Canada looks like a good place to invest to some EV producers


Canada offers ‘stability, predictability and the rule of law,’ says Industry Minister François-Philippe Champagne

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The electric vehicle transition in North America kicked off nearly a decade ago with Tesla Inc. chief executive Elon Musk moving at breakneck speed, but now it’s shifting to a different phase: the slow and boring chapter in which automakers take months —  or years even — to decide where to build their EV operations.

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That may be a good thing for Canada as it seeks to grow its auto sector.

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“It’s clear that energy security, food security and supply chain resiliency is top of mind to leaders around the world,” Industry Minister François-Philippe Champagne said at a press conference on Dec. 5 in Germany, where he was meeting with Volkswagen AG and other automakers. “Canada is in many respects the answer.”

Champagne has travelled around the world, and for months, he’s preached the same message to any automaker or battery maker who would listen: these days, “stability, predictability and the rule of law are in high demand and short supplyin the world, but Canada has all of them.

He’s not the only politician who’s taken note of the rising geopolitical tensions: amid high inflation, a lingering pandemic, growing tensions between China and other world powers, and Russia’s invasion of Ukraine, some companies and politicians have started praising Canada’s reputation as a safe, reliable, and perhaps boring, partner as one of its best assets.

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It was a point made by Valdis Dombrovskis, the European Union’s trade commissioner in Ottawa, on Dec. 2.

“We need to rethink our approach to trade, to supply chains, in the case of supply chains, maybe move away from an efficiency model to a resilience-driven model,” he said.

Canada is in many respects the answer

Industry Minister François-Philippe Champagne

Dombrovskis emphasized that resilience “comes through diversification” and said EU countries want to grow their network of free-trade agreements around the world to avoid developing dependencies on any one nation.

“Like for example, we had a dependency on fossil fuels, and especially gas supplies from Russia,” he said.

That was one factor behind German Chancellor Olaf Scholz’s visit to Canada this summer, where he was accompanied by executives from VW and Mercedes-Benz Group to explore whether this country could serve as a future energy partner.

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On that visit, VW and its battery company PowerCo SE signed a memorandum of understanding (MOU) with Canada to co-operate on building a sustainable North American battery supply chain.

“The government of Canada has already proven to be a strong and reliable partner,” Oliver Blume, chief executive of VW, said last week, adding the country is “one logical option” in which to build a battery factory.

Volkswagen chief executive Oliver Blume.
Volkswagen chief executive Oliver Blume. Photo by Krisztian Bocsi/Bloomberg files

Such announcements are evidence of the slow and deliberate pace of new electric vehicle battery investments, which mark a huge change of pace from a couple of years ago.

For example, in 2015 Tesla faced heavy pressure from investors to ramp up its vehicle production by 10 times to 500,000 vehicles per year by 2018. The following year, it opened its battery factory outside Reno, Nev., while the facility was still only 14 per cent completed. Stories soon emerged of long shifts and worker injuries inside the factory.

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By contrast, VW signed the MOU this summer and updated it this winter, but there’s still no guarantee it will ever build out any operations in Canada. Nonetheless, the dialogue is a positive sign, Champagne said.

“Let’s remember that Canada was not even on the radar screen of German manufacturers just a few months ago,” he said at Monday’s press conference. “And we have turned that (around) completely.”

The federal government is not alone in noticing how Canada’s reputation for stability can be an asset to entice foreign manufacturers to invest here. Victor Fedeli, Ontario’s minister of economic development, job creation and trade, said he heard as much this September during a trade mission to Japan and South Korea to meet with automakers and battery companies about building operations in the province.

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“They feel Ontario is a stable market,” he said. “In a tumultuous world filled with turmoil, they turn to Ontario and see a sea of calm and that’s what they like. They see stability and calm here.”

It was a message conveyed by a dozen companies, he added, and one he hadn’t previously heard as a good reason to invest in Ontario. Fedeli also said the companies’ employees believe it would be a safe place to live.

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Of course, Canada has other assets beyond its reputation as a safe and reliable place. Blume mentioned “decarbonization” as a top goal for his company, which makes Canada’s largely clean grid, and its position as an emerging critical mineral supplier, attractive.

Champagne also continues to promote Canada’s commitment to reduce its emissions to net zero as key for companies pursuing similar goals. He added that he’s taking that message not only to automakers and battery companies, but to those in every sector.

“These discussions are reaffirming the strength of our supply chain,” Champagne said.

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