10 Jan Who benefits most from Canada’s ambitious EV targets? Maybe China
Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, believes the recent electric vehicle targets set out by Canada’s environment minister also carried this pointed message to Canada’s domestic auto industry: “Let them eat cake.”
Volpe says he has come to this conclusion because he believes those goals, which include a national target of 100 per cent zero-emission vehicle sales by 2035, cannot be met.
- Do you have questions about Canada’s plan to phase out the sale of gas-powered cars and trucks by 2035? Send an email to ask@cbc.ca.
He accused the government of not caring whether those cars are domestically built or come from China, regardless of the impact it may have.
“Which is a very damaging proposition to Canadian industry and Canadian interests,” Volpe said.
He and other analysts suggest there could be unintended consequences for setting such targets and warn that China and its auto manufacturing base could come out the winner, all at the expense of Canada’s auto industry.
CBC News asked the environment ministry about concerns that the government’s EV targets will only help to serve China’s EV auto manufacturers while having a significant negative impact on Canada’s auto manufacturing base.
The federal government is laying out its final plan to phase out new, gas-powered passenger vehicles by 2035, with gradually increasing targets for manufacturers to meet.
Targets are obtainable, ministry says
In response, the ministry said that the government’s EV targets are being complimented with “multiple measures” to ensure that Canada benefits from the transition to electric vehicles.
“Indeed, the manufacturing of zero-emission vehicles, their components, including batteries and the acquisition and refining of the critical minerals they need, represent huge opportunities that are already paying dividends for the Canadian economy,” it said in an emailed statement.
The government is building on its record of being a destination of choice for investments throughout the vehicle supply chain, and has secured $34 billion in investment in the battery and automotive supply chain, the ministry said.
Environment Minister Steven Guilbeault has said industry should have no problem meeting these targets, and during the mid-December announcement noted that the Canadian marketplace is already experiencing “a rapid shift toward zero-emission vehicles.”
Environment and Climate Change Minister Steven Guilbeault on Power and Politics regarding his government’s new regulations to increase the number of electric vehicles in Canada.
Recent data shows a growth in electric vehicle sales. According to a Statistics Canada report this month, new zero-emission vehicles (ZEVs) made up 12.1 per cent of all new motor vehicles registered in the third quarter. That represented an increase from the third quarter of 2022, when ZEVs were 8.7 per cent of all motor-vehicle registrations
Meanwhile, Joanna Kyriazis, a senior policy advisor with Clean Energy Canada, said provinces like B.C. and Quebec have exceeded EV sales goals.
She said those who are skeptical of Canada meeting its 2035 targets are not giving the domestic auto industry enough credit.
“The first requirement under the federal policy is 20 per cent by 2026,” she said. “We’re going to blow past that.”
Fast EV transition may open market to China
Yet Niel Hiscox, president of Clarify Group Inc., a Canadian-based automotive research and advisory firm, said even with the best will, and all the investment in the world, legacy automakers would still be challenged to reach those targets.
“So there’s a potential that the need for fast transition actually opens the market for the Chinese manufacturers in a way that a slower approach might not.”
Car manufactures in North America have set different targets for EV sales. GM, for example, said it will transition to all electric by 2035, but “are going to be led by the customer,” according to recent comments from CEO Mary Barra.
Honda is aiming for 40 per cent of its North American sales to be zero-emission vehicles by 2030. There have also been reports that the Japanese automaker is considering making an $18.4 billion investment to build electric vehicles in Canada.
Jan. 8, 2024 – CBC News has learned the Honda Global team will be in Canada to meet with federal government officials. For more, we speak to Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. Plus, pro-Palestinian protests on a highway overpass in Toronto are sparking backlash. Jewish leaders say the protests are deliberately targeting a prominent Jewish neighbourhood and warn of rising antisemitism. We speak to Noah Shak, vice president of countering antisemitism and hate at the UJA Federation of Greater Toronto.
Ford Motor Company is also hoping that electric vehicles make up half of its sales by 2030. But some manufacturers have cut back on production on some electric vehicles.
Canada’s targets are somewhat more ambitious than those in the U.S.
In 2021, U.S. President Joe Biden issued an executive order mandating that 50 per cent of new cars be EVs by 2030. Canada’s plan calls for 60 per cent to be EVs by that year.
Meanwhile, the U.S. Environmental Protection Agency (EPA) has proposed that by 2032, two thirds of new vehicles sold should be electric.
Canadian targets ‘ridiculously optimistic’
“If the Canadian government is absolutely committed to that target, it is not going to come through any domestic base production,” said Mark Barrott, an automotive industry expert with the Michigan based consulting firm Plante Moran.
He called Canada’s 100 per cent target “ridiculously optimistic” and said it will “open a door for the Chinese to come in.”
Part of the solution would involve the Chinese electric vehicle maker BYD, based in the southern China tech hub of Shenzhen, which recently dethroned Texas-based Tesla Inc. as the top global seller of electric cars in the last three months of 2023.
It’s part of a wave of Chinese electric car exporters that are starting to compete with Western and Japanese brands in their home markets, bringing fast-developing technology and low prices.
“All the BYD cars we’re going to import, or Tesla models there from Shanghai that we’re going to import, we’re going to directly benefit the Chinese objective for global market domination in EVs,” Volpe said.
Other Chinese EV exporters include NIO, Geely Group’s Zeekr and Ora, a unit of SUV maker Great Wall Motors.
“The main concern for global automakers is the influx of cheap Chinese EVs into their home markets and other major markets before they can produce EVs at lower costs,” Jing Yang, the director of China corporate research at the U.S.-based credit rating agency and corporate analysis firm Fitch Ratings, recently told The Associated Press.
China has mostly ignored Canadian market, so far
Canada does import some EVs made in China, but those are mostly from U.S. entrepreuneur Elon Musk’s Tesla, which has a large plant in Shanghai. But for the most part, Chinese manufactured cars have not yet entered the North American market.
Along with geo-political tensions, many North American consumers perceive Chinese vehicles to be of lesser quality than those from manufacturers in North America, Europe or Japan, Barrott said.
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He said Chinese vehicles would also face issues complying with North American safety standards. As well, one of the most significant barriers of entry to the U.S. market is that finished vehicles from China are subject to a 25 per cent tariff.
Although Chinese cars don’t face the same tariffs in Canada as they do in the U.S., China has mostly ignored the Canadian market so far, making successful inroads in Europe, and likely waiting until it finally zeroes in on the U.S., Hiscox said.
He said Canada’s high EV target could cause Chinese exporters to take notice of the Canadian market. “If you’re BYD or you’re NIO, you look at it and you say ‘Oh, their government has now said they have to go EV.’
“There’s a period of time where those [legacy] brands that have had the market so far cannot fill the need at the price point it’s going to take to really drive adoption.”