrain, McMaster Automotive Research Centre.

• Canada Research Chairs - $265M/year: – 1,650 world-leading research chairs in health, natural sciences, engineering, social

sciences and humanities.

• Stephen Hawking is a Distinguished Visiting Research Chair at the

Perimeter Institute, the world’s largest centre for theoretical physics. *Source: Times Higher Education World University Rankings 2016-2017)

9 universities and 24 colleges with innovative auto-related research initiatives and training programs in advanced manufacturing

University of Waterloo WatCAR Centre for Automotive Research (Waterloo, ON) conducts advanced research to enhance automotive innovation and competitiveness. Over 125 researchers make it the largest university-based automotive activity in the country.

Institute for Quantum Computing and the Perimeter Institute The Institute for Quantum Computing is leading the development of advanced autonomous vehicle applications, and the Perimeter Institute for Theoretical Physics is a research institute that has attracted some of the world’s top minds. Both are in Waterloo, ON.

University of Ontario Institute of Technology Automotive Centre of Excellence at the UOIT (Oshawa, ON) is a unique testing and research facility with commercially available world-leading capabilities .

MacAUTO McMaster Automotive Resource Centre (Hamilton, ON) is a coordinating body for advanced automotive research.

University of Windsor Automotive engineering specialization and private sector research partnerships

Conestoga College Centre for Smart Manufacturing - development of new products and processes for Advanced Sensors, Electronic Systems, Software, Light Manufacturing Production and Assembly, 3D Printing and Materials (Kitchener, ON)

St. Clair Windsor The Mechanical Engineering Technology - Automotive Product Design program in the on-site Ford Centre for Excellence in Manufacturing,(Windsor, ON)

Automotive Universities and Colleges

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Ontario has the tools and resources to train employees and bring innovations to market

Diverse Automotive R&D

Multi-material metals

Metal Forming processes

Metal joining approaches

Synthetic composites and Biological composites

Computational simulation design validation

Surface & performance

Thermal management for Battery and HVAC

Energy management

Body and chassis design for hybrid/alternative powertrain

Battery performance diagnostics and control optimization

Mobile phone integration

Connected car and infotainment

Application management

Integrated console

Fuel cells

Fuel systems storage tanks

Gaseous control systems

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Focus on Continuous Improvement

• Ease of doing business in Ontario and Canada

→Learning from other jurisdictions

→Creating a concierge-style service

• Selling Canada’s value proposition to the world

→Understanding the competition and marketing Canada’s strengths

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Canada: Ready to Compete

With a strong innovation ecosystem, a stable fiscal and economic framework, a highly productive and skilled labour force, and government focused on industry

Low Taxes

Strategic Location

World-class R&D clusters

Major Manufacturing Hub

Quality

Productivity

Educated Workforce