Auto industry’s biggest shakeup ever marks chance for Canada to rise


For some Canadians, his words rang out like a wake-up call because in recent years, engines for the F-150, and other Ford vehicles, have been assembled in Windsor, Ontario.

Of course, electric vehicles like the new F-150 don’t have engines — they have batteries and motors. That’s why Stephen MacKenzie, president of Invest Windsor Essex, the local economic development corporation, is scrambling to attract battery manufacturers to the region.

“We have automotives in our DNA,” said MacKenzie, “but things are changing.”

As automotive manufacturers, one by one, announce plans to move away from gasoline and shift production to electric vehicles, it’s prompting calls for a new industrial policy in Canada to address a major gap. Even as the area along the Michigan-Ontario border has a 100-year-old auto sector, battery manufacturing remains a nascent industry throughout North America, and is nearly non-existent in Canada.

Yet batteries account for an estimated 30 to 40 per cent of the cost of a typical battery electric vehicle.


This week, G7 leaders concluded the first in-person summit since the pandemic started, without reaching any agreements on a timeline to phase out gasoline-powered cars as some activists had hoped.

But President Biden has called it a security imperative to establish a battery supply chain that’s independent from China. To do this, he has proposed spending hundreds of billions of dollars to build new infrastructure and attract manufacturers.

Meanwhile, in Canada, François-Philippe Champagne, federal minister of innovation, science and industry, told the Financial Post that government will have to play a role in plugging gaps in the EV supply chain, including battery manufacturing. He noted the federal Liberals’ proposed $8-billion net-zero accelerator fund, to be doled out over a seven year-span, could help in this area.

We have automotives in our DNA, but things are changing

Stephen MacKenzie, president of Invest Windsor Essex

“We are in discussions with different companies, as you would expect, to plug these gaps and make sure we onshore as much of the supply chain as possible,” Champagne said, “understanding the future is really in the battery and the whole ecosystem around that.”

There are also penalties that could incentivize foreign battery manufacturers to locate plants here. The Canada-U.S.-Mexico trade agreement adds a 2.5-per-cent tariff if more than 25 per cent of a vehicle’s core parts, including the battery, are made outside of North America.

“Logically, it just seems to me that OEMs (automotive companies) are going to have some plans for battery production here,” said Dave Adams, president of the Toronto-based Global Automakers of Canada. “The question is whether that’s going to be in Canada or the U.S.? That remains to be seen.”

In February, the Windsor Star reported that MacKenzie is courting an undisclosed battery manufacturer that is looking to build a $2-billion “gigafactory” that could employ up to 2,000 people.

A decision could take months, and the unnamed company is also studying potential sites in Indiana, Michigan, and Ohio. But if it were to choose Windsor, it would mark the first plant in Canada where battery cells are manufactured and assembled, MacKenzie told the Financial Post.

While MacKenzie said Windsor’s grid could supply the estimated 90MW per year needed for a gigafactory, he acknowledged electricity costs in that part of Ontario trend higher than other parts of North America.

“Think of all the decisions that go into locating a factory of that size — it’s labour, it’s cost of labour, mobility of labour, proximity to market and supply chain, cost of utilities and cost of land,” he said. “If you take all the factors into account we believe we have a strong case.”

Still, MacKenzie said he’s talking to several other companies and hoping to attract other battery manufacturers, or even plants that produce other electric vehicle parts.

Mark Beveridge, a principal consultant to research firm Benchmark Minerals Intelligence, said that energy accounts for a small share of the total cost of a battery, and that the raw materials account for the largest share, as much as 80 per cent of a battery.

While Canada is rich in copper, nickel, cobalt, lithium and other raw materials needed for electric vehicle batteries, Beveridge said there are still unresolved questions about whether these can be produced in a cost-competitive way that will attract EV makers.


There are of course, already firm plans for electric vehicle production in Canada. Ford, backed by $590 million in provincial and federal funding, has announced plans to convert its Oakville Assembly Plant into an electric vehicle plant, possibly with a battery assembly plant. General Motors announced it would invest $1 billion in an electric vehicle plant in Ingersoll. But what happens to the rest of Canada’s significant auto manufacturing sector remains up in the air.

A spokeswoman for Ford declined to say whether the company plans to transition its Windsor operations towards EV production. Meanwhile, Stellantis, which produces the Chrysler Pacific Hybrid minivan in Windsor, said last year it plans to invest $1.5 billion to make its operation capable of producing EVs but has offered no further details.

In any case, automotive manufacturing is likely to see the most significant changes in a century as batteries and motors gradually replace conventional engines that combust gasoline during the next decade, according to Sam Wilkinson, director of clean energy technology for the research firm IHS Markit.

I believe the automotive industry is thrown open to disruption like it’s never been thrown open before

Sam Wilkinson, IHS Markit’s director of clean energy technology

“The industry is going to be transformed in a way that it’s never been transformed before,” said Wilkinson, “and who holds the value is going to change.”

Because EVs remain more expensive than internal combustion engine vehicles, automakers are focused on reducing costs, and moving EV production facilities closer to end markets is a logical first step, he said.

At the end of 2020, 83 per cent of all battery manufacturing facilities were located in China, compared to six per cent each in Europe and the U.S., with Korea and Japan in control of about two per cent each, according to Wilkinson.

Ford has announced a partnership with South Korea’s SK Innovation, and General Motors announced a partnership with LG Chem to help both companies with battery production.

“There’s many, many partnerships being formed,” said Wilkinson. ”Engines is what made those companies, and engines aren’t going to be in cars anymore. I believe the automotive industry is thrown open to disruption like it’s never been thrown open before.”

Marc Bedard, president and founder of The Lion Electric Co.

Andrej Ivanov via Reuters

There are other signs of a budding electric vehicle supply chain coming to life in Canada. St. Jerome-Que.’s Lion Electric Co., which designs and manufactures battery powered school buses, announced a $185-million facility, backed by two $50-million loans from the federal and provincial government.

Under the current plan, Lion Electric would import battery cells from South Korea, but assemble them into packs at Montreal Mirabel International Airport that could be inserted into its vehicles.

A mineral supply chain is also slowly taking shape. Investissement Quebec last year agreed to inject $95 million into Nemaska Lithium Inc., which is advancing a lithium mine and electrochemical plant in the province. It has also invested millions of dollars into Nouveau Monde, which is advancing a graphite mine — another key component of an electric vehicle battery.


Out west, Burnaby-based Nano One Materials Corp. has long designed cathode powders for lithium-ion batteries, and has been licensing its technology to companies for production.

Frank So, executive vice president for Maple Ridge-based E-One Moli Energy Ltd., a subsidiary of Taiwan’s Molicel, said it applied for funding from the federal government to build a battery manufacturing facility in 2019 but hasn’t yet heard back. “Our timeline for expansion really depends on the timing of funding from the federal government,” said So.

Flavio Volpe, president of the Auto Parts Manufacturers Association of Canada, said for years the auto industry has been nearly impenetrable because a company had to prove it could produce at scale and quality.

Now, with the shift to electric vehicles, everything is up in the air, he said.

“I can get engines anywhere,” Volpe said. “It’s different on batteries. There is room for new scale players and it’s the first time in the history of the auto sector, that that’s true.”

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