Question Period Note: DELAYS AND CHALLENGES IN CANADA’S AUTOMOTIVE INDUSTRY’S TRANSITION TO ELECTRIFICATION

How are delays and challenges in the automotive industry’s transition to electric vehicles (EVs) impacting Canada’s investments in the domestic electric vehicle (EV) battery value chain?

•Over recent years, federal and provincial government collaboration with industry has attracted significant investments to support the transition to electric vehicle production and to establish a Canadian battery supply chain.

•The Government of Canada recognizes that any industrial transformation takes time, and that responsible risk-taking is part of supporting innovation in a competitive global economy.

•While the timeframe for specific projects may vary with market conditions, Canada’s automotive industry remains well positioned for long-term success.

The Canadian automotive manufacturing sector supports over 121,000 direct jobs, contributed $17.1 billion in 2025 to Canada’s gross domestic product, and is one of the country’s largest export industries. The sector is anchored by the presence of five automotive manufacturers: Stellantis, Ford, General Motors (GM), Toyota, and Honda— that are supported by a diverse supply chain of nearly 700 automotive parts manufacturers across Canada. In 2025, Canada produced over 1.2 million vehicles, ranking 14th globally in vehicle production.

In light of the global transition to electric transportation, the government has stepped up in recent years to attract key investments to produce EVs, as well as batteries and battery materials, through a series of measures, including the Strategic Innovation Fund (now Strategic Response Fund), Special Contribution Agreements (ISED), as well as manufacturing investment tax credits (Finance Canada) Some of the announced investments by the industry include:

• NextStar Energy (LGES), investing $5 billion for an EV battery manufacturing plant in Windsor, Ontario;

• PowerCo, investing $7 billion for a cell manufacturing plant in St. Thomas, Ontario;

• GM/POSCO, investing $600 million to produce cathode active materials in Bécancour, Quebec.

While these generational projects will establish the foundation for long-term growth, the automotive industry is facing challenges due to several factors including U.S. tariffs, the significant cost and time needed to transition to EV production, compounded by a slowdown in the growth of global EV demand, which has resulted in companies revisiting their investments in EV and battery production. As is the case in other jurisdictions, timelines and manufacturing plans for some of the announced investments in Canada may be adjusted to ensure assembly plants are prepared for long-term success. ISED remains in close communication with firms in which the government is investing, including regarding projected timelines for development, completion, and production.

Within the context of present uncertainties and challenges facing the sector, on February 5, 2026, the Prime Minister announced a new automotive strategy to protect jobs, attract investment, and position Canada as a global leader in next generation vehicle manufacturing. The strategy includes measures to accelerate investment in auto manufacturing, strengthen domestic demand for EVs through new affordability and charging infrastructure programs, maintain counter tariffs to protect Canadian manufacturing, and modernize trade and emissions frameworks to support long term competitiveness and electrification.

•Canada has everything it needs to lead in electric vehicle (EV) and battery manufacturing: strength in automotive manufacturing, a talented workforce, green energy, and critical minerals.

•The announced investments by the industry will establish the foundation for long-term growth, even as the automotive sector is currently facing challenges due to factors including an uncertain global economic environment, a slower than anticipated growth in EV demand, and the high cost and significant time needed to support electrification.

•Consistent with global trends, this has resulted in companies revisiting the timing and scope of their investments, including for some announced EV and battery projects in Canada.

•Rest assured, the Government of Canada is taking concrete action to support the sector as it navigates these challenges. Canada’s automotive strategy includes supporting automotive production with up to $3 billion through the Strategic Response Fund, strengthening the automotive remission framework, maintaining counter-tariffs to protect Canadian manufacturing, and implementing new affordability and infrastructure measures to build domestic EV demand.