The Agenda with Steve Paikin (Audio) - Will Ontario's EV Strategy Survive Election 2025?

Episode Date: February 4, 2025

Ontario has ponied up billions and billions of dollars to be the electric vehicle capital of the world. But with the Trump administration's pivot away from EVs, and tariffs on top of that, has this province's investment been misguided? Brian Kingston, President and CEO of the Canadian Vehicle Manufacturers' Association; Rachel Doran, VP of Policy and Strategy of Clean Energy Canada; Josipa Petrunic, President & CEO of the Canadian Urban Transit Research & Innovation Consortium; and Greig Mordue, Associate Professor in the School of Engineering Practice and Technology at McMaster University and the ArcelorMittal Dofasco Chair in Advanced Manufacturing Policy join Steve Paikin to discuss.See omnystudio.com/listener for privacy information.

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a TVO original podcast. Follow and listen wherever you get your podcasts. Ontario has ponied up billions and billions of dollars to be the electric vehicle capital of the world, but with the Trump administration's pivot away from EVs and tariffs on top of that, has this province's investment been misguided? Let's ask in the nation's capital, Brian Kingston,

president and CEO of the Canadian Vehicle Manufacturers Association. And with us here in studio, Rachel Doran, vice president of policy and strategy of Clean Energy Canada. Josipa Petrodić, president and CEO of the Canadian Urban Transit Research and Innovation Consortium,

and Greg Mordu, associate professor in the School of Engineering Practice and Technology at McMaster University and the Arcelor Mittal DeFasco Chair in Advanced Manufacturing Policy. Great to have you three back here in our studio. And Brian, nice to have you on the line from the nation's capital. Going to put you to work right away because, of course, we all want to know today how the 25% tariffs on automotive are going to affect this country's industry. Tell us. Well, tariffs will have immediate and devastating effects for the automotive industry, not just

in Canada, but across North America. We have created a North American supply chain through decades of intentional policy meant to reduce barriers, align regulations, and create a totally integrated market. When you put a 25% tariff on those components and finished vehicles that move across the border, it will lead to production losses, potential job losses, and of course, price increases for Americans of these new vehicles. So this is a very dire situation. We're hopeful that there still remains an off ramp,

but if they do go forward, we're gonna be in serious economic trouble. Rachel, one of the things I don't get is, if a car is produced in Canada by an American owned company, but it's going back and forth over the border multiple times with some parts that are Canadian and some parts that are American, how do you know if it's a Canadian product or an American product and whether it gets tariffed or whether it doesn't?

Well I think it's going to be complicated absolutely and you pointed out, you know, a vehicle can go back and forth across the Canada-U.S. border eight to twelve times and so you know I think as Brian pointed out, automakers are really, you know, have used that to really leverage an integrated North American market that all of a sudden we're putting kind of a new line across. So, I think how the supply chains reshape themselves is gonna be a product which we're watching how it rolls out, but certainly it shows just, yeah,

the absolute challenge for a market that is used to really operating as one. What about, for example, Canadian manufacturers? You want to give me the example? Buses? Buses in Winnipeg. Yeah, absolutely. Well, I mean, it might help folks also understand a little bit about like what is a tariff,

right? It's just a tax at the border, essentially, is what it boils down to. So if you look at something like New Flyer Industries, they make buses in Winnipeg, very important manufacturer. They own most of the North American market. Or Nova Bus in Quebec, they own most of the rest of the North American market. If part of that bus, let's say the axle and let's say the power train are partially designed in Winnipeg, then it gets to the border and it's hit with a tax, pretty much a 25% tax on that portion that was made in Canada, goes off to the factory in the United States

to get packaged up with the rest of the component parts, say a motor, a battery pack, or a diesel engine, and then that gets packaged up and sent back over the border, back to Winnipeg for the rest of the bus to be put on top. Well, that particular item, at least a component of it, was hit with a tax when it crossed the border at least once, which means when the bus comes back to Winnipeg, a company like New Flyer has to decide, do

they swallow that loss, that 25% hike, or do they pass it to the customer? Now, it probably won't be a full 25% hike because the whole thing might not be taxed. It's just that part when it crosses the border. But somebody's going to have to pay for that. And that means usually the transit buses taxpayers end up getting more expensive buses pretty much overnight. The other danger there is if there's retaliatory tariffs. So if the Canadian government does come out hard and fast and strong as they do and say listen

when stuff comes back over the border we're gonna slap it with some taxes too well then that power train and those component parts when they come back over the border to get to Winnipeg get hit with another tax. Greg this sounds nuts. Is it? Well, of course it is. And Brian's absolutely right. I mean, we've built up these integrated supply chains since 1965 and the auto pact.

And we completely changed our automotive industry at that point in time. But the auto assemblers and the automakers have been going through an enormous process of trying to figure this out and their contingency plans and they'll be looking at where do we get these RX 400 or 450s that are built in in Cambridge and where else can we get them and and and the issue is Not can we set not can we? Make vehicles in the u.s. They can make vehicles in the US. How do we avoid the tariffs?

And so they'll be going through all kinds of hypothetical machinations. Can we build these? Can we supply the US from Japan and pay 2.5% tariffs instead of 25% Canada? Can Canada divert its production from going into the US? Can it divert it and send it to Europe, where the plant in Japan might have used to have done?

So those are long-term decisions. They don't happen overnight. But that's what we're into now. Well, let me ask Brian about that. Do you think there are meetings happening as we speak at the Canadian auto manufacturers, thinking about how they can, I don't know what, avoid going to the States and do business in Europe

or Japan instead? Oh, well, absolutely. I mean, auto manufacturers are notorious for having extremely efficient supply chains and having multiple contingency plans in place. All you have to do is look back to the ambassador bridge blockade to see the amazing efforts that auto manufacturers

went through to divert trucks, use other modes of transport and keep plants open. Remember, every hour a plant is down, a line is down, you're talking about millions in dollars in costs. So they will be doing everything possible to determine what could be done to avoid the tariff. The one challenge though with the Canadian industry is we are so deeply integrated north south

because of the USMCA and the auto pact. So the ability to suddenly change your manufacturing and say, you know what, we're gonna send this to Europe or Asia, very, very difficult in the near term. So Greg, I gather that's why the government of Canada has decided to delay the imposition of tariffs for, what is it, two or three weeks or something like that in order to give our supply chains a chance to refigure things? Well, they're going to need a lot of time to refigure things and two or three weeks will start it. But they've got, you know, our automakers don't necessarily look at labor, for example, as a variable cost.

Some of them do, but a lot of them look at it as a fixed cost. We've got these people, we've got 5,000 people, we've got 10,000 people, and how do we keep them busy? And how do we keep them busy in the context of tariffs that could add up to as much as $5 billion a year if you're making 500,000 vehicles a year. And we do have a manufacturer that makes that. Toyota, for example. Toyota will make about $10 billion a year globally or more.

They're not going to eat $5 billion out of their Canadian assembly plants. So how do you mitigate that? Do you ramp it down? They have a big commitment to their people. But how do you keep that commitment going for four years, eight years, whatever? Can I raise something though? I mean we are talking a lot about tariffs and counter tariffs and tariffs and counter tariffs and how to mitigate

and circumnavigate that, but there's a whole other component to this that we can't lose sight of. A president's powerful, but not so powerful that they can just rip up any agreement and Congress has no say and nobody else has any other say. There are courts, courts and more courts when it comes to fair and free trade. So one of the components that I would imagine is occurring in terms of the discussion in the boardrooms, or it should be, certainly it should be happening in Ottawa right now, is taking it to the courts. Kuzma has chapter 31, you have the ability of state-to-state negotiations and adjudication.

We might say, well, Donald Trump doesn't believe in that. Donald Trump could have a stroke tomorrow. We have to understand, is it the Republican Party and the entirety of Congress that also is going to ignore the adjudication process? So we need to start that process, state-to-state adjudication, and basically suing the Americans for what they're doing. Secondly, within Kuzma, we have a Mexico-Canada arrangement that we negotiated.

If I were Justin Trudeau or Pierre Poullier, but especially Justin Trudeau, I would be having a peer ated in Mexico City right now with President Schambon, and basically identifying how the two periphery countries under the labor agreement under KUSMA can start to get together and form an alliance of things that we can negotiate together. And the third thing that is in there is corporations can still sue governments under KUSMA.

It's something we don't like because we don't like it when companies sue us and taxpayers, but every company can in fact sue the American government through KUSMA and through the WTO. So we still have that capability as state to state negotiations and adjudication. We have the ability to form an alliance with Mexico under CUSMA and we have the ability to take it not only to the WTO but also have our corporations too. Let me ask the overarching question then and Rachel I'll start with you on this. Liberal governments, conservative governments, federally, provincially, they have all invested billions upon billions of taxpayers dollars in this sector, in the EV sector, because they've made a bet that this is, you know, what did Gretzky say,

go where the puck is heading, not where it's been. They think this is where the business is going. Are we still today, in light of all of this tariff nonsense, as bullish on those decisions as we once were? So I mean, just to raise the context up, you know, 10,000 feet here, there has been, as of 2024, $2 trillion invested in the energy transition globally. A third of that investment has been in electrified transport. We've seen investments from automakers globally reaching the $1 trillion level.

Not all that money's out the door, but it's just to put in context, even if we're seeing a slow south of the border around electric vehicles, that is not necessarily the direction of travel for the rest of the world, where we're already seeing, you know, major uptake and year after year growth of electric vehicles globally up to 25%. So, you know, best case scenario, of course, that we're talking about here today, we try to find a way to, you know, continue our partnership with the United States. But a lot of people are looking around in Canada and saying, well, what's our backup plan today? And I think a clean growth plan, it's really important to then double down and think about how is Canada going to be involved and continue to leverage its competitive advantage and look for new opportunities. You know, we need to continue to follow the rest of the world.

We can't just stay with where the US is going blindly. We need to have, you know, kind of consistency. Well, let me ask Brian about that. Should we still be as bullish on these billions and billions of investments in the EV sector as we once were in light of this tariff war? Absolutely. This is the direction that industry is going. This is the most promising technology.

And as you just heard, I mean, billions, if not trillions of dollars is going into this transition. So there's no question about what the end goal is here, but absolutely what we're gonna see in the near term is a slowdown in EV adoption. We are seeing a reduction in consumer incentives, ongoing challenges with charging infrastructure. This is slowing the transition and a lot of the forecasts for EV uptake in the United States, in Canada, they have come down from the very bullish forecasts that we saw two,

three years ago, but no one is questioning that we are moving toward electrification. What we're not clear of right now is what will that pace be? I think it's safe to say that 100% EV by 2035, as Canada had established, was never realistic. That's a total fantasy now. That's not going to happen, but that doesn't mean that we're still going to see massive amounts of electrification. And look, I encourage anyone, if you haven't been in an electric vehicle, try it out. The driving experience is fantastic. And like any technology transition, once you get over those barriers and people are exposed to it, they will see that this is a superior product.

Greg, your view on that. I mean, if you're in the business of electrification of mobility, or if you're in the business of generating support for the auto industry, of course you're going to be supportive of the of the incentives that were provided. But the reality is we committed as Canada 42 billion dollars, Canada and Ontario and Quebec for that matter, 42 billion dollars for battery plants worth 19 billion dollars. That doesn't make any sense. Well we wanted to be number one in the world that's why we did it. Well we are going to build the batteries that were

told to build in the volumes that were told to build using the processes that were generated outside of Canada in Korea, in the US, in Germany. We are not building an electric vehicle supply chain in Canada that has start to finish. We just aren't. We've paid an enormous price, frankly $42 billion dollars could have bought you Stellantis probably could have bought you General Motors which has a market cap of about $50 billion dollars. Ford has a market cap of $55 billion dollars. Honda has a market cap of $40 billion dollars. We could have bought any of those companies and I'm not suggesting that we should have but I'm just trying

to give you some context of what we paid for. So Volkswagen with a market cap of 50 billion dollars we were prepared to give them 17 billion dollars for a single battery plant. It doesn't make any sense what we've done. We could have we could have said okay we're spending. We could have built 20 brand new hospitals. Those are important for Ontario too. We paid. We overpaid. Yes, I don't disagree with you, Greg. Are the investments inflated and overpaid, especially in the hype of Mr. Champagne going around the world and attempting to attract these investments? Yeah, probably, definitely. And if you look in that list, I mean, there's money going

into Line Electric Bus, which is declaring bankruptcy declaring bankruptcy now right so you can nitpick in there and say we probably could renegotiate some of those elements and do it behind closed doors but in terms of public facing is it in the right strategic vein absolutely so Doug Ford is right to come out and say basically we're staying strong in these investments now behind closed doors maybe renegotiate some of the inflated investment into corporate welfare but on the front end of it investments into the supply chain and critical minerals especially around the ring of fire are we right to

articulate that this is the way of the future yes because I have no doubt what is underpinning Donald Trump's regime of activity right now is access to those critical minerals Rachel should be second guess the EV that we've made so we did a study in 2022 before any of these gigafactories were landed, really highlighting that this could be a huge opportunity for Canada. You know, there are massive shifts in global supply chains happening around the energy transition. We saw the US south of the border play big in the Inflation Reduction Act and kind of set the table stakes. It's like, here's what it's going to take to attract investment.

Canada leaned in. I think in our study, we relate to Greg's point, highlighted the value of the EV supply chain overall and that maybe there's a big boost for Canada's GDP in jobs by investing in things that may not be quite as splashy. It might not be a gigafactory. It might also be just the processing of critical minerals,

trying to do the upstream things before it actually gets to battery production. Battery plants, though, are a big attractor of jobs in GDP. I don't think we are in a position to comment on individual deals, but I would agree to the trajectory of, we need to be thinking about a clean growth plan in Ontario and how to leverage the competitive advantage

of clean electricity, talented labor, and critical minerals and that's why Bloomberg, you know, in addition to connection with the US market ranked us number one for battery supply chain potential in the world in 2024. I think this is an economic opportunity it would behoove us not to turn our back on but you know try to think again about how to get the best benefit for Canada but brian uh... you know yes i i i i i actually wanted you to jump in on that yes indeed uh... i just want to get the facts clear on on the supports that have been put forward

to attract these automakers the overwhelming proportion of government support is through production subsidies and what that means is the government to match what the US had done in the Inflation Reduction Act where the US is subsidizing every single battery out of a plant, the federal government with Ontario put in place a similar program and to be fiscally responsible they had to assume that

these battery plants will be producing the maximum number of batteries and that's how they calculated the size of the production subsidy. There is no chance given what we're seeing right now in the EV market and all of the trade turbulence that these projects will be producing at maximum capacity. So that $40 billion number that you're hearing quoted is not remotely realistic. These subsidies will be far, far smaller. And not only that, if President Trump tears up the IRA, which he has said he will do, the subsidies go away.

So I think it's really important that people realize that the amounts being quoted are far less. And if you look at the long-term benefits of these plants, this is good for Canada. Greg wants back in. Well, the reality is the production incentives, I don't think anyone's going to say that, oh, this was a great deal because we didn't make very many batteries.

And that's essentially what Brian is trying to say. That we have about $8 billion in capital investments. We have another $7 billion or so in making hole on taxes because we tax incentives in Canada they don't tax them in the in the US and this is all keeping us full and fair with the IRA and then another and then another 30 billion dollars or so if the production happens so the best thing that's happening out of the slowdown and electric vehicles and I Rachel will not agree with me but the best thing that

happens is is as Brian says we are not going to meet those requirements on production incentives but they are going to be billions and billions of dollars. My number of 42 billion dollars that I've come up with assumes that they're going to operate at 75% capacity and they're going to come online a year later than originally promised. It's a lot of money and and I compared the the 15 to 17 billion dollars for Volkswagen for example with the 1 billion dollars that it typically would take across North America to land an assembly plant and the spin-off benefits of an assembly plant are much much greater than the spin-off benefits of an assembly plant are much, much greater than the spin-off benefits

of a battery plant. Can I put it in comparison, though? Perhaps, Greg. Because again, I don't disagree that corporate investments sometimes balloon into corporate welfare, and we don't always get that ROI. But if we speak as Canadians, and in particular in this context of what do we want to keep here, dangling

here in the industry, and also have as a negotiating tactic against the Trump regime and in terms of negotiating down into the future. If we take a look at this right now, as Canadians we spent over 30 billion dollars building a pipeline to support the export of oil. A pipeline that was supposed to cost under 10 billion dollars ballooned over 30. We had no problem as Canadians buying that pipeline struggling still to sell it up but buying that pipeline to export an important product. And keep Alberta happy.

And keep Alberta happy and keep Western Canada roaring. Was it the best investment? Maybe, maybe not, but we did it and it has served as a backup now to us. In terms of the strategic play that I think Brian is raising, and also yourself, and Joze, the industry is most certainly staying its course. So while personal passenger cars have dropped off recently, a bit of a logarithmic plateau, we look at heavy duty. There is no city in the European Union that has stepped away from its decarbonization goals. All

buses are going zero emissions, battery or hydrogen. Trucking is going zero emissions by public sector mandate or by bans and by congestion charges. Governments are decarbonizing their fleet by 2030. all corporate fleets in Europe have to be zero emissions. Inexorably going in one direction. The strategy is there. Let's negotiate around the edges to improve those deals. Again, behind closed doors. But walking away from them at this crux would hand over to Donald Trump

an industry that he's angling for. Rachel, you want to know that? I think that there are... I would echo a lot of what's been said here, like we need to stay the course. Ontario, you know, the auto sector is an incredibly important part of Ontario's economy. So the benefits of electric vehicles are one, economic for Ontario and the production, and two, for the household.

So there is no time like the present to be thinking about the energy security of using your own electricity which is domestically produced and actually is proven to save you know drivers over the lifetime cost of their vehicle. So electric vehicles is a benefit for Ontarians to drive and a benefit for the economy to produce. The exact details of again an individual deal. The more important piece is how do we keep a foot in the door of this massive energy transition investment? Well, you won't be surprised to hear all four political parties, the main parties that are represented in the Ontario legislature, have some ideas on that.

Sheldon, if you would, middle of page three, we're going to do just some bullet points here on what the four main parties are saying. The progressive conservatives, after years of economic decline under the Liberals, so they say, our PC team has fought hard to rebuild Ontario's manufacturing sector and bring back good jobs with 45 billion dollars in new investments in the first electric vehicle and battery plants in the country. To protect Ontario, boy we're hearing that a lot lately, Doug Ford needs a strong four-year mandate from the people that outlives and outlasts

the Trump administration. Okay, how about the official opposition NDP? New Democrats will not only keep Ontario's electric vehicle commitments, but will also build on that progress to create and sustain new auto jobs in a thriving EV market. If the worst hits, we will be ready to take care

of our people with a strong income protection program. As your next premier, I will support a smart, tough and unified tariff response that hits back hard. So says Marat Stiles. Bonnie Cromby and Ontario's Liberals will diversify our economy to insulate ourselves from market changes. Yes, we will stand up for autoworkers. Yes, we will support the EV sector. But unlike Doug Ford, Bonnie Cromby won't put all of your money in one basket, leaving our economy vulnerable and our workers at risk. And finally, the Greens, they are strong supporters of Ontario's growing EV industry. The investments need to be

accompanied by credible measures that make it easier and affordable for people to buy and use the EVs we produce, like purchasing rebates and expanded charging infrastructure. We will continue to fight for a strong made in Ontario EV people to buy and use the EVs we produce, like purchasing rebates and expanded charging infrastructure, we will continue to fight for a strong made in Ontario EV strategy that puts people and workers first. That's what the four main parties have to say about that. Greg, what do you like about what you just heard? I don't like much of what I've heard, frankly, for the same reasons that I communicated five

minutes ago. The reality is the US has put the IRA and the incentives on pause. And on pause probably means on long-term hiatus. So if what we're trying to do is not poke the Donald Trump bear, we don't do that by saying we're going to double down on our investments that we made in the sector. If the government of Canada has said if IRA disappears, we're going to pull back from our investments as well. That's the responsible thing to do. They shouldn't have gotten there to start with, but that's the responsible thing to do now. However, if Doug Ford wants to keep his multi-billion dollar investment, he's going to have a lot of trouble.

And he's going to have a lot of trouble with the perpetuation of the tariffs in the US. It's going to be all the difficulties that Brian have communicated, exacerbated over a longer period of time. Let me get back to Brian. You've heard what the four parties have to say. What do you like? What don't you like? Well, I'm encouraged by the commitment to the sector in the auto industry. I think everybody recognizes how important auto is to Ontario's economy and the fact that it creates good, well-paying, largely unionized jobs in the province. The only thing that concerns me is there does seem to be a belief that somehow the PC government has gone all in on electrification only. Not the case. We have a in on electrification only. Not the case.

We have a very diversified automotive sector. Yes, we've secured some major, major investments into battery plants. We've got Windsor that's retooling to electric, Cami building an electric truck. We've also got gas powered vehicles still being built in Ontario and Premier Ford has been very supportive of that.

So it's a diversified auto sector and flexibility is gonna be the key as we go through this very topy transition. You need all power trains. We're gonna need efficient gas powered vehicles. You need plug-in hybrids, full electric, the full suite. So I'd like to see a little bit more understanding of that by some of the parties that this is a diversified industry

and the current government has in fact supported all of those investments. Yes, super your feedback on what the four parties have to say. Yeah, we'll definitely get rid of the EV incentives. There's no need for that. That's wasteful tax dollars into the incentivization people to buy cars. The rising oil price alone with tariffs or not drive people to smaller vehicles, smaller engines.

They always have they always will. Let's rely on that. But in terms of staying the course, I like what I'm hearing about staying the course publicly around electrified vehicle investments, but more importantly around manufacturing investments, because you have to give market signals. We're in the emergency room situation. We're not in the ICU yet.

So in the ER, we're trying to stop the bleeding. At least the parties right now are recognizing stop the bleeding by giving market signals of stability. But Greg, to your point about the US is gonna rip up the IRA. Yep, they are. Why? Because it's Biden policy.

Do I think for a minute Donald Trump and the Republicans are not going to come swinging back with industrial policy that equally invests, if not more, into their pet projects, not for a minute. They are absolutely, they're going to come swinging back with industrial policies, not the IRA. They will call it something else. It comes like something else. The Donald Trump wonderland, whatever they want to call it, industrial policy is going to come swinging back with industrial policy. It's not called the IRA. Call it something else. It's something else. The Donald Trump, Wonderland, whatever they want to call it.

Industrial policy is going to come swinging back. And we don't want to be swinging away at a moment when we can tweak and use the scalpel rather than the ax, as Obama said. We can tweak those agreements, line ourselves up, keep the market signals where they need to be. And the last thing I will say is the diversification. Nobody's mentioned hydrogen here.

But to their great credit, I mean, the Ontario government did come out with a hydrogen strategy. Lots of provinces have. To the discredit of every province so far, almost no money has gone into a hydrogen strategy of significant sort that would build out that industry. We have hydrogen producers here.

There's zero emissions vehicles as well, zero emissions energy production. It is the kind of investment that would actually securitize a niche market in the province as well. Last word to Rachel. So a few points on diversification. Batteries are the largest growing clean energy technology. There's going to be markets and stationary battery production as well.

It is not even just the EV supply chain. And at subs of the border, we're still seeing places like California and 40% of the US auto market still fighting to keep mandates headed towards auto vehicle, electric vehicle uptake. So we can expect to see some uptake south of the border. 50% of US citizens polled said they were open to an EV in the next five years. So there's going to be some organic demand there. In terms of domestically, encouraging to hear some conversation around the supports

to help Ontarians benefit from this, we're seeing Dodge Charger EVs produced in Windsor and the only places you can buy them in Canada are Quebec and BC. Because there's policies there helping support uptake, we see uptake getting up to as high as a quarter and a third in those jurisdictions and it's because EVs, they do save people money over time. So helping people just deal with the upfront costs so they can benefit from long-term savings is actually a household affordability measure in addition to the emissions benefits which can be up to 90% of the life cycle emissions of a gas-powered vehicle. So there's a dumber of layers of benefit here and I think, you know, definitely interested to see all parties leaning

into both growth of the battery industry but also clean growth in general and looking for some of those surrounding supports as well. Good. I have time left to ask my director to bring up a foreshot of all of our guests so that I can thank them all. Brian Kingston in the nation's capital from the Canadian Vehicle Manufacturers Association. Rachel Doran, Clean Energy Canada, Josipa Petronich, QTRIQ you call it, right? QTRIQ, Canadian Urban Transit Research and Innovation Consortium, and Greg Mordew, McMaster

University where he's got the ArcelorMiddle DeFasco Chair in Advanced Manufacturing Policy there. Great discussion everybody, thanks very much. Thank you. Thank you.