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?

• The Government of Canada is committed to the automotive industry’s transition to electrification, while creating and maintaining good jobs, promoting economic growth and enabling a shift towards a net-zero economy.

• Federal and provincial government collaboration with the industry has attracted over $40 billion in announced investments to transition to electric vehicle (EV) production and to establish a Canadian battery supply chain.

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

• While the implementation timeframe may vary with market conditions, the companies investing in Canada remain committed to their projects.

The Canadian automotive sector supports nearly 550,000 direct and indirect jobs, contributed $18 billion in 2023 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, GM, Toyota, and Honda.

In light of the global transition to zero-emission vehicles (ZEVs), Canada has stepped up to compete for key investments to produce EVs, as well as batteries and battery components. The government has recently attracted large anchor investments in ZEV manufacturing as well as battery material processing, all of which stand to increase the supply of ZEVs and further encourage the industry’s transition. Some of these announced investments include:

• Honda: $15 billion to create Canada’s first comprehensive electric vehicle supply chain in Ontario, including EV, battery, and battery material manufacturing;
• NextStar Energy (Stellantis/LGES): $5 billion for an EV battery manufacturing plant in Windsor, Ontario;
• PowerCo: $7 billion for a cell manufacturing plant in St. Thomas, Ontario;
• Northvolt: $7 billion to establish a battery manufacturing facility in Saint-Basile-le-Grand and McMasterville, Quebec;
• Stellantis: $3.6 billion for EV manufacturing at its Windsor and Brampton assembly plants;
• General Motors (GM): $1 billion for production of Brightdrop EV600 and EV400, electric light commercial vehicles, in Ingersoll, Ontario; and,
• GM/POSCO: $600 million to produce cathode active materials in Bécancour, Quebec.

While these investments establish the foundation for long-term growth, the automotive industry is facing short-term challenges due to several factors including the significant cost and time needed to transition to EV production, compounded by a slowdown in the growth of EV demand, which has resulted in companies globally revisiting their investments in EV and battery production. Consequently, as it 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 whom the government has invested, including regarding projected timelines for project development, completion, and production.

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

• The recently announced Government of Canada investments in the EV battery value chain are generational opportunities that are critical for promoting economic growth, anchoring supply chains and supporting the shift to a net-zero economy.

• Recognizing Canada’s efforts to develop an end-to-end battery ecosystem, in 2024 BloombergNEF reported that Canada has the strongest EV battery supply chain potential in the world.

• The automotive industry is facing challenges due to several factors including the high cost and significant time needed to invest in the transition to produce EVs, combined with a slowdown in the growth of EV demand, which has resulted in companies globally revisiting their investments in EV and battery production, including some announced investments in Canada.

• This is consistent with trends in production delays observed globally, as companies are assessing their planned EV and battery facility investments due to a slower growth of EV demand than anticipated.