The future of automotive manufacturing is electric, yet Canada’s share of current production is lagging. A new report from the International Council on Clean Transportation and the Pembina Institute offers a roadmap on how to reverse this trend

If Canada does not find a way to rapidly accelerate electric vehicle production, the country’s once-mighty automotive sector — still a critical source of jobs and economic activity in many communities — will soon “dwindle away,” according to the authors of a new study released today.

“Canada is a huge auto producer. But nobody is really shining a light on the fact that if Canada doesn’t quickly ramp up its EV production, the steady decline we’ve seen in auto manufacturing over the past 20 years is going to accelerate,” says Ben Sharpe, a senior researcher and Canada regional lead with the Washington, D.C.-based International Council on Clean Transportation (ICCT).

EV share lagging

Sharpe’s statement underscores one of the key findings in Power play: Canada’s role in the electric vehicle transition, a new report produced jointly by the ICCT and the Calgary-based Pembina Institute. (Simultaneously, the ICCT is also publishing a companion study on the future economic impacts of EV adoption in Canada, by Navius Research of Vancouver.)

Specifically, while Canada currently produces about 2 million vehicles annually, ranking 12th in the world, electric vehicle production makes up just 0.4 per cent of that total — 80 per cent lower than the current global average share of EV production among auto producing nations, which is 2.3 per cent.

With worldwide EV sales growing more than 60 per cent a year between 2012 and 2018, that trend is sure to continue, Sharpe says. Yet none of the US$300 billion in EV manufacturing investments announced by global manufacturers for North America between 2020 and 2025 is explicitly slated for Canada.

“Canada has to jump on this, or the auto sector is going to dwindle away, likely faster than the decline we’ve seen over the last couple of decades”

Ben Sharpe, Senior Researcher and Canada Regional Lead, International Council on Clean Transportation

“Electric vehicles are coming, it’s a global phenomenon,” says Sharpe. “Canada has to jump on this, or the auto sector is going to dwindle away, likely faster than the decline we’ve seen over the last couple of decades.”

Policy action needed

In addition to evaluating Canada’s position in the manufacturing of electric light-duty vehicles and heavy-duty trucks and buses, where the country is performing better, the report also offers policy recommendations to help strengthen and “future-proof” Canada’s auto sector.

“Other countries are moving forward in earnest. There needs to be a very focused effort to drive our ZEV [zero-emission vehicle] economy,” says Carolyn Kim, regional director for Ontario at the Pembina Institute.

“It requires both demand-side policies… [and] supply-side policies that help bring closer to home the manufacturing of those vehicles”

Carolyn Kim, Regional Director for Ontario, Pembina Institute

“It requires both demand-side policies that help consumers find and adopt zero-emission vehicles. But also, supply-side policies that help bring closer to home the manufacturing and production of those vehicles — whether it’s assembly or parts and components.”

Kim says she hopes the report provides a “reality check” that spurs action from all levels of government as well as the private sector and non-governmental players. “It’s only going to happen if there is buy-in and effort across all sectors,” she says.

Local demand drives local production

One of the simplest policy levers to motivate manufacturers to invest in local electric vehicle assembly, it turns out, is promoting domestic EV sales.

“Globally, 80 per cent of electric vehicles are manufactured in the region they are sold,” the report states. As such, it recommends an expanded set of regulatory, incentive, infrastructure and consumer awareness policies to increase demand.

Adds Sharpe: “It makes sense, right? These companies want to decrease their shipping and transport costs across their supply chains.”

He calls this finding a “hopeful” piece of data, as “Canada has already been quite aggressive in setting a long-term vision of where the country wants to go, at least on the passenger vehicle side.”

However, compared to other markets where electric vehicle uptake is high, the report characterizes Canada’s policy development as “mixed.” It highlights regulations such as a zero-emission vehicle mandate, carbon pricing, greenhouse gas regulations and a clean fuels standard as the strongest tools available to improve this situation.

“They can essentially require that electric vehicle models be made available and that the auto industry deploy, market and sell them in increasing numbers,” the report states.

The report also explores a number of other supply-side policies employed elsewhere around the world. According to Sharpe, determining which gives the biggest bang for the buck depends on local conditions.

“In general, having a mix of different approaches and different levers at various levels of government is key,” he says. “But it takes thoughtfulness and coordination to make the biggest impact. You can’t just have different levels of government throwing money at companies and not having an overall plan.”

Heavy-duty traction

The report points to two areas where Canada’s position in the EV industry relative to the rest of the world is quite strong. The first of those: trucks, buses and other heavy-duty electric vehicles.

While China dominates global production of electric vehicles in every sector, Canada ranks sixth in the world in electric heavy-duty vehicles. It’s a tiny share, at 0.1 per cent, but the ranking closely tracks our fifth-place standing in overall commercial vehicle production.

The key here, says Sharpe, is that “it’s such early days and mostly dominated by transit, so it’s really wide open in terms of positioning for bringing in production on the heavy-duty electric vehicle side.”

More important, perhaps, is that Canada already has a handful of competitive manufacturers of electric trucks, transit buses and school buses serving both the domestic and export market. That represents an established ecosystem on which to build.

Domestic support

The report also notes examples of policies providing additional reinforcement, such as domestic content requirements for public transit procurements in both Ontario and Quebec.

“We are seeing a lot of announcements and progressions from school boards and transit agencies moving towards electrification,” says Pembina’s Kim. “So, there’s a lot of potential to continue to grow demand in the manufacturing of electric heavy-duty vehicles. We just need to continue to be intentional with our investments and our policies to make sure that we’re creating jobs and we’re keeping that domestic manufacturing in Canada.”

“Investing in clean transportation is something that is going to deliver economic output for many years to come”

Carolyn Kim, Regional Director for Ontario, Pembina Institute

Sharpe stresses the importance of Canadian content requirements. “First, they actually codify and set requirements to have a minimum amount of content that’s built right there domestically,” he says. “Second, it just speaks to the need for growing civic pride and making ‘Buy Canadian’ something that people can really get behind.”

As someone who knows the Canadian market well yet has an outsider’s perspective, Sharpe sees potential to reinforce this sentiment by drawing stronger links between the pride around Canada’s emergent leadership in technology overall and the economic and technological promise embodied in EVs.

Bullish on hydrogen

That said, hydrogen fuel-cell technology, the second bright spot highlighted in the report, is one area where there is significant tech sector crossover.

“I’m very bullish on hydrogen,” says Sharpe. “If hydrogen proves to be a major technology on the trucking side, Canada has a huge first-mover advantage in terms of already having an established ecosystem of companies and, to some extent, policies that support that ecosystem.”

According to the report, there are three reasons why hydrogen and fuel-cell technology are strategically important to Canada’s competitive position in the EV sector:

• Existing clusters of innovative, globally leading companies in Canada’s hydrogen and fuel cell sector;
• Abundant supply of renewably sourced electricity that can be used to produce low-cost, low-carbon hydrogen for powering fuel cell vehicles;
• Hydrogen fuel cell vehicles’ potential to play a critical role in Canada’s on-road heavy-duty freight sector because fuel cells weigh less than large batteries and have better cold temperature performance.

Dual economic benefits

Looking at the big picture, Kim and Sharpe both acknowledge that in the current climate, with everyone focused on the mounting impact of the COVID-19 pandemic, some might downplay the importance of the recommendations in this report.

However, they stress that investments that promote the growth of EV manufacturing can play an important role in the coming effort to rebuild the economy.

“It’s not just assembly jobs,” says Sharpe. “It’s the supply chain and all the communities dependent on these manufacturing facilities. That’s the message: this is about your communities. This is about sustainable jobs and having a viable economic outlook.”

Adds Kim: “Investing in clean transportation is something that is going to deliver economic output for many years to come. So, it’s going to have dual benefits — stimulating the Canadian economy while also accelerating us to a clean energy transition.”