Canada’s Multibillion-Dollar Bet on Electric Vehicles: Will It Pay Off?
Canada is investing billions of dollars in the electric vehicle (EV) industry, and the question on everyone’s mind is whether this substantial investment will yield positive results. Standing against a backdrop that emphasized Quebec’s commitment to a clean economy, Prime Minister Justin Trudeau and Premier François Legault unveiled the details of what they described as a groundbreaking initiative.
The scale of the project is truly staggering. Northvolt, a Swedish battery giant, will construct a new manufacturing facility spanning 170 hectares, equivalent to more than 300 football fields, on Montreal’s South Shore, spanning two communities. Upon completion of the initial phase by the end of 2026, it is expected to possess an annual battery cell manufacturing capacity of up to 60 gigawatt-hours (GWh), sufficient to power approximately one million electric vehicles annually. Additionally, this phase will include facilities for producing cathode active materials (a key component of EV batteries) and recycling batteries, with a promise of generating up to 3,000 jobs.
However, this ambitious endeavor comes at a steep cost, with the federal and provincial governments committing a combined $2.7 billion in taxpayer funds to the project. Government production incentives, totaling up to $4.6 billion, are also part of the package, with a significant portion originating from Quebec, contingent on the presence of similar incentives in the United States.
These investments are part of a series of initiatives aimed at bolstering the burgeoning EV industry in Canada. While such projects have faced scrutiny due to the substantial public funding involved, experts argue that this funding is essential to compete in a fiercely competitive global market.
The automobile industry has a history of receiving government support, and while the outcome of these investments remains uncertain, it is evident that a significant price has been paid. Greig Mordue, the chair of advanced manufacturing policy at McMaster University’s school of engineering and a former Toyota executive, emphasized that the government’s primary tool now appears to be the checkbook.
Trudeau and Legault, on the other hand, defended the investment. Legault likened it to the billions spent on hydro-electric dams in northern Quebec decades ago, emphasizing the importance of the green economy for the next half-century.
Paolo Cerruti, the CEO and co-founder of Northvolt, cited the appeal of cheap, clean hydroelectric power and the potential availability of raw materials as factors in the decision. He also acknowledged the significant role played by financial incentives in Canada’s efforts to align itself with the United States in the EV industry.
The Inflation Reduction Act in the United States has prompted global competition in the growing green economy, with countries like Canada aiming to remain competitive in the race to electrification, according to Meena Bibra, a senior policy analyst at Clean Energy Canada.
A report from Clean Energy Canada estimated that Canada has the potential to develop a domestic EV battery supply chain that could support up to 250,000 jobs by 2030 and contribute $48 billion to the economy annually.
The global demand for electric vehicles is surging, with a 240% increase in sales since 2021 and a growing emphasis on clean energy. By 2030, North America’s manufacturing capacity for EV batteries is projected to be 20 times greater than a decade prior.
In summary, Canada’s significant investment in the electric vehicle industry is seen as a pivotal move in the face of global competition and the transition to a greener economy. While the outcome remains uncertain, the government’s commitment reflects the belief that substantial investment is necessary to remain competitive in this rapidly evolving industry.