(This article has been translated into French.)
The global economy is likely moving into recession in response to the COVID-19 pandemic. Of course, the immediate focus should be on saving lives and containing exposures. However, governments will eventually have to put an increased focus on measures to stimulate the economy. In the context of a global economic and climate crisis, the Canadian government has a historic opportunity to steer public dollars into a “green” stimulus package that targets renewable technologies and growth in clean technology. In the transportation sector, a strong focus on promoting electric vehicles would bring numerous economic and environmental benefits while also positioning Canadian manufacturing to be more competitive in the global automotive industry.
Across the world, automakers are investing billions of dollars to accelerate the deployment of an increasingly diverse mix of electric vehicles to the market. Policy is playing a pivotal role in stimulating this transition, as incentives, regulatory measures, and consumer awareness initiatives contribute to accelerate electric vehicle (EV) development and deployment in several countries.
Canada produces roughly 2 million cars and light trucks per year and holds a prominent share of global vehicle production. But with less than 0.5 percent of these vehicles being electric – more than 80 percent less than the global average of nearly 3 percent – Canada is quickly falling behind other countries in transitioning to electric vehicle manufacturing. For example, the United Kingdom and France produce a similar number of total vehicles per year, but electric vehicles represent about 3 percent of production in each of these countries. If Canada doesn’t aggressively try to capture more electric vehicle assembly and supply chains, it risks losing a major pillar of its economy.
Electrification is a recent trend, but Canada’s automotive industry has been on a downward trajectory for the last two decades. Since 2000, Canada has had a net loss of 5 assembly plants and lost about 30 percent of its vehicle production to the US and Mexico. The most recent plant closing – General Motors’ facility in Oshawa– is still fresh in people’s minds. Compounding the pain for former Oshawa workers and the surrounding community, GM announced earlier this year that it would invest over $2 billion to convert its Detroit-Hamtramck facility to exclusively produce electric cars.
But there is hope. A newly published report by The International Council on Clean Transportation and the Pembina Institute outlines several ways that the federal, provincial and local governments can boost the production of electric cars in Canada. One of the most impactful things governments in Canada can do to stimulate manufacturing of zero-emission cars and trucks is to ramp up the effort to deploy policies aimed at growing the domestic market for these vehicles. Globally, about 80 percent of electric vehicles are made in the same region where they are sold. Increased commitment to designing and implementing world-class regulatory, incentive, and consumer awareness policies will improve Canada’s attractiveness for increased electric vehicle sales and investments.
The provinces and federal government have rolled out several policies to boost electric vehicle sales and recharging infrastructure, but much more government intervention is needed. A companion study led by Navius Research shows that Canada is not on track to achieve its electric vehicle sales targets with the electric vehicle-supportive policies in place at the federal and provincial levels. In the absence of new policy, electric vehicle adoption is projected to reach only 14 percent of new light-duty vehicle sales by 2040, far below Canada’s target of 100 percent. However, the study finds that a single policy – a national zero-emission vehicle mandate requiring manufacturers to have 30 percent electric vehicles sales by 2030 and 100 percent by 2040 – could put Canada on a path to fully transforming its vehicle fleet by mid-century.
In addition to helping Canada deliver on its electric vehicle sales targets for 2030 and 2040, strong federal policy for vehicle electrification would result in significant economic benefits. The Navius study reports that the clearest path to boosting domestic zero-emission vehicle manufacturing is increasing demand for zero-emission vehicles in Canada. This increase in demand can be achieved with policies aimed at consumers, such as financial incentives and carbon pricing, or the auto sector in the form of zero-emission vehicle mandates and emissions standards. The study estimates that an ambitious mix of consumer and industry-focused policies in Canada would add nearly 800,000 electric vehicle-related jobs and $110 billion in GDP by 2040.
But beyond measures for increasing electric vehicle sales across Canada, there is a significant opportunity to ramp up industry-supportive policies to attract investment for domestic electric vehicle assembly and battery production. Canada’s auto industry can be better positioned for future growth through supply-side incentives such as research and development support, loan guarantees, and tax breaks for new or refurbished manufacturing facilities to produce electric cars and trucks.
It is clear that the domestic auto sector’s 20-year downtrend will only intensify if Canada does not act quickly. The country is still in a position to take advantage of the increasing global trend toward vehicle electrification and thrive in the transition to a low-carbon economy. The policies needed to support the industry in this electric vehicle transition can play a central role in an economic recovery plan and put Canada on a path to achieving its climate targets and vision for clean growth and sustainability. It’s time for policy-makers at all levels of government in Canada to give the auto industry the push it desperately needs.