Who benefits most from Canada's ambitious EV targets? Maybe China - Action News
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Who benefits most from Canada's ambitious EV targets? Maybe China

Analysts suggest there could be unintended consequences for Canada setting EV sales regulations and that China and its auto manufacturing base could come out the winner, all at the expenseof Canada's auto industry.

Federal government set national target of 100% zero-emission vehicle sales by 2035

Visitors check the BYD ATTO 3 at the IAA motor show in Munich, Germany, Friday, Sept. 8, 2023. The international motor show IAA Mobility 2023 takes place in Munich from Sept. 5 until Sept. 10, 2023.
Visitors check China's BYD ATTO 3 at the IAA motor show in Munich, Germany. Analysts suggest there could be unintended consequences for setting EV sales regulations, that China and its auto manufacturing base could come out the winner, all at the expenseof Canada's auto industry. Matthias Schrader/The Associated Press (Matthias Schrader/The Associated Press)

Flavio Volpe, head of theAutomotive Parts Manufacturers' Association, believes the recent electric vehicle targetsset out by Canada's environment minister alsocarried this pointed message to Canada'sdomestic auto industry:"Let them eat cake."

Volpesays he has come to thisconclusion because he believes those goals,which includea national target of 100 per cent zero-emission vehicle sales by 2035, cannot be met.

  • Do you have questions about Canada's plan to phase out the sale of gas-powered cars and trucks by 2035? Send an email to ask@cbc.ca.

He accused the government of not caring whether those cars are domestically built or come from China, regardless of the impact it may have.

"Which is a very damaging proposition to Canadian industry and Canadian interests," Volpesaid.

He and other analysts suggest there could be unintended consequences for setting such targets and warnthat China and its auto manufacturing base could come out the winner, all at the expenseof Canada's auto industry.

CBC News asked the environment ministry aboutconcerns that the government'sEV targets will only help to serve China's EV auto manufacturers while having a significant negative impact on Canada's auto manufacturing base.

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The federal government is laying out its final plan to phase out new, gas-powered passenger vehicles by 2035, with gradually increasing targets for manufacturers to meet.

Targets are obtainable, ministry says

In response, the ministry said that the government's EV targets are being complimented with "multiple measures" to ensurethat Canada benefits from the transition to electric vehicles.

"Indeed, the manufacturing of zero-emission vehicles, their components, including batteries and the acquisition and refining of the critical minerals they need, represent huge opportunities that are already paying dividends for the Canadian economy," it said in an emailed statement.

The government is building on itsrecord ofbeing a destination of choice for investments throughout the vehicle supply chain, andhas secured $34 billion in investment in the battery and automotive supply chain, the ministry said.

Environment Minister Steven Guilbeault has said industry should have no problem meeting these targets, and during the mid-December announcementnoted that the Canadian marketplaceis alreadyexperiencing "a rapid shift toward zero-emission vehicles."

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Environment and Climate Change Minister Steven Guilbeault on Power and Politics regarding his government's new regulations to increase the number of electric vehicles in Canada.

Recent data shows a growth in electric vehicle sales. According to aStatistics Canada reportthis month, new zero-emission vehicles (ZEVs) made up12.1 per centof all new motor vehicles registered in the third quarter. That representedan increase from the third quarter of2022, when ZEVs were8.7 per centof all motor-vehicle registrations

Meanwhile,JoannaKyriazis, a senior policy advisor with Clean Energy Canada, saidprovinces like B.C. and Quebechave exceeded EV sales goals.

She said those who are skeptical of Canada meeting its 2035 targets are not giving the domesticauto industry enough credit.

"The first requirement under the federal policy is20 per cent by 2026," she said. "We're going to blow past that."

Joe Biden sits in the driver's seat of a bright orange Corvette convertible in a giant room filled with cars on display as a woman with long red hair wearing a blazer and heels looks on.
U.S. President Joe Biden sits in a Corvette during a tour of the Detroit Auto Show, in September 2022 as Mary Barra, CEO of General Motors, looks on. (Evan Vucci/The Associated Press)

Fast EV transition may open market to China

Yet NielHiscox,president of Clarify Group Inc., a Canadian-based automotive research and advisory firm, said even with the best will, and all the investment in the world,legacy automakerswould still be challenged to reach those targets.

"So there's a potential that the need for fast transition actually opens the market for the Chinese manufacturers in a way that a slower approach might not."

Car manufactures in North America have set differenttargets for EV sales. GM, for example,said it will transition to all electric by 2035, but "are going to be led by the customer," according to recent comments from CEO Mary Barra.

Honda is aimingfor 40 per cent of its North American sales to be zero-emission vehicles by 2030.There have also been reports thatthe Japanese automaker is considering making an $18.4 billion investment to build electric vehicles in Canada.

WATCH | Honda to meet with federal government:

FordMotor Company isalso hoping thatelectricvehicles make uphalfof itssalesby2030. But some manufacturers have cut back on production on some electric vehicles.

Canada's targets are somewhat more ambitious than those in theU.S.

In 2021, U.S. President JoeBidenissued an executive order mandating that 50 per cent of new cars be EVs by 2030. Canada's plan calls for 60 per cent to be EVs by that year.

Meanwhile, the U.S. Environmental Protection Agency (EPA) has proposed that by2032, two thirds of new vehicles sold should be electric.

A man in a blue suit speaks to a crowd of people in front of two electric vehicles at various points in the assembly process. A neon sign above reads F-150 Lightning
Bill Ford, executive chairman of the Ford Motor Company, speaks during the official launch of the Ford F-150 electric truck at the Rouge Electric Vehicle Center, in April 2022, in Dearborn, Mich. (Carlos Osorio/The Associated Press)

Canadian targets 'ridiculously optimistic'

"Ifthe Canadian government is absolutely committed to that target, it is not going to come through any domesticbase production," said Mark Barrott, anautomotive industryexpert with the Michigan based consulting firm Plante Moran.

He calledCanada's100 per cent target"ridiculously optimistic" and said it will "open a door for the Chinese to come in."

Part of the solution would involve the Chinese electric vehicle makerBYD,based in the southern China tech hub of Shenzhen, which recently dethroned Texas-based Tesla Inc. as the top global seller of electric cars in the last three months of 2023.

It'spart of a wave of Chinese electric car exportersthat are starting to compete with Western and Japanese brands in their home markets,bringing fast-developing technology and low prices.

"All the BYD cars we're going to import, or Tesla models there from Shanghai that we're going to import, we're going to directly benefit the Chinese objective for global market domination in EVs," Volpe said.

OtherChinese EV exporters include NIO, Geely Group's Zeekr and Ora, a unit of SUV maker Great Wall Motors.

"The main concern for global automakers is the influx of cheap Chinese EVs into their home markets and other major markets before they can produce EVs at lower costs," Jing Yang, the director of China corporate research at the U.S.-based credit rating agency and corporate analysis firmFitch Ratings, recently told The Associated Press.

An aerial view of a large building with a huge sign reading 'Tesla.'
Though Canada does import some EVs made in China, most are from Tesla's Shanghai plant, seen here on Sept. 26, 2023. (Liu Ying/Xinhua/The Associated Press)

China has mostly ignoredCanadian market, so far

Canada does import someEVs made in China,but those are mostly from U.S. entrepreuneur Elon Musk's Tesla, which has a large plant in Shanghai.But for the most part,Chinese manufactured cars havenot yet entered the North American market.

Along with geo-political tensions, many North American consumers perceive Chinese vehicles to be of lesser qualitythan those from manufacturers in North America, Europeor Japan, Barrott said.

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He said Chinese vehicles would also face issues complying with North American safety standards. As well, one of the most significantbarriers of entry to the U.S. market is that finished vehicles from China are subject to a 25 per cent tariff.

Although Chinese cars don't face the same tariffs in Canada as they do in the U.S., China has mostly ignored the Canadian market so far, making successful inroads in Europe, and likely waiting until it finally zeroes in onthe U.S., Hiscox said.

He said Canada'shigh EV target could cause Chineseexporters to take notice of the Canadian market. "If you're BYD or you're NIO, you look at it and you say 'Oh, their government has now said they have to go EV.'

"There's a period of time where those [legacy] brands that have had the market so far cannot fill the need at the price point it's going to take to really drive adoption."

With files from The Associated Press, Reuters