For the second time this month, Electric Autonomy Canada can report that new Tesla lobbyist registry documents show the automaker is in formal manufacturing talks — this time with the federal government. But what kind of factory is on its mind? Batteries? Vehicles? Or something else in its supply chain?

Tesla is now formally lobbying the Canadian federal government about exploring manufacturing opportunities — specifically about speeding up “permitting timelines” — in the country.

New lobbyist records posted on August 12 show Tesla has communicated with the federal government four times in the last six months. And, most recently, with Innovation, Science and Economic Development (ISED) minister François-Philippe Champagne in mid-August — just days after Electric Autonomy Canada exclusively revealed the automaker is targeting Ontario for potential industrial facilities.

A few days prior to the most recent lobbyist record change, Champagne toured a Tesla facility in Markham, Ont., where he said in a social media post following the event, “There is a part of Canada in every Tesla.”

Tesla’s updated federal lobbying objectives now read as follows: “Seek government support to facilitate the engagement with provinces regarding permitting timelines, to increase the competitiveness of Canada and its ability to attract capital through approvals timeframes that are competitive with other manufacturing locations while working with government to identify incentives to further increase the attractiveness of Canada.”

But there is the catch: Tesla hasn’t specified — either in these latest lobbyist filings or in those we reported on earlier in Ontario — what it is it wants to make or do at a potential “advanced manufacturing” facility (as described in Ontario’s lobbyist registry documents) in Canada.

While the world may be expecting another ground-shaking opening party at a Giga Canada for batteries or vehicle assembly, Tesla’s ambiguity, coupled with recent remarks from Canadian officials, could indicate that the automaker will make something else here that is just as vital to its North American supply chain.

“We are engaging with Tesla”

At last week’s signing of Memorandums of Understanding between Mercedes, Volkswagen and Canada to secure critical battery minerals, Minister Champagne emphasized the sales pitch he is giving to EV battery supply chain companies around the world: “Canada is the green supplier of choice.”

He also hinted heavily in an interview with Electric Autonomy that relations with Tesla, the world’s most valuable OEM by market capitalization, are ramping up.

When asked about any Tesla talks, Champagne (in contrast with previous statements saying that ISED is generally in talks with all automakers) offered a concrete, “We’re engaging with Tesla as well.”

But Champagne went on to describe that, for ISED, it’s not just about attracting battery production to Canada. The government is trying to capture as many components — and players — in the EV supply chain as soon as possible and that means “optimizing” the value chain.

“We’re looking at copper foil, we’re looking at electrolytes, we’re looking at magnets and there’s more to come, trust me,” said Champagne. “I’m open…look at my smile. You know I’m not stopping there.”

When asked for more detail on the minister’s statement, an ISED spokesperson said to Electric Autonomy, “Minister Champagne is working on attracting a project to compliment the ecosystem in the magnet field.”

The types of magnets used in electric vehicle motors fall largely into two categories: induction (patented by Nikola Tesla in 1888) and permanent. Securing a magnet supplier in Canada (or a permanent magnet motor maker) would be a major boon for the continental EV battery supply chain. Currently, almost all magnets and magnetic motors come from Asian suppliers. Securing a local supply of these essential components is necessary to support North America’s EV production.

Both the minister and the spokesperson declined to give further details on Tesla’s Canadian intentions, citing privacy concerns.

Three Tesla representatives contacted by Electric Autonomy did not respond to our request for an interview.

A quiet, but growing, Canadian presence

If any splashy Tesla-in-Canada announcements are forthcoming, it will mark a change from the automaker’s form to date. So far, Tesla’s investments and interests in Canada have gone largely unremarked upon by the company, even as they keep building.

Since 2017, Tesla has financed lithium-ion battery research at the Jeff Dahn lab in Dalhousie, named for its preeminent head scientist and physicist who is regarded as the world’s leading expert on li-ion batteries.

In October 2019, Electric Autonomy exclusively reported that Tesla bought Hibar Systems Ltd., a Richmond Hill, Ont.-based battery technology company, world-renowned for its ultra-precision technology. Tesla renamed Hibar Tesla Toronto Automation. Then, last November, it opened a second Tesla facility next door in Markham, where it makes battery-making equipment to be sent to gigafactories around the world.

More recently, in April, Tesla posted a job opening for a new critical minerals supply chain policy associate in Toronto, specifying that the job has “particular focus on global battery minerals and responsible sourcing policy.”

A month later, when Tesla declared as part of a larger disclosure of its battery mineral suppliers that it is receiving supply of nickel from Vale Canada, that seemed to close the circle in terms of the job posting and any other active stakes the automaker might currently have in Canada.

However, it turns out that another company with a Tesla-supplier contract in hand has recently arrived here.

Volta Canada Energy Solutions is a subsidiary of South Korean-based copper foil manufacturing company Solus Advanced Materials. In November 2021, Volta Canada purchased land to set up a copper sheet factory in Granby, Que., with an output of 60,000 tonnes annually, according to Solus’ quarterly filings. The Volta Canada Quebec factory started construction in July of this year and is set to be operational by the second half of 2024, reads the company materials.

Those moves coincided with a report in The Korea Economic Daily, citing unnamed industry sources, that Solus had secured a contract to supply Tesla’s Gigafactory in Austin, with shipments beginning last January, as well as the option to supply Giga Berlin from Sonya’s Hungary copper foil manufacturing facilities.

In its corporate filings, Solus specifically notes that manufacturing the foil in North America exempts the company from tariffs if it exports to the United States, Mexico and Europe and meets the 75 per cent made-in-North-America batteries requirement that now governs EV rebate eligibility in the U.S. under the Inflation Reduction Act.

Volta is currently lobbying ISED for funds to help finance its factory.

Other Canadian ingredients Tesla may be after

While Solus’s arrival plugs another hole in Canada’s EV battery supply chain (and Tesla’s), local, clean access to electrolytes and the magnets used in electric vehicle motors continue to be outstanding issues.

On the Canadian side, there are a handful of companies working directly on electrolytes. Li-Metal Corp. and Blue Solutions are the two most high-profile Canadian companies in the space.

But magnets are where the government’s attention is keenly focused and the point where Canada’s assets, the government’s aspirations and Tesla’s interests could be colliding in an interesting way.

“The biggest part of demand for rare earths comes from permanent magnets. Permanent magnets are really important in changing electrical energy into mechanical energy, which is why they’re important for electric vehicles,” says Andy Leyland, co-found of S C Insights in London. “It’s probably the biggest growth market.”

In 2018, Tesla confirmed the Model 3 had an embedded permanent magnet synchronous motor. Models S and X use a combination induction (front motor) and permanent magnet (rear motor). And CyberTruck, which is also powered by two motors, will also have one each of induction and permanent magnet motors.

There are performance differences between the two types of motors, but for the bottom line, the most significant difference is cost. The high-energy permanent magnets that go into EV motors are usually made from more costly rare earth elements (REE). The main ingredient is neodymium iron boron.

Rare earth elements in Canada

“Manufacturing permanent magnets is the largest global use for REEs, accounting for 29% of total forecasted demand,” reads the Natural Resources Canada REE webpage. “Canada has some of the largest known reserves and resources (measured and indicated) of rare earths in the world…but producing REEs requires complex separation and refining processes.”

Currently, most of the world’s neodymium supply is exported from China (60 per cent) with additional supporting mines in Australia and one in California. Likewise, the overwhelming majority of neodymium refineries are in Asia. But under the new American Inflation Reduction Act, electric vehicles will only be eligible for purchase subsidies if more than 40 per cent of the vehicle’s critical minerals are mined and processed in North America.

In North America, today, there is just one operational commercial magnet alloy producer: Electron Energy Corp. in Pennsylvania. And there is also just one major rare earth mining operation: the recently reopened Mountain Pass mine in California, which is operating without its own dedicated refining facilities and currently ships raw ore to Asia for processing.

The need and the opportunity, then, are clear. Setting up an industrial facility in Canada to refine and process rare earth elements into alloys — whether done by Tesla or another company — would help fill a North American supply chain gap that is set to be a major liability under the new American regulations in just a few months.

“The value is in the refining and processing,” agrees Leyland. “Canada is in, again, this quite good position in that there are lots of rare earth projects. But the important thing is you can’t just build the mine. You need to build the processing facility, you need to build the master alloys and you need to then build the magnets. Otherwise, you’re just shipping it to Asia and you lose the subsidy.”

There are signs of momentum in that direction.

This month, the Saskatchewan Research Council’s Rare Earth Processing Facility announced it successfully ran its first test to create rare earth ingots — essentially a block of rare earth metals — sourced from Canada’s only operational rare earth mine, Nechalacho in the Northwest Territories.

The Council says its rare earth ingots are a first in Canada and take the country one step closer to being able to produce EV magnets. It says its facility has the capacity to produce magnets for 300,000 EVs per year and that products will be available for sale in 2024.

Montreal-based miner Torngat Metals is another contender for North American magnet components. It owns a neodymium resource at its Strange Lake operation in northern Quebec, which it claims is one of the largest confirmed REE deposits in the world. Last December, Torngat registered lobbying activity with the federal government pertaining to developing a critical minerals strategy.

“The goal is to produce and transport a beneficiation concentrate from mine site to a new facility in Bécancour, Québec where the separated rare earth oxides would be produced,” reads the Torngat website. (Oxides are the most commonly sold rare earth materials into the market for refining into alloys — they are usually a powdery substance.)

Torngat says it is currently doing “piloting and engineering” at its Strange Lake site, but has not publicly announced any future dates to start selling product — either raw material or oxides.

But even if the Saskatchewan facility and Torngat are able to start bringing refined rare earth minerals to market, it will not be on a scale large enough to support the auto industry. Tesla is just one of several OEMs that have pledged to produce millions of electric vehicles per year. 

If it and other OEMs want to qualify for IRA purchase incentives, they will need to shore up the rare earth component of their vehicles — and due to the proximity to such vast reserves of rare earth elements, Canada is an attractive location to set up value-added infrastructure.

Location, speed and supplies

Now that a precedent is set after last week’s Memorandums of Understanding between the Canadian government and Volkswagen and Mercedes to get preferential access to Canada’s raw minerals, it is possible other OEMs may be considering following suit.

In April, Tesla CEO Elon Musk tweeted: “Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.”

Multiple sources with knowledge of the matter, but not authorized to speak, told Electric Autonomy that, earlier this month, high-level Tesla employees visited Vale Canada operations in Sudbury, Ont., just ahead of the Mercedes-Volkswagen announcements. That trip, sources say, was part of a larger location scouting mission by Tesla in Ontario and Quebec to seek out potential manufacturing locations.

The deciding factor, assuming everything else checks out, will be speed. Based on Tesla’s stated lobbying aims, it likely wants to secure aggressive permitting timelines that turn a process that used to take years into months — the kind of thing already seen outside the auto sector with the new Moderna factory in Quebec and with several Amazon warehouses and distribution centres across Canada.

A battery plant or an assembly plant might yet be in the cards. But if Tesla is looking to get into refining, Canada could be an attractive choice — especially if Tesla is looking to get more directly involved in rare earth elements.

“The critical thing is not to have a missing link in the supply chain,” says Leyland. “You know, we’ve seen that before: you produce the raw materials, you have to ship them halfway around the world and shipping back again. Not only does that not make sense economically, it means that you lose your raisons d’être in terms of security of supply.”

“It’s making sure that when those supply chains happen, you don’t have a missing link in the supply chain. You can keep it in North America.”