Canada’s electric vehicle industry is facing existential threats — here’s how it can still flourish

The electric vehicle (EV) industry has been one of the most defining technological trends of the past decade, transforming the automotive sector while fuelling advancements in manufacturing.

Yet after billions of taxpayer dollars have been invested, the EV industry in Canada is facing headwinds. Chief among these are the trade tariff threats from U.S. President Donald Trump.

For a country with an automotive sector that exports 91 per cent of its parts to the U.S., the threats feel existential. They may also be seen as a betrayal of the centuries-long economic and cultural partnership between two neighbours sharing one of the world’s longest and most porous borders.

Adding to these international headwinds are three other obstacles within the EV industry: high costs, limited battery range and sparse battery charging infrastructure. These concerns continue to affect firms here in Canada, with the likes of Stellantis juggling high inventory, slow sales and falling revenue.

These challenges have sparked skepticism about the future of EVs in Canada and whether the federal and provincial governments’ multi-billion-dollar investments in the industry are wise.

As researchers who study Canada and other countries’ innovation policy initiatives amid breakneck changes in technologies and markets, we argue that Canada has every reason to ratchet up its commitments in the months and years ahead.

Along with artificial intelligence, EV represents the emergent frontier of advanced manufacturing in the digital age. Winners of this innovation race will stand to dominate the global market for the foreseeable future.

The case for staying the course

Despite current challenges, EVs remain the future of the automotive sector. Even conservative estimates suggest that by 2040, around three-quarters of new car sales will be fully electric globally.

Canada’s position in the EV industry is stronger than recent news coverage indicates. The country ranked first among 30 countries in a 2024 EV battery supply chain report, outperforming even China.

This ranking reflects Canada’s vast reserves of critical minerals essential for EV battery production and its burgeoning battery manufacturing sector.

Over the past few years, Canada has attracted significant investments from manufacturers like Umicore, Northvolt and Volkswagen-owned PowerCo.

Canada has reasons to be optimistic about EV and energy storage demand. While concerns about U.S. protectionism loom, Canada’s commitment to zero-emission vehicles ensures fiscal incentives and policies that will likely boost short-term demand.

On the environmental, social and governance front, Canada outperforms many of its global competitors in battery manufacturing. Though by no means perfect, the country’s climate change policy ambitions, clean electricity grid and commitment to sustainable mining position it as a global leader in the EV space.

Advanced manufacturing

Canada’s robust innovation ecosystem for advanced manufacturing is another key strength. A prime example is the Ontario Vehicle Innovation Network (OVIN).

OVIN commercializes advanced automotive technologies and manages the development, testing, piloting and uptake of transportation and infrastructure technologies. It operates seven regional technology development sites across Ontario, including in Waterloo, Hamilton, Windsor-Essex, Durham and Toronto.

By serving as a bridge between government, industry and researchers, OVIN has become a model for multi-level governance, with projects jointly funded by the federal and provincial governments and close working relationships with municipalities.

As the EV industry navigates economic and policy challenges, initiatives like OVIN are crucial for driving long-term growth and competitiveness.

The road ahead

While Canada’s automotive innovation ecosystem is generally robust, it requires some calibration to overcome current challenges and claim the next frontier of the global EV race.

In particular, Canada needs to consolidate its EV innovation ecosystem by integrating the upstream of its domestic supply chain assets with the downstream of its technology commercialization and adoption.

In other words, this means getting more critical minerals to market and making sure a substantial portion of the materials mined in Canada are processed and used domestically to build batteries and vehicles, so the entire EV production cycle benefits Canada’s economy.

Such an endeavour will require Canada to establish the right policies, regulations and financial support to tap into its vast reserves of critical minerals to supply the country’s battery plants.

It is the presence of these reserves that made Canada attractive to the automakers in the first place. Leveraging them wisely will be critical for the country’s long-term success in the EV industry.