Capturing Canada’s Electric Vehicle Opportunity

Canada has what it takes to become a global EV powerhouse. But to keep up with the competition, we must leverage our wealth of resources, from clean power to skilled workers and sustainably produced critical minerals.

crowd of General Motors workers posing for the opening of Canada's first all-electric manufacturing plant in Ingersoll, Ontario.

Deal after Deal

Canada’s list of achievements is noteworthy: launching the country’s first full-scale electric vehicle assembly plant, landing a trio of highly sought-after EV battery gigafactories from VolkswagenStellantis/LG, and Northvolt, and being considered by Honda for an $18-billion EV plant. It’s clear to anyone watching that Canada is looking to earn itself a place in the global clean economy as a producer of the high-value cars of the future. 

For about two years now, senior federal and provincial officials have stood alongside industry to announce what feels like investment after investment, whether for a rare earth minerals R&D plant in Saskatchewan, a battery enclosure plant in Southwestern Ontario, or a battery cathode facility in the emerging battery hotbed of Becancour, Quebec. All in all, investments in Canada’s EV sector have added up to a whopping $37.4 billion—$30 billion of that added in just the last two years. More impressively, this quintupling of investments between 2021 and today has happened within a broader auto industry that was otherwise in decline

The enthusiasm from investors, which include major foreign and domestic heavy-hitters like Magna, as well as federal and provincial governments, is well-founded. In 2022, Bloomberg moved Canada up three spots—from fifth to second place in its global ranking of countries’ overall lithium-ion EV battery supply chain potential, citing, in part, our mineral resources and large hydropower capacity in addition to other competitive factors. Across the ranking’s five key themes and out of 30 leading countries, Canada was ranked third for access to key raw materials; fourth for infrastructure, innovation, and industry; sixth for environmental, social, and corporate governance considerations; eighth for the manufacturing of battery cells and components; and tenth for local EV and energy storage demand—the only country to land in a top-ten spot across all five themes (a feat unmatched even by China, the world’s unequivocal leader in battery production). This year, Canada dethroned China as the world’s most promising EV battery-making destination—the first of any country to do so in the history of Bloomberg’s ranking—thanks to consistent manufacturing and production advances and policy follow-throughs made since.

And it’s potential that, if realized, could support 250,000 direct and indirect jobs by 2030 and add $48 billion in GDP annually, according to a 2022 report from Clean Energy Canada and the Trillium Network for Advanced Manufacturing. Fortunately, our timing could be just right: Nearly all the enabling conditions Canada needs to succeed are there, including global and domestic demand for EVs and a supportive trade and climate policy environment across the continent.

The Playing Field for EVs in Canada

Today, EVs already make up 14% of all new cars sold globally, while 12% of new cars sold in Canada in 2023 were electric. In certain Canadian provinces, namely B.C. and Quebec, it’s closer to one in four. What’s more, battery-electric vehicles, specifically, have already passed their crucial tipping point of 5% of new vehicle sales in 31 countries, a pivotal point after which countries can expect rapidly accelerating uptake en route to mass adoption. 

Indeed, global sales of all passenger zero-emission vehicles have been growing exponentially, averaging an annual growth rate of 65% between 2018 and 2022—making it the only key driver of the energy transition on track to meet its 2030 target for limiting global warming to the agreed target of 1.5 degrees, according to a World Resources Institute report.

And with a protectionist “Buy North American” provision in the US’ sweeping Inflation Reduction Act, which requires EVs to use a percentage of North American materials in their batteries to qualify for its US$7,500 EV consumer tax credit, Canada has now also been given preferential access to supply battery minerals, materials, and components to the world’s largest auto market. In short, the demand for electric vehicles is there and growing. The question is whether we have the right policies in place to support a fledgling new battery sector—and for the most part, we do. 

Since 2022, Canada has unveiled a suite of policies that support its EV battery ambitions. That includes the country’s first-ever Critical Minerals Strategy, backed by $3.8 billion in federal support to increase the world’s supply of responsible, Canadian-sourced minerals; a draft of the proposed Clean Electricity Regulations that would see electricity grids across the country reach net-zero emissions by 2035, ensuring our clean power advantage far into the future; and, more recently, a nation-wide EV Availability Standard that will require automakers to sell 100% zero-emission passenger vehicles by 2035, a move that could boost domestic EV demand while ensuring a healthy supply of affordable EVs for Canadians looking to go electric (whether for the environment or to save money). The latter is also a proven policy that both of the country’s leading EV provinces and 17 U.S. states have successfully adopted

With several major projects in the pipeline and a policy environment that recognizes the scale of the opportunity, Canada is off to an encouraging start. But to realize our full battery supply chain potential—along with the jobs and economic benefits they bring—amid growing global competition, there are still several challenges we need to address.

Slow Permitting, Stiff Competition, and Other Challenges 

For one, Canada is not known for making quick decisions. Our slower permitting and impact assessment processes have—and could surely continue to—deter companies looking to scale up quickly from investing here. 

Another challenge Canada faces is fierce competition with global industrial powers, like the US and China, for major investments. China’s batteries are now as cheap as they get, and realistically, Canada will likely not be able to compete on cost. And the US, with its generous cleantech tax credits and massive domestic auto market, could also prove difficult for investors to resist (though a 2024 US election introduces some uncertainty). 

Canada’s abundant clean electricity—an advantage that neither the US nor China currently have to leverage—is a card that Canada should continue to play. In fact, news releases from every single company that Canada landed a major investment from—including UmicoreGM/PoscoVW, and Northvolt—explicitly highlight the country’s “clean,” “renewable,” or “low-carbon” energy as having been a big draw in their investment decision.

But to hold onto one of its biggest competitive advantages, Canada must ensure its electricity supply remains clean and abundant into the future, including as residential users adopt cleaner heating and transport technologies like EVs and heat pumps. 

Ontario already got a taste of what poor energy planning could result in when it lost out on a $2.5-billion plant from LG Chem that would have brought up to 1,500 to the region. The reason: not having enough electricity. Meanwhile, Quebec—currently responsible for producing one-third of the country’s total electricity supply—has similarly warned that it will run out of surplus electricity come 2027. 

Lastly, despite Canada’s mineral resource wealth, very few of Canada’s metals and minerals are actually making their way into batteries right now. Many new mines and associated infrastructure will have to be developed if Canada wants to capture any significant EV battery mineral market share by 2030. While there are some signs of action, like the federal government’s $3.8-billion Critical Minerals Strategy and 30% critical mineral exploration tax credit, if Canadian governments want to seize the battery mineral opportunity, they need to pick up the pace. Developing the up- and mid-stream parts of the battery supply chain is key to spreading out the economic benefits across the country, such as to Indigenous communities in our mineral-rich North, beyond just those in Canada’s traditional manufacturing hotspots Ontario, Quebec, and Manitoba. It is also important to avoid future bottlenecks, like the pandemic-related supply chain snarls that hit Canada particularly hard compared to its North American peers. 

Of course, a Canadian battery supply chain will also require workers from start to finish. While Canada is home to a vast and highly skilled workforce, various industries have been struggling to fill jobs left by retiring baby boomers.

Finally, Canada is a world leader in battery research and innovation, with impressive EV research centres dotted near its industrial centre, as well as one as far out as Nova Scotia. But as we continue to embrace foreign investment, for which we were ranked third in the OCED in the first quarter of 2023, our governments must not forget to also invest in its homegrown companies in the sector, like BC-based Nano One Materials, Ontario-based battery recycler Li-Cycle, and many others. 

What’s Next for Canada

As Canada heads to phase two of its battery industry building efforts, it should focus on clearing bottlenecks and staying competitive. The first step is speeding up its permitting process.

Review processes for permits and impact assessments must be made more predictable and efficient across the battery supply chain—whether it’s for the opening of a new mine or a new battery recycling plant—if Canada wants to unlock its battery minerals and materials wealth and keep highly-sought investments from flowing south or elsewhere. And it must do so with meaningful Indigenous participation and consent while keeping with its high ESG standards—a strength that should be embraced. 

Second, Canada should finalize its proposed Clean Technology Manufacturing investment tax credits—a measure that would help incentivize companies looking to invest in Canada’s battery supply chain while aiding in competition with similar measures offered in the US. 

The hard lesson learned in Ontario was that, in addition to keeping the country’s electricity grids clean, we also need to be growing them. Building out Canada’s clean electricity capacity will help ensure the country can continue saying yes to clean investments, bringing jobs to Canadians and driving the future economy. And as for what type of generation, a recent Clean Energy Canada study found that electricity from wind and solar are already among the cheapest to produce and are set to get cheaper, even when battery costs are included. The choice should be easy.

Moving forward, we also need to make sure that we have the right workers with the right skills in the right places. We can do so by finding ways to mobilize and prepare workers for a lucrative future in the EV and battery industry, such as through EV-focused college training programs, of which there are already several.

Last but not least, Canada should also invest in its homegrown battery leaders that need funding to scale up. If Canada can succeed at all these steps, we will have a place on the global stage as a leader in EVs.

This post was co-authored by Sicellia Tsui and originally appeared in TheFutureEconomy.ca.

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