Industry minister Francois-Philippe Champagne has led the strategy that’s seen some of the biggest investments in the history of Canada’s auto sector.Tara Walton/The Canadian Press
The era of Canada putting down big bets on massive new electric-vehicle battery plants is coming to end.
As Industry Minister, François-Philippe Champagne has led the strategy that’s seen Stellantis N.V., STLA-N Volkswagen Group and Honda Motor Co. HNDAF commit to new factories in Ontario that represent some of the biggest investments in the history of Canada’s auto sector.
A few months ago, Mr. Champagne was still talking up the possibility of landing one or two more such commitments from global automakers.
But in a year-end interview with The Globe and Mail, he acknowledged he’s no longer big-game hunting the same way. Instead, the focus has shifted to solidifying the existing commitments during a turbulent period for the nascent EV sector, and leveraging them to grow out the domestic supply chain that they are meant to anchor.
“Now, it’s about consolidation,” Mr. Champagne said, referring in particular to landing and advancing investments in mining and refining battery materials such as lithium, graphite and nickel.
Repeatedly invoking a new mantra about the need to achieve greater “speed and scale,” he was tacitly acknowledging that Canada needs to dramatically pick up the pace for the battery plants to be supplied primarily by the country’s ample reserves of critical minerals – access to which was one of the main reasons cited by the automakers for placing the investments here.
Mr. Champagne also reflected on how Ottawa’s EV-battery strategy has played out to date, defending the government’s billions of dollars in subsidies, in the face of mounting skepticism resulting from setbacks in the auto sector’s transition to EVs, as it has struggled with slower demand growth than expected.
While that bumpiness has not derailed the three landmark battery plants in Ontario, it has jeopardized a fourth planned by Sweden’s struggling Northvolt AB, and seen other retreats such as Ford Motor Co. F-N putting off plans to assemble EVs at its facilities in Oakville, Ont.
Quebec says Northvolt battery project will go ahead as company cuts 20% of global staff
How much longer Mr. Champagne will be the point-person for the strategy is an open question, given that a federal election early in 2025 appears increasingly likely, and the governing party that he serves faces a double-digit deficit in opinion polls.
But his perspective may be useful context for whoever is in office by the end of 2025, and tasked with deciding whether and how to double down on trying to turn Canada into a force in EV-making.
One of his arguments is that subsidies for the battery plants will not be nearly as high as most people perceive – particularly when it comes to Stellantis and Volkswagen, which most media reports have suggested will top $28-billion in combined support from the federal and Ontario governments. (The Honda deal has a lower ceiling and is structured differently.)
That figure is essentially the maximum total possible, contingent on the plants operating at full capacity from the earliest possible date, because it’s mostly derived from production subsidies per battery made that expire in the early 2030s. An arguable upside of the EV demand-growth slowdown, to which Mr. Champagne implicitly pointed, is that the cost for taxpayers will be lower because the factories – expected to be operational for decades – won’t need to ramp up as quickly.
“People have this impression that we have dispersed that money,” he said. “But today, I’ve landed tens of billions of investments, and I’ve only dispersed a few hundred million.”
He was somewhat more philosophical on the more negative consequences of the industry’s recent struggles, including for Canada’s large industry of parts-makers and other suppliers at the mercy of automakers’ rapidly shifting timelines for EV roll-outs – framing it as inevitable during a revolutionary industrial change.
“If you look at the history of the world, when you have a shift in technology for the next century, the first few years are always bumpy,” he said. “My role, and the role of the industry, is not only to look at next week or next month or next year, but to position Canada for long-term success.”
He also suggested that in the near-term, Canada is well-positioned to weather uncertainty around the pace of the shift away from internal combustion engines, because Ontario still has several assembly plants making vehicles with those gas-fuelled motors for the foreseeable future, as well as some (notably Stellantis’s Windsor assembly plant) building flexible platforms that can make both types of vehicles.
In a possible nod to current political dynamics in the United States – where most Canadian-made vehicles are sold, and where president-elect Donald Trump’s EV skepticism may or may not be counterbalanced by Elon Musk’s role in his administration – Mr. Champagne repeatedly invoked Tesla Inc. as evidence of the need for patience. He did so on the premises that Tesla had plenty of highs and lows before establishing dominance of the early EV space, and that Tesla’s soaring stock price shows that investors retain faith in EVs ultimately taking over the market.
Otherwise, he mostly steered away from commenting on the extent to which Mr. Trump’s threat to impose a 25-per-cent tariff on Canadian exports could hurt all forms of vehicle-making here, other than to express optimism that Mr. Trump’s sensitivity to markets – which could react negatively to massive disruptions of the highly integrated Canada-U.S. supply chain – will help dissuade him.
Actually strengthening that supply chain in the coming years is partly contingent on the natural-resource question – whether Canada can kick-start its mining sector enough to supply not just domestic facilities but also U.S. ones, as industries seek to reduce reliance on China – which contributes to the government’s focus shifting upstream.
Mr. Champagne touted a few examples of progress over the past couple of years – particularly at the mid-stream level, such as plans for Canada’s first copper-foil factory and a joint venture by General Motors Co. and Posco Chemical Co. Ltd. to produce cathode active materials, both in Quebec.
He also noted the multifaceted nature of Honda’s investment in Ontario, which includes partnerships with Posco and with Asahi Kasei Corp. to make battery components. That could carry extra weight since Honda’s recently announced plan to merge with Nissan Motor Corp. to create the world’s third-largest automaker, which is widely seen as an effort to keep pace with Chinese competitors. And Honda chief executive Toshihiro Mibe hinted to The Globe earlier this year that his company is interested in further investing in this country’s natural resources.
But while the effort to get more critical minerals to market does not rest entirely with whoever sits in his chair in cabinet – and is contingent on factors ranging from the federal Natural Resources ministry’s efforts to work with provinces to speed up permitting, to infrastructure investments, to the Finance Ministry’s implementation of mining tax incentives – it now requires the sort of entrepreneurial hustle Mr. Champagne brought to landing the battery plants.
He acknowledged that it might have seemed more obvious to start upstream and then move downstream. The economic case for subsidizing the battery plants always rested partly on the establishment of a reliable market for Canadian resources, so it’s a significant hitch that Canada is not yet fully prepared to supply them.
But Mr. Champagne contended that there was a narrow window during which the automakers were deciding where to situate the battery plants – which has now almost closed, with most such North American commitments already made – and he had to seize it.
The alternative, he suggested, would have been to effectively give up on Canada’s long history of making cars and trucks, which was a real prospect a few years ago as a decades-long decline threatened to be worsened by being left behind in the EV shift.
“One of the first briefings I got from officials was basically that [I would be] presiding over the end of the auto sector in Canada gradually,” he said. “And we turned what was a challenge into an opportunity.”
Whether Canada’s efforts to position itself as a major player in the electrification of transportation hold up as a win in the long-run, though, will depend on the success of its next phase working backward to build a supply chain – whoever is steering it.
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