A long-term forecast from Navius Research says Canada’s ZEV economy could provide $150 billion GDP and 1.1 million new jobs by 2040

Alongside the report released today by the International Council on Clean Transportation on the state of Canada’s EV manufacturing sector comes a new, follow-up study by Vancouver-based Navius Research painting a bright — and compelling — portrait of the future of Canada’s ZEV economy. (With a timeframe spanning two decades, its assumptions should be shielded from the impact of the current COVID-19 pandemic upheaval.)

The key takeaway? The transition towards zero-emission vehicles will play a crucial role in Canada reaching its climate change targets and could bring sizeable economic opportunity to the country. That transition won’t be as strong, however, without a national zero-emission vehicle production mandate put into place, despite the potential effects of several other EV-supportive policies already at work.

For instance, should a robust national ZEV policy be established, the report projects that Canada’s ZEV economy could consist of over 1.1 million jobs and $150 billion GDP by 2040.

Growth expected

In order to determine the long-term economic impact which ZEV adoption would have on Canada, Navius developed forecasts of ZEV adoption under different policy scenarios.

First, it assumed a simple continuation of current federal and provincial policies and then factored in overall economic trends and their expected impact on ZEV pricing and sales.

According to those projections, ZEV sales will continue to grow mainly due to shrinking vehicle costs and consumer preference changes as a result of expansion of EV infrastructure. However, the totals would fall dramatically short of Canada’s current targets for vehicle electrification — 30 per cent of vehicles by 2030 and 100 per cent in 2040.

Even then, zero-emission vehicles will still have a substantial impact on Canada’s economy, boosting both the ZEV economy’s contribution to Canada’s overall GDP as well as the number of jobs associated with the industry.

Under this scenario, GDP from the ZEV industry is projected to grow to $43 billion in 2040 from $1.1 billion in 2020, and associated jobs to 342,000 from 11,000 during those same years. That represents an average annual GDP growth rate of 18 per cent, which outpaces the growth of the rest of the economy by roughly 16 per cent.

Policy could spur gains

If effective ZEV policy is enacted, however, those numbers could look quite different. 

If Canada meets its current ZEV targets, the country could see the ZEV-related economy reach $152 billion by 2040 — $43 billion higher than the expected result under our current policy. ZEV-related jobs could also reach 1.1 million, which is a 758,000 increase from current policy projections. That would represent a GDP growth rate of 24 per cent, six per cent higher than the current-policy projection.

That increase comes not only from greater ZEV sales, but a decrease in production prices which, according to Navius, would result from ZEV-supportive policy.

Under a strong-policy situation, 15.6 million ZEVs would be on the road in Canada by 2040, as opposed to 3 million expected under current policy

While battery and fuel cell costs are expected to decrease by more than half over the next two decades, for instance, mandating a certain level of ZEV production could lead to further production chain efficiencies and even lower product costs. The higher the level of ZEV production internationally, the more that effect is expected to be increased.

The report also projects that under a strong-policy situation, 15.6 million ZEVs would be on the road in Canada by 2040, as opposed to the mere 3 million expected under current policy.

Transport expected to dominate

Transport services are expected to account for the bulk — 92 per cent, according to the report — of the future ZEV economy.

That category includes a large amount of work currently undertaken by the traditional automotive economy, such as trucking, public transit, ride-sharing and much more. The sheer size of that segment reflects the role which fleets of all kinds have to play in the transition to electrification.

A smaller amount is represented by related EV services, such as charging infrastructure and electric vehicle maintenance, as well as domestic vehicle manufacturing.

Manufacturing holds potential

Currently, there are only a handful of zero-emission vehicles manufactured in Canada, including the Chrysler Pacifica minivan, New Flyer Xcelsior CHARGE transit bus, the Nova Bus LFSe transit bus and The Lion Electric school bus.

However, domestic vehicle manufacturing could be boosted by increased Canadian consumer demand for zero-emission vehicles, according to Noel Melton, a partner at Navius.

“We’re certainly not going to lose the internal combustion vehicle without strong policy to get there”

Noel Melton, Partner, Navius Research

“Our research does show that probably the best way to help EV manufacturing in Canada is to make sure that there’s a really strong demand for EVs in Canada, whether that’s through ZEV mandates like in B.C. or Quebec, or some other type of policy,” Melton says.

Manufacturing decisions are naturally hard to predict, and as such the ability for research such as this to present an accurate picture of what ZEV production in Canada might look like in 2040 is limited.

However, such investments would assuredly put Canada’s ZEV GDP and job numbers on a path to even higher growth. Should Canada become a leader in ZEV manufacturing, Navius’ ambitious forecasts for the size of the ZEV economy could prove modest in retrospect.

Concrete policy

Under current policy, Navius projects that ZEVs will account for only 14 per cent of light-duty vehicle sales by 2040. That not only represents a huge shortfall against the federal government’s 100 per cent target for that year, but it’s less than half of the 2030 target of 30 per cent.

Medium-duty vehicles, heavy-duty vehicles and bus sales are projected to arrive at 11 per cent, 13 per cent and 26 per cent zero-emission by 2040, respectively.

“We’re certainly not going to lose the internal combustion vehicle without strong policy to get there,” says Melton.

The policy examined by the report is a nationwide ZEV mandate requiring all light-duty vehicles sold in Canada be zero-emission by 2040, and that 30 and 15 per cent of medium and heavy-duty vehicles, respectively, be zero-emission by 2030. Included in that policy is a ZEV production incentive, which would subsidize 10 per cent of the costs of ZEVs manufactured in Canada.

Although current policies, such as federal and provincial electric vehicle purchase incentives, are expected to continue to bolster short-term ZEV sales, Melton says that they won’t be enough to meet Canada’s stated targets.

“Our research has shown that if you wanted to get to these targets, you’re probably looking at something in the neighbourhood of $5,000-$6,000 per vehicle over a couple of decades to get there,” says Melton. 

Ecological and financial gains

The report paints a clear picture: the future of Canada’s ZEV economy is bright, but it can be made even more so by decisive policy action.

Although Navius designed the report with only economic forecasts in mind, numbers such as those paint an ecological picture of their own. As long as EVs remain in the minority, Canada’s emissions targets will be out of reach, and a cleaner future for the country will continue to be delayed.