Multinational companies are pumping billions of dollars into Canada’s electric-vehicle manufacturing sector, lured by government incentives, access to raw materials and cheap renewable energy. VW just announced that it had chosen a site in Ontario to build its first battery-cell plant outside Europe, citing Canada’s natural resources as one of the reasons. VW’s plan follows recent EV and battery-making project investments by GM, Stellantis, Michelin Tires, Brazilian miner Vale, U.K. mining company Rio Tinto, and German chemicals company BASF, among others.
According to The Wall Street Journal (March 23, 2023), Canada is benefiting from a push by the U.S. and its allies to reduce their dependence on China for the critical minerals used in EV batteries and military equipment. In one example, Stellantis and South Korea’s LG are building a $4.1 billion battery plant in Windsor, Ontario, with 2,400 workers starting next year. As we discuss in Chapter 8 (Location Strategies), incentives are common and Canada has had to pay up to win the investments, scrambling to keep up with the U.S., which has unveiled a raft of subsidies meant to draw investment in its EV industry. Canada gave $732 million to land the Stellantis/LG venture.
Canada is among the most expensive countries in the world to build cars and the highest-cost market for car assembly in the North American free-trade zone. To save money, auto makers in recent decades moved thousands of manufacturing jobs and motor-vehicle assembly capacity to Mexico, dropping auto employment in Canada from 175,000 to 110,000.
The Canadian government is pitching itself as a counterweight to China in the race to develop EV technology. China leads the world in processing metals and minerals like nickel, copper, lithium and cobalt. It also is home to 78% of the world’s cell-manufacturing capacity for EV batteries. Helping Canada’s pitch: It is one of the few places in the Western Hemisphere with the raw materials companies need to make their EVs. Electra Battery Minerals Corp. is the only facility available in North America for processing battery-grade cobalt, a metal used in batteries. Rio Tinto is upgrading an iron-ore and titanium refining facility in Quebec with a $500 million investment.
Access to hydroelectricity was a key reason GM and others chose Quebec. The renewable power helps lower GM’s greenhouse-gas emissions. Quebec also offers the lowest industrial rates for power in North America.
Classroom discussion questions:
- Summarize the reasons more companies in this field are looking to Canada.
- What is China’s strength in the EV supply chain industry?