The Big Read

Canada’s electric dream: Are government incentives and smart R&D enough to build a domestic EV industry?

This is the second in a series taking a deeper look at the landmark deal to bring electric vehicle production to Ontario. In the first installment, we reported on what the deal means for auto workers. In the third, industry executives and policy experts share their recommendations for getting Canada’s EV industry into gear.

OTTAWA & HALIFAX — When Ford declared last week that it would become the first automaker to produce consumer electric cars in Canada, announcing a $1.8-billion endeavour run out of the Oakville, Ont. plant, it was the best news the Canadian auto sector had received in some time. The record-high spend for the sector—born out of negotiations with Unifor, the union representing Ford’s workers—is seen as a pivotal moment for Canada in the shift away from petrol-sipping cars. 

The federal and provincial governments will each contribute $295 million to Ford’s project. “Today’s investment marks the beginning of zero-emission-vehicle manufacturing in Canada,” Industry Minister Navdeep Bains, a former Ford accountant, said at the announcement, “and secures Canada’s place in a cleaner and more sustainable global automotive ecosystem.”

Talking Point

Ottawa hopes Ford and Chrysler’s multi-billion-dollar investments in making electric vehicles in Canada are only the start of the auto sector’s new green future. A vibrant innovation ecosystem of researchers and firms working on batteries, charging equipment and other parts of the supply chain holds promise. But with consumer interest in the cars still low worldwide and practical challenges to production, it’ll take more than hefty government incentives and landmark deals to make Canada an EV powerhouse.

That was just one piece of a bigger plan to incentivize EV production and sales in Canada. On Thursday, Unifor president Jerry Dias announced another tentative agreement—Fiat Chrysler will spend up to $1.5 billion to build electric or hybrid vehicles at its Windsor, Ont. plant, fuelled by as-yet-unspecified government incentives. The union’s next negotiating target is GM. 

Ottawa has a consumer-facing plan, too. Bains’s Liberal federal government wants zero-emission vehicles to make up 10 per cent of light-duty sales by 2025, and 100 per cent by 2040; last month’s throne speech promised measures to make them more affordable. The hope is that auto manufacturers will follow consumers in making the transition to EVs. A zero-emission-vehicle strategy prepared by Innovation, Science and Economic Development Canada (ISED) in March claimed the electrification of the auto industry, as well as aviation and rail, “represents an opportunity for Canada.” 

With its new focus on EVs, Canada is joining a global convoy that’s gaining momentum. To date, 13 countries have set policies to phase out the manufacturing and sales of combustion engine vehicles, and 31 cities and regions have done the same. In interviews and op-eds, Bains has made the argument that Canada is well positioned to lead in the EV sector. Most of the components for a domestic EV value chain already exist within Canada—from essential raw materials and a robust R&D and startup network for batteries to plants that churn out tens of thousands of cars a year. The government is hoping manufacturing will be the key link in that chain. By incentivizing car makers to build their electric models here, Canada may be able to tie together those disparate strengths. 

The question is whether having the parts naturally leads to the whole: a fully fledged electric-vehicle industry. Consumer interest in battery cars is still low, at just five per cent of newly registered vehicles in 2019. And with plants in China, Germany and the U.S. already set to produce EVs for leading manufacturers, some worry that Canada is late to the game. Between the Ford deal, rebate schemes and funding programs for battery innovation, Ottawa has already bet close to $1 billion on the burgeoning industry. But is it enough to entice companies to set up shop—and carve out a leading role for Canada in the global EV sector?

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