Big changes are coming to the Canadian auto industry.

In fact, a new report from KPMG says it’s already happening.

Facing an uncertain environment in trade, the overall economy and the automotive markets, Canada’s automotive industry is acting rather than waiting for a new Canada-U.S.-Mexico Agreement, said the report, titled Disruption as Usual: Canada’s Automotive Outlook in an Era of Changing Lanes and Uncertain Roads.

Based on a survey of 263 Canadian automotive sector leaders — manufacturers, dealers and parts suppliers — the report said the industry as a whole is strengthening its resilience, optimizing costs and scaling artificial intelligence in design and production to assisted and autonomous driving, predictive maintenance and personalized in-car experiences.

“We’re seeing a foundational and irreversible transformation underway in the Canadian auto sector,” KPMG Canada partner and national automotive sector leader Dave Power said. “The implications down the supply chain and across the economy will be significant, but the industry, especially the more established players, have dealt with high levels of disruption before.

“That doesn’t make the current tariff environment easier. It just once again calls on the resiliency the industry has built up to be put back into action. From our recent survey and in conversations with automotive leaders, parts suppliers and dealers, it’s clear significant activity is underway to optimize their operations and explore new markets, partnerships and opportunities.”

For the dealer sector, the major challenges aren’t so much about geopolitical and economic pressures as about consumer demand and potential operational and financial issues going forward. According to the survey, shifting consumer demand ranked as dealers’ No. 1 concern, cited by 35% of respondents, followed by industry transformation (32%) and sustainability and supply chain transformation/disruption (29%).

Dealers are expecting that transformation to include deep structural change, the report said. The survey found 96% of dealers said they expect to see consolidation to reduce the number of suppliers, while 92% said brand and design is likely to become less relevant, and 90% expect increased regionalization of the industry — all within the next five years,

In addition, 87% said they expect OEM consolidation to result in fewer automakers, and 84% believe traditional OEMs will be replaced by new entrants to the Canadian market, with China leading the electric vehicle segment.

“Dealers are trying to work out how to remain relevant to customers as auto sales move online and EV powertrains require substantially less after-sales service,” Power said. “It will be extremely important, particularly for dealers, to plan for multiple scenarios.

“Focus on ‘no-regret’ moves such as divesting non-core assets like extra lots or warehouses, strengthening supplier relationships, investing in productivity-enhancing technology and embracing digital, service-focused and hybrid models like agency sales or hub-and-spoke retail will be key.”

OEMs and parts suppliers and manufacturers also see change coming, though maybe not quite as extensive as expected by dealers. The report said 17% of them said are likely to be “completely transformed” over the next three years, with “fundamentally different” business models, products or operations, while 40% percent believe they’ll keep the same business model and products and emerge stronger than before.

Another 12% said they expect to be acquired or go through a consolidation, 19% said they’ll be only minimally affected and 9% said they’re at risk of failure.

Through the uncertainty, KPMG said, manufacturers and suppliers are prioritizing operational stability, with reinforcing supply chains and securing raw materials as their top priority over the next three years, followed closely by boosting productivity and optimizing costs.

The report found those shifts already underway, as 82% of them said they’re actively adjusting their supply chain strategies, 70% are exploring international markets and more than 60% have increased their prices and/or “substantially changed” their product mix in response to the tariff environment.

Joy Nott, a partner in KPMG Canada’s trade and customs practice, said U.S. tariffs have put “intense cost pressure” on the Canadian auto industry.

“The leading auto sector players aren’t just managing disruption on the U.S. border,” she said. “They are also looking to new markets that can offer greater trade certainty. It’s worth remembering that Canada has 15 free trade agreements with 51 countries covering 1.8 billion people and 60% of the world’s GDP.”

OEMs and suppliers are also turning toward technology to help them adapt. The survey showed 69% are investing heavily in artificial intelligence and emerging technologies, 70% have achieved or surpassed their technology adoption targets, 20% reported AI-related productivity improvements of more than 25% and 44% said advanced technology and software integration is the Canadian auto industry’s biggest opportunity in the next three years.

In the report, Power said “there will be no going back to ‘normal’ ” as Canada’s trade relationship with the U.S. has fundamentally changed the automotive landscape, creating “new, uncharted risks and opportunities” throughout the industry.

But, he added, that’s really nothing new.

“The auto sector has been dealing with disruption for years — from supply challenges to new technologies and trade barriers to shifting customer expectations,” he said. “For many sector leaders, the current environment is simply ‘disruption as usual’ — albeit with significantly larger table stakes than normal.”