Canada’s EV Strategy has FAILED quickly and dramatically, after burning $60-billion over the last two years for no ownership or control and hardly any job… It’s time to jump on China EV Bandwagon

Former prime minister Justin Trudeau attends a news conference in St. Thomas, Ont., on April 21, 2023.

Canada’s electric vehicle strategy has failed, and there are lessons to learn

Canada’s automotive and electric vehicle (EV) manufacturing strategy has failed to deliver on its promises of economic growth, job creation, and environmental leadership

Canada has aggressively positioned itself as a hub for EV and battery manufacturing, leveraging:

1. Government incentives: Billions in subsidies for EV battery plants (e.g., Stellantis-LG Energy Solution, Volkswagen’s gigafactory in Ontario).

2. Critical minerals advantage: Canada’s rich reserves of lithium, nickel, and cobalt (key for batteries).

3. Clean energy grid: Hydroelectric and nuclear power support low-carbon manufacturing.

4. Proximity to the U.S.: Benefits from the U.S. Inflation Reduction Act (IRA) and integrated supply chains.

We must face an uncomfortable truth: Canada’s automotive and EV manufacturing strategy, touted as a generational opportunity to drive economic growth, jobs and environmental leadership, has failed quickly and dramatically.

The federal and Quebec governments made a bad $4.6-billion dollar bet on Northvolt, a Swedish EV battery manufacturer, which has entered bankruptcy less than two years since a $7-billion investment announcement. The $270-million invested by Quebec in Northvolt’s parent company in Sweden is now “lost,” confirmed the provincial government in March.

The head of Canada’s Building Trades Unions called the subsidizing of foreign workers building the EV battery plant in Windsor, Ont., “a slap in the face” and an “insult to Canadian taxpayers.” And Umicore, another multibillion dollar project championed by our politicians near Kingston, said in a statement the company has “prioritized maximizing the use” of its battery materials plants in Poland and Korea, rather than build the new project in Ontario.

Meanwhile,

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Canada’s EV strategy appears to be nothing more than a $57-billion politically driven stunt disconnected from economic realities​. Yet there is something good to come out of it: There are many valuable lessons we can and should learn, especially now in this new global trading reality and as the new wave of politicians are rethinking how to strengthen Canada’s economy and security in the intangibles economy.

Despite proclamations about good jobs, how many new jobs are truly created, rather than being reshuffled away from domestic industries? Today EV and automotive factories rely predominantly on automation and robotics, not workers – just 7 per cent of a car’s value goes to labour.

But won’t these foreign firms pay Canadian taxes? Foreign EV firms such as Volkswagen and Stellantis are exempted from paying taxes on the financing they receive from Canadian taxpayers. Meanwhile Canadian firms continue to pay taxes and aren’t receiving the same subsidies, so they are effectively punished for being Canadian and small. Is it any wonder that Canadian companies such as Electrovaya are incentivized to grow in the U.S. instead of here.

Is there hope for the EV Industry under the ‘corrupt” leadership of Doug Ford?

Canada does not get the wealth effects from these investments. Because of the nature of contemporary economy, the benefits go to the owners of intellectual property (IP) embedded in the technology, not those that buy or install it. Canada once owned the EV technology via publicly funded research at Dalhousie University, but it gave it all away to foreign firms.

In the traditional, production-based economy, foreign direct investment (FDI) into Canada brought advanced production technology, management expertise, local supply chain opportunities, new jobs and new tax base for Canada. But FDI in the innovation economy is extractive and the flow of technology, revenues and tax base, knowledge asset and critical technical personnel is out of Canada. The value accrues to the companies and countries that own and control the technology, not those that make or use the technology.

Failures: Key Criticisms

1. High Costs & Subsidy Reliance:

   • Critics argue that Canada is overpaying to attract multinational corporations (e.g., $13B+ in subsidies for VW’s plant).

   • Risk of “corporate welfare” without guaranteed long-term job stability.

2. Slow Rollout & Delays:

   • Some projects face construction delays, permitting issues, or workforce shortages.

   • EV adoption in Canada lags behind targets due to affordability and infrastructure gaps.

3. Global Competition:

   • The U.S. IRA dominates investment flows, while China controls 80% of global battery supply chains.

   • Canada’s strategy may not be enough to compete at scale.

4. Job Creation Uncertainties:

   • Automation in EV plants may limit long-term employment gains.

   • Traditional auto sector (e.g., ICE vehicle plants) could shrink faster than EV jobs replace them.

5. Environmental Concerns:

   • Battery production and mining face opposition from Indigenous groups and environmentalists.

   • Emissions from mining and manufacturing could offset some EV benefits.

Canada’s EV strategy also overlooked the geopolitical and technological forces facing the country. China’s BYD has been steadily rising over the years, rapidly filing EV patents, eventually becoming the best-selling EV company utilizing a different lower cost battery technology. Between 2009 and 2022, China spent $38-billion to create an industry in which BYD alone has reached US$100-billion in revenue. For those who say Canada can’t have its own globally relevant automotive companies, compare China’s strategic investment with Canada’s nearly $60-billion commitment over the last two years for no ownership or control and fewer than 10,000 jobs, which are currently being automated.

Counterpoints: Is the Strategy Really a Failure?

• Early-Stage Challenges: Transitioning an industrial sector takes time; most projects are still in development.

• Long-Term Potential: Canada could secure a niche in North American EV supply chains, especially with U.S. partnerships.

• Diversification: Reducing reliance on oil/gas by building a cleantech manufacturing base.

In response to the U.S. automotive-focused tariffs, Canada’s Prime Minister has signalled that he will hand out some of the up to $8-billion in Canadian-raised countertariffs to foreign owned and controlled automakers, apparently taking the same approach not supported by contemporary economic analysis, which has spectacularly failed for the battery plants. Given the continuing attacks on the Canadian automotive industry and the swift failure of Canada’s very expensive EV strategy, this more-of-the-same non-sovereign approach will continue to be disastrous. Canadians needs a real Canada first strategy – one with Canadian owned innovation at its centre.

Key Questions Moving Forward

• Will Canada’s subsidies pay off in jobs and supply chain dominance, or will it become a cost burden?

• Can the EV sector offset losses in traditional auto manufacturing (e.g., Stellantis layoffs in 2024)?

• How will Canada address critiques of its critical minerals extraction policies?

Canada may find true solution in China to strategize its automotive and EV industry. Here’s a breakdown of Canada’s best bets and the pros/cons of aligning with China:

Canada’s Best Strategic Bets

1. Strengthen North American Integration

   • Pros:

     • Leverage USMCA (US-Mexico-Canada trade deal) and the Inflation Reduction Act (IRA) to attract investment.

     • Build a regional EV supply chain with the U.S. and Mexico to reduce dependency on overseas suppliers.

   • Cons:

     • Competition with U.S. states for investment (e.g., Michigan, Georgia).

     • Risk of being a “branch plant economy” if Canada only assembles batteries rather than innovates.

2. Double Down on Critical Minerals & Processing

   • Pros:

     • Canada has lithium, nickel, cobalt, and graphite—key for batteries.

     • Focus on mineral processing (not just extraction) to add value before export.

   • Cons:

     • High costs of building refineries vs. cheaper Chinese processing.

     • Environmental and Indigenous opposition to mining projects.

3. Accelerate Domestic EV Adoption

   • Pros:

     • Boost demand for Canadian-made EVs via consumer incentives, charging infrastructure, and fleet electrification.

   • Cons:

     • High upfront costs for consumers and slow infrastructure rollout.

4. Strategic Alliances Beyond China (EU, Japan, South Korea)

   • Pros:

     • Partnerships with Germany (VW), Japan (Toyota, Honda), and South Korea (LG, Samsung) reduce reliance on China.

   • Cons:

     • These countries also have their own domestic priorities.

Should Canada Team Up with China?

Potential Benefits:
✅ Cost Efficiency – Chinese firms (CATL, BYD) dominate battery tech and could set up cheaper, faster production in Canada.
✅ Market Access – Partnering with China could open doors to Asian markets.
✅ Technology Transfer – Chinese companies lead in EV innovation (e.g., CATL’s LFP batteries).

And major risks include Geopolitical Tensions and Supply Chain Vulnerability,

Best Path Forward: A Balanced Approach

1. Limited, Non-Critical Partnerships with China

   • Allow Chinese firms to invest in non-strategic areas (e.g., EV components but not full battery supply chains).

   • Example: CATL licensing tech to Canadian miners but not owning key infrastructure.

2. Focus on North American & Allied Supply Chains

   • Work with the U.S., EU, Australia, and Japan to build a China-alternative supply chain.

   • Example: Canada supplying processed lithium to U.S. battery plants.

3. Become a Global Leader in Sustainable Mining

   • Use strict ESG standards to market Canadian minerals as the “cleanest” option for Western automakers.

Final Verdict

Canada’s best bet is not full alignment with China, but a cautious, diversified strategy:
✔ Priority #1: Deepen North American integration (U.S. & Mexico).
✔ Priority #2: Secure alliances with EU/Asian partners (Japan, South Korea).
✔ Priority #3: Engage China selectively—without ceding control of critical supply chains.

A China-heavy approach might offer short-term gains and Canada should play to its strengths—resources, clean energy, and proximity to the U.S. — while avoiding over-dependence on any single foreign power.

CATL in Canada: Risks, Rewards, and Realities

China’s Contemporary Amperex Technology Co. Limited (CATL)—the world’s largest EV battery manufacturer—could be a game-changer for Canada’s EV ambitions.

Canada’s Advantages for CATL

✅ Access to Critical Minerals – Canada has lithium, nickel, cobalt, and graphite (key for CATL’s LFP and NMC batteries).
✅ North American Market Entry – CATL could supply Tesla, Ford, Stellantis from Canada, bypassing U.S. IRA restrictions on Chinese batteries.
✅ Clean Energy Credentials – Canada’s hydroelectric power aligns with CATL’s need for low-carbon manufacturing (important for EU/US compliance).

CATL’s Advantages for Canada

✅ Fast-Tracked Gigafactories – CATL builds plants faster and cheaper than Western rivals (e.g., its 80 GWh German plant took <3 years).
✅ Cutting-Edge Tech – CATL leads in LFP batteries (cheaper, longer-lasting) and cell-to-pack (CTP) innovation.
✅ Jobs & Investment – A CATL plant could bring thousands of jobs (e.g., its Michigan deal with Ford promised 2,500+ jobs).

What Would a CATL Deal Look Like in Canada?

Option 1: Full Gigafactory (Like VW in Ontario)

• Pros: Massive job creation, fast scale-up.

• Cons: High subsidy costs, U.S. market access risks.

Option 2: Licensing & JV (Like Ford’s Michigan Model)

• CATL provides tech, but a Canadian/Western firm owns the plant.

• Pros: Less geopolitical risk, keeps IP secure.

• Cons: Less investment, fewer jobs.

Option 3: Mining & Processing Only

• CATL partners with Canadian miners (e.g., Lithium Americas, Nemaska) but doesn’t build batteries.

• Pros: No U.S. backlash, still benefits from Chinese demand.

• Cons: Misses out on high-value manufacturing.

Case Study: CATL in the U.S. (Ford’s Michigan Plant)

• Deal Structure: Ford owns the plant; CATL licenses tech.

• U.S. Response: Republicans called it a “Trojan Horse” for Chinese influence.

• IRA Impact: Batteries may not qualify for full $7,500 EV tax credits.

• Lesson for Canada: A similar deal would face political heat, but may be the safest path.

Should Canada Pursue CATL?

Yes, If…

✔ It’s a licensing/JV model (not fully Chinese-owned).
✔ The U.S. signals no retaliation (e.g., IRA exemptions for Canadian-made CATL batteries).
✔ Subsidies are performance-based (e.g., clawbacks if jobs disappear).

Related:-

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• Trump announces 25% Tariff on All Cars… Why Canada should Remove Tariffs on Chinese cars immediately, and Why Partnering with China may just resolve the U.S. Auto Tariffs Woe once and for all by “Riding the Dragon”
• Should Canada Removes Tariffs on Chinese EV’s so that Canadians have access to state of the art Electric Vehicles… (and Save the world)?