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In November, Ontario Premier Doug Ford set a goal of building 'at least' 400,000 EVs in the province by 2030.REBECCA COOK/Reuters

Before the 1965 Canada-U.S. auto pact, this country ran a chronic trade deficit in cars. As station wagons filled the driveways of postwar North America, Canada’s auto industry remained largely shut out of that vast car-crazy country to the south.

The auto pact changed everything. In exchange for free trade in motor vehicles, the big Detroit-based auto makers agreed to produce at least one car in Canada for every one they sold here. The plan worked so well that, with the later arrival of Japanese auto makers to Ontario, the province overtook Michigan in motor-vehicle production by 2004 with almost 2.7 million light vehicles rolling off the assembly line here.

Alas, as the loonie surged from near 60 US cents in the early 2000s to parity by 2011, Canada lost its competitive edge in autos. Production has declined steadily in the past decade, hitting a post-auto pact low last year, when barely 1.1 million cars and light trucks rolled out of factories here, according to a report last week from DesRosiers Automotive Consultants.

What’s more, the big three Detroit-based auto makers – General Motors, Ford and Stellantis – produced only 383,000 vehicles in Canada in 2021, about 240,000 fewer than they sold in this country last year, according to Canadian Vehicle Manufacturers’ Association data.

Global supply chain shortages exacerbated a drop in production here that had been written in the cards as new investments largely bypassed Canada after the Great Recession. Even before the COVID-19 pandemic, Canada’s trade deficit in motor vehicles and parts had surged to $22-billion in 2019. It fell to $13-billion in 2020, as North American production fell sharply. But the trade deficit soared again in 2021.

The recent retooling of GM’s Oshawa, Ont., plant to produce gasoline-powered Chevrolet Silverados and GMC Sierras to meet North America’s seemingly insatiable demand for pickups will help boost Canadian production this year. But the future of Canada’s auto industry will mostly hinge on how successfully it manages the transition to electric vehicles. So far, things are not looking great.

Last week’s news that GM will invest US$7-billion in Michigan to produce electric versions of the Silverado and Sierra pickups and build a new battery cell plant in the state has increased pressure on the federal and Ontario governments to boost incentives here. The GM investment includes US$824-million in state tax breaks.

While Ford and Stellantis announced plans in 2020 to start building EVs in Ontario by mid-decade, backstopped by federal and provincial subsidies, the province still risks becoming an also-ran in EV and battery production unless it outbids the U.S.

In November, Ontario Premier Doug Ford set a goal of building “at least” 400,000 EVs in the province by 2030 – an objective that sounds ambitious (it currently produces none), but which would still not make Canada a major player in zero-emissions vehicles given the pace of expansion elsewhere. That expansion is being underwritten by massive state subsidies, raising the price of admission for Canada.

Meanwhile, the retooling of Ford’s Oakville, Ont., assembly plant and a Stellantis factory in Windsor, Ont., to produce EVs remains far from a sure thing. While U.S. President Joe Biden’s plan to offer US$12,500 rebates on American-built EVs is currently stalled in Congress, the threat of Buy American incentives serves to deter auto makers from making hard commitments to Canada.

In 2021, Ford, GM and Toyota announced billions of dollars in new investments to build EV batteries in several U.S. states. Ontario and Quebec still appear to be in the running for one or more battery plants – with Windsor placing its bets on an investment by Stellantis. But, over all, Canada is struggling to keep pace.

The Detroit-based auto industry’s switch to all-electric vehicles and batteries is by no means a guaranteed success. GM, Ford and Stellantis are still light years behind Asian and European rivals in EV production and sales. Tesla sold 340,000 EVs in the United States in 2021; GM sold a mere 25,000.

What’s more, the North American industry remains well behind China in building the supply chain required to scale up EV production, with global shortages of lithium and cobalt looming by 2025, according to the Paris-based International Energy Agency.

Despite all the talk in Ottawa and at Queen’s Park, Canada is barely on the radar when it comes to the global EV value chain, which includes everything from critical mineral mining and refining to cathode and anode manufacturing and EV assembly.

Ottawa last year set a “mandatory target” of 100-per-cent zero-emissions vehicle sales in Canada by 2035. It will take a seismic effort on the part of governments here to ensure that at least some of them are made in Canada.

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