What can feds do to support emerging electric vehicle industry?

Canada’s auto sector made a critical comeback last year as the Detroit Three automakers announced nearly $6-billion to bring EV production north of the border. But after a costly Ambassador Bridge blockade by Canadian protesters and with U.S. President Joe Biden’s Buy American EV tax credits still on the table, Canada’s federal government will need to employ some mic-dropping efforts to truly convince a burgeoning EV industry that Canada remains an ideal place to invest.

There are some big economic opportunities at stake. Around the world, automakers are pouring more and more money into electric vehicles, with plans to spend a huge half a trillion dollars in next five years. The value of the EV battery industry, meanwhile, is expected to exceed $360-billion in the next decade with demand for critical minerals set to grow at least thirty-fold.

Canada has all the ingredients to build a world-class EV sector: not only a strong automaking heritage but also the potential for a battery supply chain that’s been ranked the fifth most promising in the world. And yet, despite some progress in recent years, speed bumps remain.

For starters, Canada lags far behind other regions when it comes to EV sales. While countries like Germany, the U.K., France, and China are seeing EVs make up between 15 per cent and 26 per cent of new car sales, Canadian sales were below six per cent in 2021. This is bad news for Canadian drivers, who are missing out on thousands of dollars in cost-savings per year, not to mention insulation from today’s soaring gas prices. But it also makes it tough for auto and battery makers to justify investments in Canada when the domestic market for these products is still relatively small.

The federal government can help by continuing its rebate program, which makes EVs more affordable, while expanding the program to capture more vehicle classes (such as more SUVs popular with families) along with used vehicles to improve accessibility.  More EVs on the road must also be supported by a comprehensive public charging network across the country.

Because Canada’s car emission rules are tied to America’s, our auto industry has been held victim to the policy pendulum swings of varying U.S. administrations. Meanwhile, carmakers in the likes of China and the EU have benefitted from the certainty of consistent rules. To protect Canada’s clean car future from a potentially disruptive 2024 U.S. election, Canada must adopt a zero-emission vehicle standard that sets a clear, smooth path for Canadian EV sales.

After all, a zero-emission vehicle standard offers something that all emerging industries want: certainty. A charging installation company, for example, can have confidence in its decision to install new charge points in a local shopping mall, while a battery recycling company can justify expanding its operations. It guarantees the market, in turn supporting the industry that relies on it. A zero-emission vehicle standard will also ensure carmakers prioritize Canada for where they sell and build EVs, even if Biden’s tax credit for U.S.-made EVs is enacted.

But Canada’s EV success wouldn’t be complete without a strong domestic battery supply chain to power it. And already it’s losing crucial ground.

China continues to dominate the battery market with 80 per cent of global cell manufacturing, while the EU is on track to capture 20 per cent of the market share by 2025. Meanwhile, the market in North America is heating up, and Canada keeps missing out. Several U.S. states are offering massive incentive packages to land manufacturing facilities, which have helped attract at least US$20-billion in investment, supporting nearly 15,000 jobs to date. With President Biden’s new Infrastructure, Investment and Jobs Act allocating over US$6-billion more to battery supply chain development, Canada’s window of opportunity is nearly closed. The federal government needs to move fast and bring real investment to the table.

And yet, hope persists. While Canada’s auto industry may have hit a few speed bumps, there are some very compelling reasons for EV makers to build their future here. Let’s not let them miss out on what Canada can offer.

This post originally appeared in the Hill Times.

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