In face of tax credit, Canadian electric vehicle makers look to U.S. to build – National
Damon Motors Inc. likes to refer to its electric motorbikes as groundbreaking, but the company’s manufacturing plans are also bucking a trend among Canadian companies.
It’s one of numerous electric-vehicle companies that have emerged in Canada as the push toward emission-free driving accelerates, but unlike most others, it plans to export the majority of the vehicles it will start producing in Surrey, B.C., next year to markets in the U.S. and Europe.
Company founder and chief executive Jay Giraud said the lack of tariffs on exports to the two regions was a key consideration for building in Canada, as was the ability to build near their research and development team.
“As a young company, it’s really important that our R&D and manufacturing are co-located.”
Other Canadian electric vehicle companies have also built up manufacturing plants close to home, but increasingly are looking to expand production in the United States as protectionist policies and other pressures help increase the trend toward building where one sells.
“There really is a relationship between where you build and where you sell and that’s particularly the case for EVs,” said Joanna Kyriazis, senior policy adviser at Clean Energy Canada.
“The batteries for EVs are very big. They’re heavy and expensive and logistically challenging to transport over long distances. So as the global auto industry transitions to EVs we are seeing more regionalization or localization of supply chains.”
To improve domestic production, experts like Kyriazis are pushing for more buyer incentives, both on the personal vehicle side and commercial, as well as other government support programs.
Montreal manufacturer Lion Electric Co. currently produces electric school buses and commercial vehicles at its plant in Saint-Jerome, Que., which last quarter amounted to 40 vehicles, including 28 for Canadian demand and 12 destined for the U.S.
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But going forward, the company has big plans to ramp up production in the U.S. with a plant in Illinois it expects to open next year with a capacity of 20,000 vehicles per year.
Company spokesman Patrick Gervais said Buy America provisions for transit vehicles were certainly a motivating factor to build the plant in the U.S., but that it also goes with the company’s efforts to make manufacturing more energy efficient.
“We have a policy to build where we sell, because we feel it goes with our mission which is all about GHG emissions.”
The company’s Canadian facility also has significant excess capacity since it’s able to produce about 2,500 vehicles a year, so further government support would mean more production at home as well.
“Electrification is a great new opportunity for the Canadian economy, and we need to make sure that we put everything in place to grow this whole ecosystem,” said Gervais.
Winnipeg-based bus manufacturer New Flyer Industries does some production in its home city, but it also has three plants in the U.S. The company didn’t specify how many of its zero-emission buses are produced in Canada, but notes it has a backlog of about 1,700 of those buses compared with capacity of about 8,000 annually across its three production lines.
Aldergrove, B.C.-based Vicinity Motor Corp. has a production facility in the community, but is also building a facility in Washington State that it says will be Buy America compliant.
Some major parts suppliers have also ended up looking further afield to build their electric vehicle components. Aurora, Ont.-based parts giant Magna International Inc. announced a deal last month to build battery enclosures for the high-profile electric Ford F-150 in the U.S., and said in February it had started to build a new plant in Michigan that will produce battery enclosures for the electric GMC Hummer, but the company says it produces no electric vehicle parts in Canada.
There is certainly change ahead for Canada’s electric-vehicle industry with major spending commitments from the big three U.S. auto companies, but it will still be a few years before any pure electric passenger vehicles roll off any assembly line.
Canada’s passenger EV manufacturing is also facing threats from U.S. President Joe Biden’s tax credit proposal that would favour vehicles made in the U.S. and which the Canadian government says would effectively impose a 34 per cent tariff on electric vehicles assembled in Canada.
In a letter sent Friday to key members of the U.S. Senate, Deputy Prime Minister Chrystia Freeland and Trade Minister Mary Ng threatened to impose retaliatory tariffs if the proposed incentives go forward.
With this being such a pivotal moment in the transformation of manufacturing, Canada needs to do more now to make sure the whole supply chain and economy can benefit, said Matthew Fortier, chief executive of Accelerate, a new industry alliance.
The alliance, launched in September, was formed to push for a more coherent national strategy, to attract investments across the demands of electric vehicles including minerals, parts, batteries and assembly.
“This is a generational opportunity to build a strategy where Canada can be competitive,” said Fortier.
He said it’s important to move fast because the country has already lost time, especially as competition heats up from other governments to secure crucial battery production that can help anchor other parts of the supply chain.
“Is Canada behind? Absolutely. We wish we had a strategy last year, five years ago, but we can absolutely be a part of the global race towards competitiveness in the EV space.”
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There are signs of progress, including new tax breaks scheduled to come into effect in the new year, billions of dollars earmarked for the electrification of public transit, and the federal government says mandates are coming on the minimum number of electric vehicles dealers have to sell.
Government funding has also been flowing to secure more production from a wide range of projects, including $590 million for the Ford Motor Co. to shift to electric production in Oakville, $100 million to help Lion Electric build a battery assembly plant and research centre, and $400,000 from the B.C. government to help Damon Motors move toward production of its pioneering motorcycle design.
Further co-ordination and efforts, however, are needed if Canada is going to seize the full potential of a moment from so much competition, said Fortier.
“The window is open right now, I don’t know when it’s going to close, I just know that there are a lot of different counties and jurisdictions trying to get through that window.”
© 2021 The Canadian Press