1.1 - Establish a national, auto industry strategy

Canada has the potential to develop itself as an automotive superpower on the world stage. Expanded production capacity in vehicle assembly and parts production can fuel growth in creating good union jobs, expanding workers’ skills as well as securing investments in technological advancements and innovations. More than that, Canada can strategically position itself as a global leader at every stage of the supply chain. This leadership includes capitalizing on internal combustion engine (ICE) vehicles that still dominate the market as well as rapidly rising alternative propulsion zero emission vehicles (ZEV) – from the mining and refining of critical minerals, of which Canada maintains significant stores, all the way through to recycling. From an economic development perspective, Canada is the envy of the world.

Canada's Dominance in Minerals Needed for EV Production

Grey world map showing major mineral sources by country of lithium, cobalt, nickel, manganese, and graphite for electric vehicle production.

However, this expansion, and the economic benefits that go along with it, will not come to Canada by chance. Governments cannot simply cheerlead their way to product commitments, industrial expansion efforts and job creation by blaring the ideological trumpets of “low taxes” and “flexible labour standards.” Instead, countries the world over, such as the United States, China, Germany, France, Japan, Korea, Brazil and others, approach auto sector development as a strategic priority by using a range of trade, investment and economic oversight tools to achieve broader national objectives in areas of job creation or decarbonization.

Canada’s federal and provincial governments clearly understand the strategic potential of auto sector growth. Investment attraction tools, particularly the federal Strategic Innovation Fund and its associated Net Zero Accelerator Fund, are proving effective. For instance, SIF monies, that were matched dollar-for-dollar by the Ontario government helped leverage nearly $2 billion for retooling Ford’s Oakville Assembly Plant as well as financial supports for GM plants in Oshawa and Ingersoll as well as Stellantis facilities in Windsor and Brampton. The bulk of these commitments were negotiated in conjunction with Unifor-Detroit 3 collective bargaining in 2020.23 Additionally, governments continue to assign internal resources to lead strategy tables, stakeholder dialogue and other initiatives to better understand and activate this shift.

Major Canadian EV investment in Canada September 2020-April 2022

Red and blue winding linear timeline graph of investments in electric vehicles in Canada from September 2020 to April 2022.

However, solidifying and growing the auto sector and its associated supply chain requires more than subsidy commitments. It also requires a more cohesive whole-of-government approach to sector development, underpinned by a comprehensive and goal-oriented industrial strategy.

2 See CBC News (October 8, 2020): https://www.cbc.ca/news/business/ford-oakville-government-1.5754974

3 See CBC News (April 4, 2022): https://www.cbc.ca/news/canada/london/gm-plants-government-funding-1.6407621

  • Growing the auto sector and maximizing the benefit of Canada’s powerhouse position along the supply chain requires coordination and clearly articulated objectives, including plant and production capacity targets. Absent such a plan, sector development is at risk of taking place along a more politicized timescale that treats investment as a tool for political competitiveness rather than a strategic economic building block. A comprehensive auto industrial strategy can usefully serve as a framework through which government officials, in various departments, and at federal, provincial, territorial and municipal levels, must understand and craft other related policy measures, including vehicle efficiency mandates, cross-border trade policy, regional development and infrastructure priorities as well as skills training, adjustment and fiscal incentives, among others.

  • Efforts to coordinate a comprehensive and national industrial strategy across various federal ministries and agencies (including Innovation, Science and Economic Development; Natural Resources Canada; Employment and Social Development Canada; among others) without a dedicated oversight body is both challenging and an inefficient use of government resources. The same is true for provincial governments, notably Ontario. Allocating responsibility for this work to a dedicated office is critical. An adequately resourced government body responsible for Canada’s auto sector strategy could function as a standalone Ministry of Automotive Supply Chain Development with dedicated staff resources, decision-making powers and a specific mandate. Also critical is establishing a permanent federal-provincial body to coordinate these efforts.

  • Through the office of the Ministry of Auto Supply Chain Development, governments must establish a single streamlined investment attraction division that can champion new investment opportunities and help navigate applications through various federal and provincial funding as well as municipal support programs. Such an approach would assist in securing new vehicle and component part production mandates as well as related supply chain investments in Canada. A “one-stop shop” can accelerate applications and review procedures, bring greater government expertise to the application process and help avoid unnecessary lag times. Governments must also ensure investment supports for major auto sector projects are on par or better than competing jurisdictions.

  • Of all manufactured goods in Canada, cars and car parts are the country’s most valuable export commodity. Even in its early days, the auto industry has always relied heavily on cross-border trade, mostly in North America. Unfortunately, Canada’s relentless pursuit of so-called free trade agreements, including with low-wage, low-cost and import-resistant jurisdictions, contributes to a competitive imbalance for the domestic auto sector. Consider that Canada for much of its history exported more vehicles and parts to the world than it imported. In 2005, Canada reported its last annual trade surplus in automotive trade of $4.5 billion. Since then, Canada’s automotive trade deficit has risen to more than $37 billion in 2021, a new record.4

    Figure_1.1_C_-_ENGLISH.png

    For many years, Canada dangled access to its vehicle market and, by extension, the North American market, as a carrot to secure new free trade agreements including with Mexico, Korea and the European Union, among others. This approach has put added pressure on Canadian autoworkers to have wages cut and other costs, under threat of offshoring and job loss. Stronger auto trade and labour provisions in the new North American trade agreement that replaced NAFTA, the Canada-US-Mexico Agreement (CUSMA), are a shift in the right direction, but leaves room to do more. Canada must advocate for trade policies that expand, not harm, the domestic auto industry and its workers, by renegotiating or withdrawing from trade treaties that fail to meet this objective.

    4 Statistics Canada, accessed through Government of Canada Trade Data Online portal, April 5, 2022.

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