#5. Focus investment in domestic manufacturing of component parts
The Canadian auto sector benefits from a deep pool of nearly 1,000 component parts suppliers6, employing approximately 75,000 workers. The shift toward vehicle electrification will significantly affect the parts supply base. In some cases, the viability of some parts suppliers will be threatened by a decline in demand for certain existing component parts, particularly those connected to gasoline-based powertrain, fuel and exhaust systems as well as components not incorporated in electric vehicles. In other cases, transferrable parts must adapt to the specifications of ZEVs for suppliers to secure future contracts. Most importantly, Canada must identify new high-value, in-demand parts for ZEVs and focus investment attraction efforts on them, building production capacity right here in Canada.7 Electric motor systems, e-axles, power electronics and battery cells are some of the lucrative component parts powering electric cars. Securing production of these parts creates new job opportunities and, in some cases, pathways for existing Canadian powertrain (i.e. engine and transmission) facilities to diversify production and steadily transition to an all-electric future. Stellantis and LG Energy’s $5 billion battery cell manufacturing investment in Windsor-Essex in March 2022 shows that, with the right mix of supports, Canada can attract these critical EV component parts and the thousands of jobs that come with them.8 Canada must also focus resources to secure lucrative supplier parts contracts for both existing ICE vehicles while securing future product commitments for parts in ZEVs at the same time.
6 See Automotive Policy Research Centre Database: https://automotivepolicy.ca/database/
7 The Automotive Parts Manufacturers Association’s (APMA) Project Arrow initiative (an all-Canadian built ZEV concept car) presents a compelling case for growing the Canadian parts industry’s production footprint, see: https://projectarrow.ca/
8 Stellantis Press Release (March 23, 2022) https://www.stellantis.com/en/news/press-releases/2022/march/stellantis-and-lg-energy-solution-to-invest-over-5-billion-cad-in-joint-venture-for-first-large-scale-lithium-Ion-battery-production-plant-in-canada