Over a period of six months, Canada’s auto industry has been brought back to life. Starting last autumn, Ford, General Motors and Stellantis announced C$5.7bn ($4.5bn) worth of investment in Ontario — more than C$4bn of which will re-tool their factories to build electric vehicles (EVs). When the BrightDrop delivery van starts rolling off production lines at the General Motors Ingersoll plant next year, it will become the country’s first large-scale EV operation.

Canada’s biggest ever flurry of auto investment could not have come sooner. Once ranked among the world’s biggest five auto manufacturers, it now fails to crack the top 10. “We were watching the death of our industry by a thousand cuts. But now the pendulum has swung for the first time in over 20 years,” says Jerry Dias, president of Canada’s biggest private sector union, Unifor, which helped secure the deals. He is now speaking with US auto parts companies that are looking to return to Canada.

Upstream blueprint

The first major investments in Canadian electric mobility have brought bigger ambitions to life. The government and auto industry are asserting the country as a serious contender in the race to build the full value chain for next-generation vehicles. It has abundant reserves of battery minerals and is a top-six producer of graphite, nickel and cobalt, according to the Mining Association of Canada (MAC). It places fourth in BloombergNEF’s lithium-ion battery supply chain ranking, behind China, South Korea and Japan which collectively harbour 80% of today’s capacity. 

Ontario is North America’s second biggest auto cluster — trailing only Michigan — and its capital Toronto ranks fourth in CBRE’s latest North American tech talent report.

The Automotive Parts Manufacturers' Association (APMA) says nearly 400 companies want to be part of their Project Arrow, which is building a 100%-Canadian concept EV. “We have stumbled on an incredible auto-tech crossover community,” says APMA president Flavio Volpe. “We have all the elements in place to lead in every single component of the vehicle of tomorrow.”

According to the national statistics office, nearly 70% of the electricity grid is powered by renewables. The bulk is provided by hydropower, which in recent years has been shown to emit greenhouse gases at levels that challenge its classification as ‘clean power’. But trade body WaterPower Canada notes that the carbon dioxide-equivalent emissions generated by the country’s hydroelectricity is on par with wind power, and the methane emissions from its cold reservoirs are lower than those in warmer climates.

It means the country’s green credentials are touted as a drawcard for the energy-intensive activity of battery production – especially as momentum grows globally to regulate emissions in EV production. “We have the potential to produce the lowest carbon battery EV on a lifecycle basis anywhere in the world,” says MAC vice president Brendan Marshall.  

Research firm Benchmark Mineral Intelligence recently told the Canadian parliament that a true leader is yet to emerge in building EV and battery supply chains, and that Canada can create an upstream blueprint. Its combination of minerals, tech capabilities and world-class suppliers, such as Magna, also creates a rare opportunity among legacy auto markets to offset the old-economy job losses inherent in the EV transition. 

Race against time

But for all its potential, Asia’s dominance and Europe’s growing battery capacity are sparking concerns that Canada may miss its window. A recent Clean Energy Canada (CEC) report observes “very limited activity happening at any stage along the supply chain”. Mr Marshall says Canada lacks scaled production of all its battery minerals and that one of its newest nickel mines took 13 years to come online. 

Ontario is vying to attract a company that will build a gigafactory, and hopes the arrival of EV production will help its bid, given automakers’ desire to avoid transporting heavy components. “We are presenting our location to a number of international battery companies that are looking to set up gigafactories somewhere in North America,” Stephen MacKenzie, chief of Invest WindsorEssex, said in July. “We hope to have some announcements in the coming months.” He added that the province is willing to offer incentives and that he has recommended all levels of government collectively cover 20–25% of the value of a battery project. 

The government has chipped in one-third of Ford’s C$1.8bn EV investment, C$46.4m to accelerate battery mineral processing, and C$10m to help First Cobalt open North America’s first cobalt refinery. But it is facing intense pressure to do more. Mr Marshall understands that one-quarter of the national C$8bn Net Zero Accelerator fund has been earmarked for an EV supply chain, but a government spokesperson has told fDi it is only open to firms incorporated in Canada. The proposed 50% corporate tax cut for businesses building zero-emission technologies only benefits those turning a profit. 

CEC’s Joanna Kyriazis says “there is no comprehensive roadmap for … what investments will be made and where along the supply chains.” Lack of a coordinated strategy and public funding is in line with Canada’s hands-off approach to industrial policy. But the industry says to reach its EV potential, the government must step up its commitments. Pointing to the US administration’s $174bn EV package, China’s state-backed industry and European state aid, Mr Volpe says: “We need to stop pretending that we all operate in a free market.”

America: friend or foe? 

Inextricably linked to Canada’s EV future is the US, which buys some 70% of its vehicles, according to the Canadian Vehicle Manufacturers’ Association (CVMA). “The number-one reason for investment in Canada’s auto industry is because we sit right above the world’s wealthiest economy,” says Brian Kingston, chief executive officer of the CVMA. 

To qualify for duty-free sale under North America’s USMCA trade pact, 75% of an EV’s battery must be sourced from the continent. Mr Volpe notes that in a business operating under single-digit profit margins, a 2.5% tariff is not insignificant. The US’s push to cut China from tech supply chains is another plus for Canada’s battery ambitions.

But Ms Kyriazis describes Canada’s relationship with the US as “both collaborative and competitive”, noting that “Mr Biden has made very clear he wants to make batteries and EVs a centrepiece of his economic plan.” The White House has confirmed its willingness to rely on allies for battery minerals. Insiders agree this risks Canada continuing its long history of exporting raw materials without any added value, and makes refining investments the lynchpin of its EV success.

But Canada must move fast, otherwise it could miss a once-in-a-generation opportunity to become a major player in an industry of tomorrow. The stakes could not be higher: “In 20 years from now, if we’ve done this right from a public–private partnership perspective, Ontario and Quebec will be the lead EV cluster in North America,” Mr Volpe says.

This article first appeared in the August/September print edition of fDi Intelligence.