Question Period Note: Automotive Industry (ZEVs)

What is the Government of Canada doing to support Canada’s automotive sector?

• Canada’s strength in automotive manufacturing, combined with its world-class information technology and its natural resources, position Canada to lead in designing and building the vehicles of the future.

• As the North American automotive sector pivots to the production of zero-emission vehicles (ZEVs), battery manufacturing investments will be a critical component of the new value chains.

• Investments building Canada’s capacity in battery production will have significant benefits for Canadian workers and the Canadian economy, both now and in the future.

• Canada is supporting the transportation sector and building a green economy by investing to achieve net-zero greenhouse gas emissions by 2050.

The Canadian automotive sector supports over 500,000 direct and indirect jobs, contributed $16 billion in 2022 to Canada’s gross domestic product, and is one of the country’s largest export industries. Overall, Ontario is the second-largest automotive manufacturing jurisdiction in North America.

Canada’s automotive sector represented 15 per cent of total manufacturing exports in 2022. The sector depends on the U.S. market, with about 95 per cent of vehicles produced destined for the U.S. The Canada-United States-Mexico Agreement (CUSMA) outlines a renewed understanding between the parties on the importance of these trade relationships.

It is projected that the global sales of electric vehicles (EV) will be nearly 5 times higher in 2030 than in 2022, and Canada is well positioned to be a major player in EV production. Building off the Mines to Mobility initiative launched in 2019, Canada is in the driver seat, with investments that have been secured across the EV supply chain that will benefit all Canadians. Canada’s continued strength in automotive production is a key pillar in building a resilient, prosperous, and healthy future for Canadians. As part of these efforts, the Government of Canada released, in April 2022, its 2030 Emissions Reduction Plan, as well as Budgets 2022 and 2023, which, all together, propose measures to create thousands of new, good-paying jobs and grow the economy, all while fighting climate change.

Potential benefits to Canada from these investments include:
• Anchoring the future Canadian supply chain: Around 50 per cent of the battery’s total value accrues in battery cell and pack production activities—anchoring a significant portion of value-added production in Canada.

• Accelerating investment across the value chain: Battery manufacturing activities generate important demand for Canadian critical minerals and can help attract additional processing activities to Canada.

• Promoting growth in the automotive sector of the future: Integration between battery and automotive manufacturing activities can help make Canada an even more attractive investment destination for future EV assembly and parts manufacturing.

• Securing good jobs for Canadians: Battery ‘gigafactories’ typically employ thousands of people, create valuable economic spin-off benefits for local communities, and support even more good jobs across their supply chains.

• Supporting the shift to a net-zero economy: The shift to using batteries and EVs is a vital part of Canada’s plan to reach net-zero by 2050, and will help to reduce pollution across Canada.

The automotive sector has been affected by an ongoing shortage of semiconductors and other supply chain disruptions which has limited production capacity and reduced sales. Several factors have played a role in driving the semi-conductor shortage, including increased demand for consumer electronics, supply chain issues, natural disasters, and COVID-19. With current demand still exceeding supply in the automotive industry, and no new rapid supply for hard-to-procure components such as semiconductors, rare earth metals or other battery elements, supply chain constraints are likely to continue through 2023. To address this, automakers and suppliers plan to accelerate the establishment of their own production and supply chains where possible, a trend we are seeing in Canada as well.

• The Government of Canada supports manufacturers that want to embrace the electrification of transportation and build Zero-Emission Vehicles (ZEV), right here in Canada.

• The biggest players in the automotive industry have announced investments in Canada: Ford, Honda, GM and Stellantis have committed billions to growing their businesses here.

• The government is also attracting anchor investments in battery material processing and cell manufacturing to build a domestic battery ecosystem. The battery-related industry’s announced investments include:
- PowerCo (Volkswagen): to establish an electric vehicle battery manufacturing plant in St. Thomas, Ontario (details to come);
- NextStar Energy (Stellantis/LGES): $5 billion for an electric vehicle battery manufacturing plant in Windsor, Ontario;
- GM/POSCO: $500 million to produce cathode active materials in Bécancour, Quebec; and
- Umicore: $1.5 billion for a battery materials plant in Loyalist, Ontario.

• Potential benefits to Canada from these generational investments include anchoring and accelerating investment across the value chain, promoting growth in the automotive sector of the future, supporting the shift to a net-zero economy and, securing good jobs for Canadians.