When the federal government announced a $5-billion commitment to the Net Zero Accelerator in last month’s budget, it caught the attention of Canada’s auto sector. The program, intended to speed up decarbonization in a range of industries, is a “game-changer for [the] Canadian zero-emissions vehicles business,” according to a budget-day tweet from Flavio Volpe, head of the Automotive Parts Manufacturers’ Association.

But a month later, the reaction from the electric-vehicle industry is decidedly mixed.

While Innovation, Science and Economic Development Canada told The Logic that some of the Net Zero Accelerator funding will go toward developing an end-to-end battery ecosystem in Canada, a recent report from Clean Energy Canada echoes what those in the industry said in a series of recent interviews: the program is ambitious, but if the federal government is serious about building a domestic EV battery industry, it won’t be nearly enough on its own.

The Liberals’ $5-billion, seven-year budget pledge added to a December 2020 announcement of $3 billion to be spent over five years. The influx makes the Net Zero Accelerator one of the better-funded government initiatives among a slew of budget proposals that added tens or hundreds of millions of dollars to programs like the supercluster initiative, Industrial Research Assistance Program and Critical Battery Minerals Centre of Excellence. 

The government has said it plans to use the accelerator, which draws its funding from the Strategic Innovation Fund, to transform “key sectors” such as steel, aluminum and cement, and speed up clean-technology adoption for the auto and aerospace sectors. While it has yet to announce any funding through the accelerator, lobbying records show that the Net Zero Accelerator has attracted preliminary attention from at least one oil company, as well as the cement industry. 

Though the term “accelerator” is often used for programs that mentor startups, ISED said the Net Zero Accelerator would not offer any formal mentorship, outside of program analysts that monitor for compliance and help companies with the claims process. 

Mohammad Hussain, speaking for Innovation Minister François-Philippe Champagne, told The Logic that the program is designed to create middle-class jobs and make Canada a top destination for investments in clean technology. Champagne’s office pointed to almost $6 billion in private-sector investments from automakers as proof the government’s policies are “showing results.”

The auto sector, meanwhile, is reaching a crucible. Global automakers have announced plans to pivot to electric vehicles, opening a window for Canadian companies to jump in and supply parts that have never before existed at this scale. Those in the industry said government funding could be the lifeline that Canadian firms need to compete—if the money is deployed efficiently.

Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, said the federal government and provincial governments must both be prepared to move quickly with funding and be flexible to compete with other countries clamoring for business. 

“As the industry pivots to electrification … Canada has to make a compelling case to global automakers,” said Kingston, whose group represents Stellantis, Ford and General Motors. 

“The transformation right now underway in the auto industry is so significant and changing so quickly. Just one example is when you look at battery chemistry, it isn’t a foregone conclusion in terms of what battery chemistry will ultimately be the prevailing technology that we see in vehicles on the road. So there has to be flexibility.”

The amount of money required, though, is daunting. U.S. President Joe Biden’s plan—a goliath US$174-billion spending campaign, promising to splash out on half a million chargers and other consumer incentives—is just one of the high-stakes EV bets governments around the world are making. The Clean Energy Canada report notes China, Japan and South Korea currently dominate global battery production, while the EU has invested over €6 billion in its supply chain with the goal of being self-sufficient in EV batteries by 2025. It’s a stark warning about the scale of spending necessary to catalyze a Canadian industry. The Clean Energy Canada report said it will take $15 billion in public funding just for an effective domestic battery supply-chain fund. 

There’s also the challenge of execution. Beyond the enormous expenditure, the report adds that the fund must be accessible and work expediently, “something the existing Strategic Innovation fund has historically struggled with.”  

Patrick Gervais, vice-president of marketing and communications at Lion Electric, said applying to the Strategic Innovation Fund seemed to be a slow process for the Quebec company at first, as executives tried to navigate which program to pursue. But once the process began, things sped up over five or six months, he said. Gervais said the company was ultimately happy with the pace of the government’s due-diligence process and would consider applying to the new Net Zero Accelerator part of the fund in the future—especially given that getting a single demo vehicle to a potential customer can cost hundreds of thousands of dollars, not to mention the cost of safety certifications like Altoona Testing.

Ontario-based Electrovaya, which makes lithium-ion batteries, has an application pending with the Strategic Innovation Fund. CEO Sankar Das Gupta said the Net Zero Accelerator gives him hope that Canadian companies may not be “left behind” during the electric-vehicle transition. Das Gupta hopes to make the case to the government that Electrovaya will have an outsized impact on reducing emissions by focusing on industrial vehicles, which run more hours per day than the average consumer’s car that’s sitting in a workplace parking lot or driveway.

In the past, Das Gupta said, Canadian companies sometimes struggled to get experimental vehicles on the road due to policies that didn’t hamper European or U.S. competitors as much.

Das Gupta calls this the Canadian government’s “branch plant” approach to investing, which favours established, multinational auto companies that are headquartered abroad—rather than homegrown Canadian brands.

Greig Mordue, an associate professor at McMaster University, is skeptical that the new Net Zero Accelerator can shake that “branch” mentality for electric-vehicle research as the government understandably looks to companies that can provide the most stable jobs. 

“Innovation occurs in absolute proximity to the head offices of the industry’s global leading firms, and the global leading firms are the Volkswagens and General Motors and Toyota, BMW—so that means it’s Germany and Japan and Michigan,” said Mordue, whose background includes roles in government and at Toyota Motor Manufacturing Canada. Mordue’s research on autonomous-vehicle patents suggests that while Canada had an early lead in developing autonomous vehicles, “they all eventually reverted to Detroit, Stuttgart, Japan and Korea … [and] California.” The same could happen to electric vehicles, he said.

That echoes the question within the industry of how the federal government will decide whether to favour established players or upstarts as it spends. 

Asked if the program would dedicate a certain amount of funding to Canadian founders or startups, ISED said the Net Zero Accelerator would follow the same rules as the Strategic Innovation Fund—which requires a minimal total project size of $20 million—and which is “open to all companies incorporated in Canada and supports the investment attraction of key global mandates while also scaling up Canadian-owned companies.” 

Mike Andrade, CEO of Morgan Solar, was part of a cleantech Economic Strategy Table that previously called for the government to focus funding on “high-potential” domestic firms in fields and technologies where Canada had existing strength, rather than just reducing the oil and gas industry’s emissions.

Andrade said he hopes the Net Zero Accelerator funders will go beyond funding large multinational incumbents in the auto industry and other cleantech sectors.

“The areas where I feel that we are underinvesting are the new, disruptive technologies,” said Andrade. “There’s not the lobbying organizations in the same way, there’s not the capital budgets. ”

The Canadian Urban Transit Research & Innovation Consortium is proposing two vehicle projects for the Net Zero Accelerator, shifting from applications the group had prepared for another part of the Strategic Innovation Fund, Stream 5. CUTRIC CEO Josipa Petrunic said she’s hoping the broad mandate of the Net Zero Accelerator will encourage a wider range of companies to apply, compared with past programs that were auto-specific.

For instance, said Petrunic, government funders have in the past focused on technologies that could immediately reduce greenhouse-gas emissions, ignoring innovations that could have a big impact on emissions further down the line. 

“They ignored, therefore, all the software innovation, data innovation and cybersecurity innovation that actually would have resulted in emissions reduction today,” she said. 

Petrunic warned against excessive bureaucracy, but said some simple rules should ideally be attached for companies that get the net-zero funding, including an accounting of greenhouse-gas-emission savings, job-creation projections that meet a standard definition, and even caps on executive pay to encourage larger legacy companies to pull as much funding as they can from their own margins before looking to the government’s coffers.