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Canadian governments’ efforts to woo investment in electric-vehicle manufacturing are starting to bear fruit – especially with one aspect of the supply chain, in one corner of Quebec.

On Monday, General Motors Co. GM-N announced that, in partnership with the South Korean company POSCO Chemical Co. Ltd., it will begin construction on a new $500-million factory in Bécancour, Que. The plant, which GM says will be operational by 2025 and create about 200 jobs, will produce cathode active material (CAM) – a major component of EV batteries that GM will assemble in the United States.

The news was announced three days after the Germany-based chemical multinational BASF announced that it has acquired industrial land in Bécancour, and intends to produce CAM there as well. It is not yet clear which automakers will serve as clients for that plant, which will also recycle EV batteries.

Federal Innovation, Science and Industry Minister François-Philippe Champagne hailed the announcements as evidence that Canada will be able to maintain an integrated automotive sector with the United States as manufacturers electrify their fleets.

Mr. Champagne said that his government will be a “substantial partner” in providing funding for the new facilities, as will the government of Quebec, though he did not specify the share of public dollars. And he indicated that he anticipates more announcements of EV-manufacturing investments in Canada in the coming weeks.

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For now, the plans in Bécancour offer some indication of how – and where – Canada may be finding the most opportunity to secure a role in the fast-developing North American EV supply chain, as automakers boost production in anticipation of growing demand.

Despite Ottawa and the provincial governments of Quebec and Ontario expressing optimism about capitalizing on this country’s combination of natural resources and manufacturing infrastructure to be involved in EV production – from mining through vehicle assembly – and being increasingly aggressive in making that case to automakers, they have not had an easy sell thus far.

Major investments, including all battery-assembly commitments to date, have mostly gone to the United States, owing partly to governments in that country being faster out of the gate and offering generous incentives. The challenge for Canada has been made greater by U.S. President Joe Biden’s efforts to introduce EV purchase incentives partly contingent on the vehicles being assembled in the United States.

However, upstream or midstream components of the supply chain – the processing of raw materials, prior to their usage in vehicle assembly – have been identified by analysts as an area where Canada could make headway. This is in part because of its large reserves of key minerals and high environmental standards relative to other source countries. Automakers would not be penalized by the protectionist measures under consideration in Washington for placing this stage of production outside the U.S.

Cathode active material, which GM says accounts for about 40 per cent of the cost of what goes into the batteries it will be making, has leapt out as a particular opportunity. Its production has been dominated to date by China, but companies now want it produced closer to where they will be assembling batteries for North American use.

GM Canada vice-president David Paterson said in an interview that Canada was particularly well-positioned in this case because, more so than the U.S., it has large reserves of nickel – a major cathode component.

Minerals will primarily still be sourced from overseas when the Bécancour plants first open. But the hope, from both governments and the manufacturers placing bets there, is that the establishment of major anchor clients will help spur more Canadian mining.

Other comments by Mr. Paterson helped explain why it’s Quebec – which has had little by way of auto manufacturing in recent decades, with the Canadian sector almost entirely in Ontario – that has landed these newest investments.

While noting the logistically appealing location of Bécancour, which is on the south shore of the St. Lawrence River and also has good rail and air access, he highlighted Quebec’s abundant supply of relatively cheap, zero-emissions electricity. That’s a major draw for companies launching highly energy-intensive manufacturing processes and wanting to show the environmentally conscious target market for EVs that they will be produced as sustainably as possible, while meeting commitments to transition to net-zero emissions operations.

“This is not an accident,” Joanna Kyriazis, who specializes in EV policy for the think tank Clean Energy Canada, said about which provinces the CAM facilities are going to. Quebec, Ms. Kyriazis said, has for several years been taking a “thoughtful, strategic approach” to building an EV sector, which has included focusing on specific areas – minerals, commercial vehicles and battery recycling – where it aims to compete. That’s already led to growing success in making electric buses and other trucks, which Mr. Paterson also noted.

By contrast, Ms. Kyriazis said, Ontario’s government has only much more recently awoken to the EV opportunity and imperative, if its bigger auto sector is to survive the transition from traditional vehicles with internal combustion engines. Ontario also continued to do much less than Quebec, by way of incentives and regulations, to build a domestic EV market.

To the extent that Ontario has had positive signs about its ability to make that transition, it has mostly been in vehicle assembly, with Ford, General Motors and Stellantis all making commitments in that regard. But there has been some concern about those being jeopardized by the U.S. protectionism.

The hope, from the federal and provincial governments as well as Canadian industry, is that the cathode announcements of recent days – and the other announcements that Mr. Champagne hinted are set to be rolled out – will serve to start anchoring more of a start-to-finish supply chain that firmly establishes both provinces as major players in the integrated continental industry.

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