Can Canada make good on the once-in-a-generation chance to be a major player in electric vehicle batteries?

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In the global race to reimagine the automobile for a carbon neutral future, electric vehicle car batteries will literally drive the transition.

For Canada this provides a once-in-a-generation opportunity to establish itself as a major player on the global battery scene and, in the process, create a solid anchor for the domestic manufacturing of electric vehicles that so many metalworking shops depend on.

One important difference between electric vehicles and the gas vehicles we are accustomed to is that as much as half the value of an electric vehicle is in the propulsion battery—the minerals, research, technology, and manufacturing required to build it. Mining, refining, and transporting the lithium, cobalt, nickel, graphite, manganese and other minerals required is expensive, particularly when these materials must be sourced from far away places. For metals and minerals-rich Canada—we are currently ranked fourth in the world and first in North America for raw material capacities in the battery supply chain—this presents an obvious opportunity to supply North American, and perhaps global, automotive manufacturing. The global market for batteries is expected to reach $360 billion over the next decade and the International Energy Agency projects demand for critical minerals to grow 30-fold or more by 2040.

But the opportunities in mining the materials necessary for batteries presents the low-hanging fruit. Electric vehicle batteries are not only much larger and heavier than conventional car batteries, but their technology is also far more complicated and finicky than the lead-acid systems used in our car starter batteries. As the director of the Centre for Automotive Research and Education Peter Frise explains, a high-performance battery pack consists of many individual cells, which must be connected and housed in a specially designed module or “pack” to protect it in a crash. The module also contains a sophisticated electronic battery management system to ensure that each cell is performing properly. That translates into a lot of know-how required for the manufacturing of such batteries as well as high-value work opportunities for the suppliers contracted to put them together.

A chilling potential outcome for the metalworking shops currently serving the automotive parts sector, Frise believes, could be that the high cost of electric vehicle batteries leads to pressure on the manufacturers of other vehicle parts to lower costs so that the total price of electric vehicles can compete with established gas models.

“This dive to the bottom on parts pricing would push our large supplier segment to become commodity providers of inexpensive products, which would drive wages down and could lead to firms moving to lower-cost countries,” Frise warned in an editorial published in the Globe and Mail calling for a complete auto ecosystem that brings together research and development, materials, parts, and assembly.

“As a nation that aspires to be a leader in high-value advanced technology manufacturing, Canada needs to find opportunities to add value to our natural resources and build the highest-value parts of the future car – and that is exactly what an EV battery supply chain does. Without an EV battery-making plant, Canada could be on the fringes or entirely left out of the biggest revolution in the automotive industry since it began a century ago,” Frise argues.

Is Canada up to the task? A year ago, when SHOP visited this topic, we warned that Canada was far behind Asia and Europe in establishing itself in this critical space. About 80 per cent of the world’s batteries are produced in Japan, South Korea, and China. The European Union established its own European Battery Alliance five years ago with more than €6 billion so far dedicated to building a European supply chain. There are 15 large-scale battery-cell factories now under construction as the EU aims to have an entirely self-sufficient battery ecosystem by 2025. We did take note a year ago that there was some progress in Canada. The federal government had unveiled its “Mines to Mobility” battery development strategy and included money in its budget to advance critical battery mineral processing and refining expertise.

A year later, it’s hard not to be impressed with how much has been achieved. Consider:

  • On March 4, 2022, BASF announced an agreement to secure land for a new cathode active materials (CAM) and recycling site in Becancour, Que. The site will be capable of producing up to 100 kt CAM per year. BASF is aiming to commission the project by 2025.
  • On March 7, 2022, General Motors and POSCO Chemical announced a partnership with the governments of Canada and Quebec to build a $500-million facility to produce cathode active material for GM’s Utium batteries starting in 2023. The facility will also be built in Becancour, Que., with construction beginning immediately.
  • On March 23, 2022, Stellantis and LG Energy Solution Ltd. announced a $5.2-billion investment to build Canada’s first large-scale electric vehicle battery plant in Windsor, Ont.—the largest investment in Ontario’s automotive history. The facility will create 2,500 jobs and have the capacity to produce 45 GWh of battery cells annually for the North American market. 
  • On March 30, 2022, Magna International Inc announced it’s opening an electric vehicle battery component factory in Chatham-Kent in southwestern Ontario.

These announcements are enormously important to Canada’s auto sector, particularly the Stellantis-LG one since the facility to be built will be one of the largest in the world. Are they enough to secure an electric vehicle manufacturing ecosystem in Canada for the long term?

“These announcements really are something to note, something that put Canada on the map in the battery industry. Full credit to Industry Minister Francois-Philippe Champagne and his team in securing some very meaningful investments at really key points in the supply chain,” says Evan Pivnick, senior policy advisor with Clean Energy Canada, but adds: “I also think what happens next really matters. Can we take the opportunity to be more proactive, more deliberate, and more strategic about how we build up the other core components to actually anchor a full supply chain within Canada? This would be worth billions to the Canadian economy with thousands if not tens of thousands of jobs.”

What remains to be done, Pivnick says, is to create a faster, more seamless ability to access battery critical materials. This entails proactive engagement with First Nations people whose lands may be involved, prioritizing battery critical materials in the assessment and review processes, and connecting players along the entire ecosystem to drive investment. 

“The European Union has put in a battery strategy and the Americans have their lithium-ion battery strategy. Canada hasn’t put forward a comprehensive strategy, not a public one. We have the Mines to Mobility report, which provided some really good insights but to this point Canada is still operating without a comprehensive, full supply chain strategy and that is a key element holding us back, limiting our strategic focus.”

Developing a North American Battery Alliance to connect stakeholders and drive capital investment, similar to what has already been done in Europe is one of Clean Energy Canada’s recommendations included in its Turning Talk into Action—Building Canada’s Battery Supply Chain report. Another is forming an intergovernmental battery secretariat to enable decision makers across departments to act quickly, nimbly, and in a coordinated way.

Government support is going to be an important element in this as well, says Adrian Tylim, in charge of business development for Blue Solutions, a manufacturer of commercially available, all-solid state batteries for the electric vehicle market. Blue Solutions batteries are produced in Quebec and exported, mainly to Europe where Daimler is a major customer. Blue Solutions used to source much of its battery raw materials from Canada but because of competitive pressures had to switch to sourcing the materials from abroad, mostly from China, Tylim said during a recent panel discussion hosted by Electric Autonomy Canada.

“For companies like us to continue to be competitive, particularly with the large investments now coming in the U.S. and Europe, government support is going to be extremely important. In the U.S. there are all kinds of incentives for buyers of electric vehicles. I think to the extent that the government can support incentives, everything will align, and demand will be created,” Tylim said.

Although the Stellantis-LG announcement to build Canada’s first large-scale battery plant received the greatest deal of media attention, a quieter announcement may prove just as important over the long run: The decision by Stellantis to create a battery research and development lab in Windsor. The 100,000-sq ft lab will be added to the company’s existing Automotive Research and Development Centre and 650 engineers are to be hired. The battery lab, expected to be operational by the end of 2023, will be tasked with developing and testing battery electric, plug-in hybrid and hybrid cells, modules and packs.

Improvements in battery technology have the potential to drive significant cost declines in manufacturing electric vehicles, says Alan Arcand, chief economist, Canadian Manufacturers & Exporters. Yet most of the research was being done in Asia and Europe.

“To make the electric vehicle into a viable product we are going to have to make these batteries smaller, lighter and make then go further. If Canada is to be a world leader in this space we are going to have to do the research to make sure we are involved on the technology improvement side of the things,” Arcand stresses.

So much has been achieved over the past year but still more is left to be done. What’s Canada’s time window? How long do we have to get things right before we lose this once-in-a-generation opportunity?

Right now, electric vehicle sales make up just two per cent of our market but to Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, powerful jurisdictions—such as Japan, Europe and California—have set things in motion that could see wide penetration of electric vehicles within 10-15 years.

“You could see that two per cent go up to 50 or 90 per cent somewhere during the next couple of decades,” Volpe said during the Electric Autonomy Canada panel discussion. “In the next year or two we need to establish firmly that we are either raw materials suppliers or we are battery cell suppliers or a combination of both. Otherwise, those decisions will be made in other places. We have some advantages but once they lock in what the new (supply) sources are it will be hard to jump back in.”

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