Auto analysts at Detroit’s North American International Auto Show said the USMCA trade agreement, shifting geopolitics and Canada’s supply of critical minerals have set the table for the country to create a lucrative new automotive ecosystem.
“I think in general Canada is playing an important role,” said Jay Hwang, senior analyst battery/charging for S&P Global-Mobility. “It’s a North American country and in terms of natural resources it will play an important role.
“It makes sense to assume there’s going to be more cooperation between Canada and the U.S. (on building battery supply chains), especially within U.S. companies.”
A study released this month by Clean Energy Canada and the Trillium Network for Advanced Manufacturing claims a domesticated battery supply chain could generate up to $48.2 billion annually and create 250,000 direct and indirect jobs.
The Canada’s New Economic Engine report is available at: cleanenergycanada.org/report/canadas-new-economic-engine.
That best-case scenario is only possible if the various levels of government continue their aggressive campaign to attract battery plants, materials’ processors and mining and processing investment and expand electric vehicle assembly.
However, Canada has added some key pieces to its battery chain puzzle in the past 12 months. The biggest prize being the $5 billion NextStar battery plant being built by LG Energy Solutions and Stellantis in Windsor.
Other investments include the $500 million GM/Posco Chemical materials plant in Quebec, Umicore’s $1.5 billion cathode plant in Kingston, GM/Li-Cycle’s deal to recycle batteries, the Tesla/Vale nickel contract and Mercedes/Volkswagen signing an agreement with the federal government for access to critical minerals.
In addition, Stellantis has announced Windsor as the site of its EV and battery research and development centre for North America while international automotive supplier Flex ‘N’ Gate has already opened its own battery R&D centre in Windsor.
“The opportunity to build a fully integrated EV battery supply chain is in front of us,” said Brendan Sweeney, managing director of the Trillium Network. “The work has begun, but there is lots more to do.
“Better integrating Canada’s mining and manufacturing industries can yield massive economic and social benefits but will require a level of government support—and political willpower—that we have not seen since the 1960s.”
The study urges Canadian governments to develop a national battery strategy and then focus their efforts in expanding electric vehicle assembly, battery cell manufacturing and clean battery materials production.
With the USMCA and the U.S.’s Inflation Reduction Act (IRA) both having strict North American content rules to qualify for EV credits, Canada is hoping to land companies needing to build North America supply chains.
“The IRA requires not only the cell and module to be produced in North America, but cathode material and anode material to be produced in North America,” Hwang said.
“Modules I wouldn’t worry too much about that because almost all OEMs (automakers), including foreign OEMs, are building a lot of giga factories.
“In terms of cathode and anode materials, we need to do a lot more work.”
The challenge and opportunities are even greater when it comes to the raw materials.
Canada is rated among the top five nations in the world for reserves of critical minerals, such as lithium, cobalt, nickel, and is the only Western nation to have all the critical minerals needed to make batteries.
“On the critical minerals part, nothing can come from China if you want to qualify for the (EV) credits,” said Jeff Meyer, director of energy and mobility for S&P Global. “That’s a big deal.
“We see a large concentration of battery mineral refining/processing in China.
“Refining and processing is going to be a challenge to move significant degrees out of China in a short period of time.”
Meyer added the other pressure pushing companies to North America is geopolitics.
Risk aversity and supply chain stability have become more important components in investment strategies putting Canada in the discussion.
“Traditionally there hasn’t been as big a focus on geopolitics in automotive boardrooms,” Meyer said.
“The battery supply chain, in terms of battery raw materials, geopolitics is an important consideration.
“Politics can impact mining costs, certainly I think geopolitics will become an increasingly important factor in respect to batteries and electric vehicles.”
Hwang said companies are also thinking about how green their supply chains are.
Canada’s electrical grid is 83 per cent non-emitting compared to 37 per cent in the U.S. and is among the world leaders in battery recycling technology, according to this month’s study.
“In Europe, they have Co2 regulations that have penalties for not meeting those (emission standards),” Hwang said.
“That’s an issue making carbon emissions important.”