Canada’s automotive industry is no longer facing an existential threat from the transition to electric vehicles, as it was just a year or two ago.
Wednesday’s announcement that the automaker Stellantis NV will partner with South Korea’s LG Energy Solution to build a $5-billion EV battery-assembly plant in Windsor, Ont., is proof enough of the sector’s resilience.
Billed as the single largest investment in Canadian automaking since the 1980s, if not ever, it should not only provide an estimated 2,500 jobs at that new facility but help protect many existing ones, including in parts manufacturing and at Stellantis’s existing vehicle-assembly plants in Ontario.
Combined with other, smaller recent commitments – from automakers converting some of their conventional vehicle-assembly lines in Ontario to produce EVs, to a pair of planned facilities to produce cathode active material in Quebec – it means Canada will at least continue to have a significant place in an integrated continental manufacturing sector.
But it’s not time for a victory lap just yet. There is a chance here to get closer to the auto sector’s glory days, not just preserve the shrunken version to which it was reduced in recent decades.
The question is whether Canada can leverage the big new investment to develop a full supply chain, from mining of critical battery components all the way through battery recycling. Governments have talked a lot about that but not yet developed a comprehensive, quickly actionable strategy around it.
That’s not to take anything away from what Canadian politicians have done lately to secure various new building blocks for that supply chain and especially an anchor investment like the one announced this week.
The competition from U.S. states has been stiff, as global auto giants rapidly put down North American roots for EV manufacturing, in anticipation of a large spike in demand. And the prospect of protectionist EV purchase rebates sought by U.S. President Joe Biden, which would be partly contingent on the vehicles being made in America, has added to the challenge.
Canadian governments’ willingness to subsidize some of automakers’ costs has naturally played a role in that. That includes many hundreds of millions of dollars each from Ottawa and Queen’s Park toward the Stellantis-LG venture, although the exact contributions have not yet been specified. But it’s not as though other jurisdictions haven’t been offering comparable sums; that’s long been part of the game in this sector, and the United States has often played it more enthusiastically than Canada.
More than that, there has been a new-found urgency with which governments here have courted investments. François-Philippe Champagne, the federal Industry Minister, has by all accounts been particularly energetic on that front since taking over that job early last year – bouncing around the world to aggressively wheel and deal with the automakers.
And although Doug Ford’s Ontario government was initially slow to warm to the EV transition’s economic potential – with Quebec outpacing that province on some fronts, despite much less automaking infrastructure to begin with – it has significantly scaled upped its efforts.
Crucially, despite any political differences, the two levels of government seem to have been working together in lockstep. That’s made for a more compelling pitch than previously about the advantages that places such as Windsor offer. Those include a skilled work force, clusters of nearby parts suppliers, ideal geography and logistics for supply chains on both sides of the border, potential nearby access to critical minerals and a clean supply of electricity relative to most U.S. jurisdictions.
That kind of hustle will continue to be much needed. Among other possible near-term investments, there are a few other battery-assembly plants involving major automakers up for grabs – any of which would provide another huge boost.
The more anchors there are, though, the more there will also need to be sophisticated plans to build around them.
The most glaring need in that regard is on mining and refining critical minerals, where there has been less progress thus far than on the manufacturing side.
That could change now that large would-be clients for the minerals are moving in. But those clients will initially be sourcing most minerals from overseas.
To have much chance of domestically supplying them within a decade or so, work needs to move swiftly on building infrastructure around mineral reserves; on balancing environmental protections and regulatory expedience; on building strong partnerships with Indigenous communities; on figuring out how much to subsidize projects and promote domestic ownership. It also means determining which reserves of key minerals – among them nickel, cobalt, lithium and graphite – offer the most competitive advantage and merit prioritization.
While the manufacturing side is moving along more swiftly, there are intricacies there as well. That includes determining what supports may be needed to enable parts manufacturers, accustomed to supplying for traditional internal-combustion engines, to make components of electric batteries instead.
There needs to be some thought, too, to parlaying sectoral growth around multinational investments into the rise of homegrown EV manufacturers – especially for electric vehicles and trucks, where there are several burgeoning players, such as Quebec’s Lion Electric, making waves.
And it means being diligent about preserving existing advantages. That applies especially to the available supply of clean electricity, which requires a lot of planning to meet demand that will greatly rise amid electrification of transportation, buildings and industry.
All of this becomes a little less abstract with each new EV-making deal that’s inked – and a lot less so, when it’s something as significant as this week’s.
But it’s not all just going to come together because a few big pieces are in place. There’s a great deal of work to be done, if Canada wants to not just survive but thrive in the transition to zero-emitting vehicles rapidly taking shape.
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