How The EV Sector In Canada Can Thrive Even In The Era Of Tariffs

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Last Updated on: 2nd February 2025, 12:38 am

On January 31, 2025, the US government said it would impose a 25 percent tariff on goods imported from Canada and Mexico. This is another scene in the theater of the absurd that passes for government in America at the moment. The Orange Ogre huffs and puffs about tariffs to browbeat others into making concessions on issues that have nothing whatsoever to do with the proposed tariffs. Once he gets what he really wants, the talk of tariffs magically disappears, never to be mentioned again until the next time he wants to pressure another country into doing his bidding. Like Lucy with the football, it works every time. According to Reuters, the new tariffs won’t go into effect until March 1, which gives the so-called administration time to impose its will on Canada and Mexico.

Writing in The Conversation, Charles Conteh, who is a professor of public policy and administration at Brock University in St Catherines, Ontario, and Tia Henstra, a research assistant at Brock University, argue that those tariffs — assuming they ever actually go into effect — should not be seen as a detriment to the plans Canada has for its electric car industry but rather as a way to accelerate those plans.

“The electric vehicle industry has been one of the most defining technological trends of the past decade, transforming the automotive sector in Canada while fueling advancements in manufacturing,” they write. “Yet after billions of taxpayer dollars have been invested, the EV industry in Canada is facing headwinds. Chief among these are the trade tariff threats from US President Donald Trump. For a country with an automotive sector that exports 91 per cent of its parts to the US, the threats feel existential. They may also be seen as a betrayal of the centuries-long economic and cultural partnership between two neighbors sharing one of the world’s longest and most porous borders.”

Three Obstacles To The Success Of The EV Industry In Canada

The authors identify three obstacles facing the EV industry:

• high costs
• limited battery range
• sparse battery charging infrastructure.

These challenges have sparked skepticism about the future of EVs in Canada and whether the multi-billion-dollar investments made to date by federal and provincial governments were a wise use of public moneys. As researchers who study innovation policy initiatives amid breakneck changes in technologies and markets in Canada and other countries, the pair suggests that Canada has every reason to ratchet up its commitments in the months and years ahead. Along with artificial intelligence, electric vehicles represent the emergent frontier of advanced manufacturing in the digital age. Winners of this innovation race will stand to dominate the global market for the foreseeable future, they write.

The Case For Staying The Course

Despite current challenges, EVs remain the future of the automotive sector. Even conservative estimates suggest that by 2040 nearly three quarters of new car sales will be fully electric globally. Canada’s position in the EV industry is stronger than recent news coverage indicates. The country ranked first among 30 countries in a 2024 EV battery supply chain report, outperforming even China. This ranking reflects Canada’s vast reserves of critical minerals essential for EV battery production and its burgeoning battery manufacturing sector.

Over the past few years, Canada has attracted significant investments from manufacturers like Umicore, Northvolt, and PowerCo, the battery manufacturing division of Volkswagen Group. In addition, Canada has reason to be optimistic about EVs and energy storage. While concerns about US protectionism loom, Canada’s commitment to zero-emission vehicles ensures fiscal incentives and policies that will boost short-term demand, the authors suggest. On the environmental, social, and governance front, Canada outperforms many of its global competitors in battery manufacturing. The country’s climate change policy ambitions, clean electricity grid, and commitment to sustainable mining position it as a global leader in the EV space. We have a minor quibble here: Canada may indeed have policies in place to support the sustainable mining of battery materials, but its embrace of extracting oil from tar sands tarnishes its status as an environmental hero.

The robust innovation ecosystem for advanced manufacturing is another key strength for Canada. A prime example is the Ontario Vehicle Innovation Network, which commercializes advanced automotive technologies and manages the development, testing, piloting, and uptake of transportation and infrastructure technologies. It operates seven regional technology development sites across Ontario, including in Waterloo, Hamilton, Windsor-Essex, Durham, and Toronto. By serving as a bridge between government, industry, and researchers, OVIN has become a model for multi-level governance, with projects jointly funded by the federal and provincial governments and close working relationships with municipalities. “As the EV industry navigates economic and policy challenges, initiatives like OVIN are crucial for driving long term growth and competitiveness,” Conteh and Henstra contend.

While Canada’s automotive innovation ecosystem is generally robust, it requires some calibration to overcome current challenges and claim the next frontier of the global EV race, they say. In particular, Canada needs to consolidate its electric vehicle innovation ecosystem by integrating the upstream of its domestic supply chain assets with the downstream of its technology commercialization and adoption. In other words, it needs to get more critical minerals to market and make sure a substantial portion of the materials mined in Canada are processed and used domestically to build batteries and vehicles so the entire EV production cycle benefits Canada’s economy.

“Such an endeavor will require Canada to establish the right policies, regulations and financial support to tap into its vast reserves of critical minerals to supply the country’s battery plants. It is the presence of these reserves that made Canada attractive to the automakers in the first place. Leveraging them wisely will be critical for the country’s long-term success in the EV industry,” the authors write.

It is heartwarming that Conteh and Henstra have such a positive attitude about Canada and it electric vehicle industry even if new tariffs are imposed, but that may not be enough for its nascent EV industry to survive. There was great fanfare last year when Volkswagen and Northvolt announced plans to locate battery factories north of the border, but since then Northvolt has floundered and is desperately searching for new investors. Volkswagen had a dreadful year in 2024 and has cancelled plans to bring the ID.7 to North America. Instead, it will soldier on with the dated ID.4 and the overpriced ID.Buzz. Honda has made noises about establishing an electric car manufacturing base in Canada, but has been quiet about those plans of late. Whether Canada can keep its EV mojo going in the face of economic disruption from its neighbor to the south may take more than a positive attitude.