Opinion: Canada’s electric vehicle strategy has failed, and there are lessons to learn

Jim Hinton is an intellectual-property lawyer and patent and trademark agent with Own Innovation.

We must face an uncomfortable truth: Canada’s automotive and EV manufacturing strategy, touted as a generational opportunity to drive economic growth, jobs and environmental leadership, has failed quickly and dramatically.

The federal and Quebec governments made a bad $4.6-billion dollar bet on Northvolt, a Swedish EV battery manufacturer, which has entered bankruptcy less than two years since a $7-billion investment announcement. The $270-million invested by Quebec in Northvolt’s parent company in Sweden is now “lost,” confirmed the provincial government in March.

The head of Canada’s Building Trades Unions called the subsidizing of foreign workers building the EV battery plant in Windsor, Ont., “a slap in the face” and an “insult to Canadian taxpayers.” And Umicore, another multibillion dollar project championed by our politicians near Kingston, said in a statement the company has “prioritized maximizing the use” of its battery materials plants in Poland and Korea, rather than build the new project in Ontario.

Canada’s EV strategy appears to be nothing more than a $57-billion politically driven stunt disconnected from economic realities​. Yet there is something good to come out of it: There are many valuable lessons we can and should learn, especially now in this new global trading reality and as the new wave of politicians are rethinking how to strengthen Canada’s economy and security in the intangibles economy.

Despite proclamations about good jobs, how many new jobs are truly created, rather than being reshuffled away from domestic industries? Today EV and automotive factories rely predominantly on automation and robotics, not workers – just 7 per cent of a car’s value goes to labour.

But won’t these foreign firms pay Canadian taxes? Foreign EV firms such as Volkswagen and Stellantis are exempted from paying taxes on the financing they receive from Canadian taxpayers. Meanwhile Canadian firms continue to pay taxes and aren’t receiving the same subsidies, so they are effectively punished for being Canadian and small. Is it any wonder that Canadian companies such as Electrovaya are incentivized to grow in the U.S. instead of here.

Canada does not get the wealth effects from these investments. Because of the nature of contemporary economy, the benefits go to the owners of intellectual property (IP) embedded in the technology, not those that buy or install it. Canada once owned the EV technology via publicly funded research at Dalhousie University, but it gave it all away to foreign firms.

In the traditional, production-based economy, foreign direct investment (FDI) into Canada brought advanced production technology, management expertise, local supply chain opportunities, new jobs and new tax base for Canada. But FDI in the innovation economy is extractive and the flow of technology, revenues and tax base, knowledge asset and critical technical personnel is out of Canada. The value accrues to the companies and countries that own and control the technology, not those that make or use the technology.

Canada’s EV strategy also overlooked the geopolitical and technological forces facing the country. China’s BYD has been steadily rising over the years, rapidly filing EV patents, eventually becoming the best-selling EV company utilizing a different lower cost battery technology. Between 2009 and 2022, China spent $38-billion to create an industry in which BYD alone has reached US$100-billion in revenue. For those who say Canada can’t have its own globally relevant automotive companies, compare China’s strategic investment with Canada’s nearly $60-billion commitment over the last two years for no ownership or control and fewer than 10,000 jobs, which are currently being automated.

In response to the U.S. automotive-focused tariffs, Canada’s Prime Minister has signalled that he will hand out some of the up to $8-billion in Canadian-raised countertariffs to foreign owned and controlled automakers, apparently taking the same approach not supported by contemporary economic analysis, which has spectacularly failed for the battery plants. Given the continuing attacks on the Canadian automotive industry and the swift failure of Canada’s very expensive EV strategy, this more-of-the-same non-sovereign approach will continue to be disastrous. Canadians needs a real Canada first strategy – one with Canadian owned innovation at its centre.