A pro-EV pivot, led by a return to stronger fuel economy standards, seems certain. But the biggest benefits for Canadian industry likely hinge on reducing protectionist supply chain barriers. Dan Woynillowicz sets out the landscape

President-elect Joe Biden is a “car guy” and the proud owner of a vintage 1967 Chevy Corvette. At first blush, that might not bode well for EV champions in the U.S. But the good news is that he’s also a climate hawk elected on a platform that includes the goal of creating 1 million new auto-sector jobs. As he put it in this Twitter post during the Democratic convention: “When I hear the words ‘climate change,’ I hear another word: ‘jobs.’ We can solve our climate crisis and our economic crisis at the same time.”

After four years of presidential ambivalence — and at times downright hostility — towards electric vehicles, the next occupant of the White House is set to shake-up the North American auto market and pivot towards a climate-friendly future.

Variety of levers

How does Biden plan to do it? His goal for the auto sector is to position it “to win the 21st century with technology invented in America,” catching up to China and positioning the U.S. as the global leader in the manufacturing of electric vehicles as well as their input materials and parts. To achieve this, he plans to pull a variety of levers, from the purchasing power of federal procurement (upgrading a 3-million-strong federal vehicle fleet), to supportive R&D, tax, trade and investment policies.

He’s also entertaining a scrappage program, modeled off the Clean Cars for America Climate Proposal developed by Democratic Senators, aims to increase American battery production, and has committed to building 500,000 new EV charging stations. And critically, he plans to re-establish stronger vehicle emission standards, which can play a significant role in pushing automakers to sell more EVs. 

Given we still don’t know whether the Democrats will hold a majority in the Senate, it’s worth noting that President-elect Biden may be limited to those policies and programs that fall under executive authority. But much as we’ve observed with sustained growth in renewable energy even under President Trump, when a sector’s growth stands to benefit Republican states and districts bipartisan policy support can be secured. With the EV industry expanding into Republican states — like Volkswagen’s EV assembly plant in Tennessee or Tesla’s Gigafactory in Texas — it’s not inconceivable that a Republican-led Senate would back Biden’s ambitions for the sector.

Positive implications

So, what does this all mean for Canada?

The return to stronger vehicle emission standards — out to 2025 for starters, but likely all the way out to 2030 — has significant positive implications here.

Most Canadians may not realize it, but Canada doesn’t have its own unique standards. In 2012, then-Prime Minister Harper adopted then-President Obama’s vehicle emission regulations with a schedule of improved performance to 2025. The regulations were adopted “by reference,” which in essence means the American regulations apply here — so when President Trump weakened them, reducing annual improvements from 5 per cent to just 1.5 per cent, they applied here, too.

Presuming Biden follows through on his commitment to strengthen them again, Canadians will benefit from regulations that deliver both pollution cuts and lower fueling costs from gas cars and trucks. But. Canada will also benefit from the role the regulations will play in spurring on more EV production and sales.

Increasing EV adoption

As Wood Mackenzie principal analyst Ram Chandrasekaran has noted, “Going beyond the Obama-era regulations or even reversing the new targets set by the Trump administration would definitely increase EV adoption. This has already been evidenced in other global markets. Setting a target at an automaker fleet level forces the automaker to manufacture more efficient cars. Automakers would also be required to spend more money on effective marketing campaigns and automaker-provided subsidies.”

In fact, Wood Mackenzie research finds that these regulations would have the most impact on EV adoption of any of the measures promised by Biden, increasing EV sales above 4 million by 2030 (50 per cent more than would otherwise be the case).

That would be good news for Canada’s export-oriented automotive industry, which recently saw Ford and Fiat Chrysler Automobiles commit billions to re-tooling operations to accommodate production of battery electric vehicles. It would also be good news for Canadian consumers, as it increases the likelihood that the promised growth in the number of EV models available in the U.S. — from just 16 in 2020 to 121 in 2025 — will come to fruition, and spillover into the Canadian market.

Protectionist threat

However, it also raises important questions about the integration of our respective auto industries and the extent to which President-elect Biden will be open to deeper collaboration or, conversely, adopt a more protectionist stance. His platform suggests the latter, as illustrated by its endorsement of a scrappage program focused on replacing old vehicles with new “American vehicles built from materials and parts sourced in the United States” and focus on seeing new and better batteries built in the United States by American workers in good, union jobs.”

Will a Biden-led America be open to importing EV parts and components from Canadian companies? What about batteries? Or the metals and minerals needed for them? As I’ve noted before, and will keep on pointing out: we have a mining sector that produces many of the metals and minerals needed for batteries, world-leading battery researchers, and an auto parts supply chain positioning to be part of this transition. 

In the EU it was recognized that collaboration — between countries and with the battery industry — would be key to achieving “battery independence.” The European Battery Alliance was created to tackle this challenge in 2017, and appears poised to deliver on this goal by 2025.

A similar North American approach makes sense. Canada still has a chance to shape North American battery supply chains, and the new ZEV Industry Coalition, whose aim is to “create a synchronized zero emissions supply chain,” could help. But at this point it doesn’t appear to be on Biden’s radar, or Ottawa’s for that matter.

An opportunity and an imperative

When Prime Minister Trudeau congratulated President-elect Biden after the vote, they agreed on the importance of the unique Canada-U.S. partnership, cooperating on the fight against climate change and engaging on key issues, including both trade and Buy America. So, clearly, there is an opportunity — and an imperative — for Canada’s ZEV industry to ensure its interests aren’t just on the radar, but high on the Prime Minister’s cross-border agenda.

The ZEV Industry Coalition is well-positioned to do this, now it’s time to punch the accelerator.

Dan Woynillowicz is the principal of Polaris Strategy + Insight, a strategic advisory firm helping accelerate the energy transition and deliver climate solutions.