"EVs are having a champagne moment!" declared François-Philippe Champagne as he bounded onstage to join a panel in Ottawa last month discussing the future of Canada’s electric vehicle industry.
Until recently, it would have been hard to disagree with the federal minister who has been driving the government's nearly $100-billion strategy to transform Canada into a powerhouse in the international supply chain for EVs and green batteries.
Since 2021, global auto giants including Volkswagen, General Motors, Ford and Honda — and battery-makers from South Korea to Sweden — have pledged $46.1 billion in investments, mostly in Ontario and Quebec. Canadian taxpayers have kicked in $52.5 billion through subsidies, tax credits and other funding from federal and provincial coffers.
"We are on the verge of one of the major transformations we have seen in the Canadian economy," Champagne, Minister for Innovation, Science and Industry, said at the annual Sustainable Finance Forum in Ottawa.
"I think what we have accomplished over the last two to three years is nothing short of phenomenal, attracting the EV world into our industrial ecosystem,” he said. “Canada is positioned to win.”
Nevertheless, the wheels have begun to wobble enough in recent months to fuel doubts about how realistic Canada’s EV ambitions are.
Several automakers have postponed or shelved projects as consumers fret over battery range and gaps in charging networks for still-pricey electric vehicles. Battery producers facing lower prices and margins have scaled back, too.
At stake are thousands of new EV manufacturing and battery jobs, opportunities for scores of small and medium-sized suppliers, and Canada’s aim to be the critical minerals supplier to the world. A slow-down in the shift to electric cars, buses and trucks would also jeopardize plans to clean up the transportation sector, the country’s second-largest greenhouse gas emitter.
"I think what we have accomplished over the last two to three years is nothing short of phenomenal, attracting the EV world into our industrial ecosystem."
François-Philippe Champagne, minister for innovation, science and industry
Adding to the investment uncertainty is a chaotic political scene in Ottawa and the risk of a trade war if U.S. President-elect Donald Trump imposes a sweeping 25 per cent tariff next month on Canadian exports, including cars and auto parts.
“It is clear such tariffs would devastate Canada’s competitiveness in EV, component and battery production,” Matthew Fortier, CEO of Accelerate ZEV, an alliance of supply chain players, said in a letter this month to Prime Minister Justin Trudeau.
Shifting timelines
The negative EV headlines started this summer, with General Motors saying in June it was reassessing its timeline to manufacture EV electric drivetrains at its factory in St. Catherines, Ont.
Then, Ford Motor Co. in July shelved plans to build a future electric vehicle at its Oakville assembly plant, instead opting to turn out gas-fuelled versions of its F-Series pickup truck. The automaker has since pulled out of a joint venture with South Korean partners to build a cathode materials plant — a key link in the EV battery supply chain — in Quebec, citing poor market conditions.
The abrupt resignation this month of Carlos Tavares, CEO of struggling automaker Stellantis, has focused attention on the future of its EV strategy, as the company rolled out in March the world’s first EV muscle car — an electric version of its Dodge Charger — from its upgraded Windsor, Ont., plant.
Most recently, the boss of Lion Electric also stepped down as the Quebec-based electric bus maker laid off hundreds of workers and then, this week, filed for creditor protection, signaling that it may have to sell-up to survive.
Meanwhile, the collapse of Sweden’s Northvolt is taking shape as a cautionary tale for EV battery-makers competing against lower-priced rivals in China and South Korea.
The former darling of Europe’s energy transition filed for U.S. bankruptcy protection, but said its $7-billion battery project near Montreal will go ahead after the restructuring, thanks to Quebec’s low-cost hydropower and access to critical minerals in battery-making.
In November, Belgium’s Umicore halted construction of a battery materials plant in Loyalist, Ont., after a business review. And earlier this month, a large Taiwanese battery manufacturer paused a $1-billion lithium-ion cell plant expansion that would have created 350 new jobs in British Columbia.
To be sure, some of Canada's biggest battery plant projects remain on track despite the EV sector's doldrums.
NexStar Energy, a Stellantis joint venture with South Korea’s LG Energy Solution, will start manufacturing battery cells to power 450,000 EVs when its Windsor plant is complete next year. And Volkswagen PowerCo’s gigafactory in St. Thomas, Ont. is also set to make battery cells to power up to one million EVs for 2027.
"These are massive investments. They will take time to come to fruition."
Jean Marc Leclerc, CEO, Honda Canada
Honda Canada CEO Jean Marc Leclerc shrugs off the market malaise. The Japanese automaker’s $15-billion investment in four plants to assemble EVs, process materials and build batteries is the single largest in Canada’s industrial history.
"These are massive investments. They will take time to come to fruition,” Leclerc said, sitting alongside Champagne on the panel at the sustainable finance conference.
“Right now, we are trying to undo the supply chains built over the last 30 to 40 years in a very short time,” he said, while at the same time building a new industrial ecosystem.
“Time is of the essence if we are going to be able to compete internationally.”
“Visibly slower”
The investment pauses and pullbacks are not surprising given the tempered outlook for EV sales growth in Canada and globally.
BloombergNEF, a research house, still expects global EV sales to rise but at a “visibly slower” pace than in past years.
Sales are expected to exceed 30 million cars in 2027, up from 13.9 million last year, an average growth rate of 21 per cent per year. Yet that’s down from 61 per cent between 2020 and 2023.
Canada overtook battery-giant China to claim the top spot in BNEF’s global ranking of 30 countries on their potential to build a “secure, reliable, and sustainable lithium-ion battery supply chain.” But the study, citing North America’s integrated auto sector as a big plus for Canada’s battery hopes, was published months before Trump’s tariff threats.
A recent survey by EY, a consulting firm, found Canadian interest in EVs has stalled. Of the 48 per cent of people who expected to be looking for a new car in 2025, only half said they would consider a zero-emissions vehicle, down two per cent year-on-year.
“Waning interest may be attributed to the novelty of EV technology and the wave of early adopters leveling out,” said Jennifer Rogers, EY Canada’s national automotive and transportation leader.
Consumer concerns about range anxiety, the phobia of running out of battery while driving, and Canada's limited number of EV-charging stations were among the fears. Left unaddressed, these “could negatively impact EV sales and our national targets of reaching 20 per cent of new vehicles sold by 2026, 60 per cent by 2030 and ultimately 100 per cent by 2035,” Rogers said.
Alyssa Kelly, director of research at cleantech advisor Foresight, blamed growing EV woes on expectations of a rapid return on investment by some foreign manufacturers.
“One of the challenges the industry faces are many different companies wanting a piece of this market,” she said. “Quickly jumping in and jostling for position — something seen in any industry when the market shifts.”
"Waning interest may be attributed to the novelty of EV technology and the wave of early adopters leveling out."
Jennifer Rogers, EY Canada’s national automotive and transportation leader
Foresight’s data shows healthy year-on-year growth in Canadian EV sales, she said. Nearly 13 per cent of new cars registered in Canada over a 12-month period ending in spring 2024 were EVs — a 37.9 per cent increase in zero-emission vehicle sales.
“While recent headlines point to a negative outlook on the adoption of EVs, the data emerging tells us otherwise,” Kelly told Canada’s National Observer. “The data signifies a growing market with significant potential in the long run.”
Champagne has dismissed EV doomsayers as "lacking vision and ambition." The Canadian sector will flourish, he said, “but not overnight.”
"Look at Tesla, one of the biggest EV companies in the world,” he told CNO in an interview after his panel at the sustainable finance event.
“It took 17 years for them to turn a profit, and the U.S. poured billions of dollars into that company — and Tesla faced serious financial difficulties more than once," he added.
“Uncertainty scares people”
The EV and battery sector’s growing pains are typical for any new technology-driven market, experts say. But Trump’s vow to slap a 25 per cent tariff on Canadian goods on Jan. 20, the first day of his presidency, has sent a chill through the fledgling industry.
Canada's Electrovaya, which makes lithium-ion batteries for heavy-duty industrial machines, such as warehouse forklifts, received calls from customers within a day of the tariff threat.
“One asked us to ship their entire order by January 20. They just read the news, and they said: ‘This order, let's just get it out here by that point,’” recalled CEO Raj Dasgupta.
He doubts Trump will impose the full 25 per cent tariff, but “the uncertainty scares people.”
Dasgupta knows how tough it is to compete with lower-priced Asian EV battery suppliers. Electrovaya once supplied passenger car batteries to German auto giant Mercedes-Benz, but lost the contract to a Chinese competitor.
“We couldn't compete. Asian players would beat us on price,” he said. “In a commodity-driven market, the lowest cost providers will always win.”
Dasgupta shifted into batteries and technologies for industrial, material handling and defense clients with a focus on safety and performance.
In what now appears to be a prescient move, Electrovaya secured a US$51-million loan from the Export-Import Bank of the United States under its “Make More in America” scheme, to build a new 135,000 square foot facility across the border in Jamestown, New York.
“That's the big difference between what would happen in a foreign battery plant versus a domestic industry. The brains are here."
Raj Dasgupta, CEO, Electrovaya
Electrovaya’s Canadian operations would not be badly impacted under a Trump 25 per cent tariff scenario because it’s home to the engineers and scientists who make up half of the company’s workforce, said Dasgupta.
“That's the big difference between what would happen in a foreign battery plant versus a domestic industry. The brains are here,” he said.
But Dasgupta is concerned about Canada’s reliance on an old industrial development playbook that depends heavily on foreign manufacturers. Aside from the tax credits and access to critical minerals, foreign auto- and battery-makers are choosing to set up plants because of Canada’s historical access to the U.S. market.
Should tariffs and trade barriers make it hard to move those products, “it becomes a very risky thing,” he said. “You don't want to be a country with just branch plants of foreign manufacturers and depend on their goodwill.”
As Canada’s fractious political leaders scramble to put together a “Team Canada” strategy to respond to Trump’s tariff threats, Dasgupta had a simple request.
“I’d like to just see them resolve it.”
Comments
Behind the big three automakers backtracking on EVs due to their own incompetence, one can bet the fossil fuel industry is behind it somewhere. Just like what happened back with GM and the EV 1 years ago.
Man, if this was the 60s or even 70s, we'd have responded by saying "OK, foreign companies won't do it, we'll start a Crown corporation and do it ourselves."
So, some bad news and some good news.
And the wild card may be another Truth Social Post at 3:23 a.m. announcing the tariffs are on or off.
The world and the health of our EV industry seems to teeter more on what the last person who had Trump's ear thinks, than on any other single factor. To the Democrats who decided to stay home and not vote, thanks a lot. To any progressive voters here in Canada thinking of doing the same ie. sitting out our election, please think again, similarly there is just too much hard fought for environmental and social policy (as insufficient as it may seem) to allow the CPC to wipe away in the fantastical name of "bringing it home" for the pleasured pursuits of Pierre Poilievre.