News that Tesla has recently reached an extraordinary valuation of US$1 trillion suggests yet again that the automobile industry remains a major economic force shaping the planet.
Tesla’s growth also shows that the transition to electric vehicles (EVs) marks the fifth great wave of automotive investment since 1900. Despite not owning any car companies, Canada has benefited immensely from every previous wave, thanks to shrewd policy-makers who used every tool possible. To gain a fair share of the auto market.
But as the global industry spends hundreds of billions of dollars to completely remodel for the EV future, how will Canada be sure to profit from the current spending spree?
With the threat of protectionist measures aimed at keeping American EV investments at home in the United States, Canadians are looking to adapt financially to secure auto investments, here’s a look at how a peripheral economy has changed a lot. The major auto sector gained – and how it could hold up to it in the electrified future
Read more: Canada must look inward to address US protectionism
Initially, the Ford . Was
From 1900 to 1930 the first great auto investment wave known as Fordist (after Ford Motor Company founder Henry Ford) reshaped the world of mass production and consumption.
Canada was closer to Detroit – home of the Big Three automakers, Ford Motor Company, General Motors and Chrysler – and imposed a 35 percent tariff on US imports, prompting Ford and other US automakers to avoid setting up branch plants in Canada. Them.
British preferential rules that encouraged American manufacturers to export to Commonwealth countries also helped cement the emergence of the American-owned branch-plant sector. By the 1920s, all of Canada’s domestic producers were destroyed by technical and capital requirements that were beyond them.
These policies, along with Ontario’s proximity to Detroit, made Canada the world’s second largest producer of cars by the 1920s.
the Golden Age
After the Great Depression and World War II, the second great wave of auto investment lasted from the 1950s to the 1960s. Inspired by post-war North America’s auto-brokered labor peace and its baby boom, Detroit’s golden age marked the peak of American global economic power and international investment.
Canadians dramatically revamped their auto economy to gain a share of this boom through the Canada–US Auto Pact of 1965. The deal sealed Canada’s American economic fortune, but the hard bargaining also resulted in smart interventionist Canadian measures, which required American assemblers to continue production in Canada in exchange for cross-border, tariff-free trade.
Canadian production was mostly exported to the South, prompting another investment boom, including new plants in Ontario and Quebec.
The third wave was caused by regulatory automotive regime changes in the 1970s in fuel economy (the 1973 OPEC ban), emissions control (the environmental movement) and safety (championed by consumer activist Ralph Nader).
Forced to remodel their factories to manufacture smaller, lighter vehicles as agile foreign competitors devoured North American market share, the Big Three struggled to survive. By the mid-1970s, it looked like they might exit their Canadian branch plants out of a wave of investment as they looked to revamp their American factories, a dynamic similar to today.
But Canadian policy-makers struck a new tool: direct subsidies to manufacturers in the form of investment incentives. In 1978, Canadian governments gave Ford $78 million for an engine plant in Ontario, taking it away from Ohio, fueling American anger.
Ford incentives resulted in almost permanent government financial support for the industry, including the 1980 Chrysler bailout, when Canadians sought new product mandates (including the wildly successful Windsor-built minivan) in exchange for government support. Beneficial health care policies and exchange rates also helped, and Canada came out of the 1980s and manufactured about two cars for each consumption.
The fourth wave came in the 1980s, fueled by a flood of cheap and reliable imports. The Americans forced Japanese car companies to build plants in the US by imposing export restrictions. Ottawa, fearful the Japanese would readily source the Canadian market from their new American factories, used both sticks and carrots to persuade the Japanese to build a complimentary plant in Canada.
Port blockades, aggressive lobbying and threats of punitive material regulations by Canadian policymakers were combined with financial and infrastructure support as Toyota and Honda eventually agreed to build facilities in Canada. Billions were invested and thousands of jobs were created.
industry intense entertainment
The fifth great global auto investment wave is upon us now, but it is vastly different from the last four.
First, the move away from internal combustion engines is not the usual retooling of plants, but a full-scale re-creation of industry that will reshape the modern economy.
EVs are among the largest technological upgrades in human history and will impact every aspect of the global political economy, from transportation networks to work, labor and international relations.
Second, EVs represent a major step towards a carbonless future and could help humanity survive the worst effects of climate change. They would ideally lead a system-wide cascade towards decarbonization, a scenario inspired by Tesla, which has proven that EV production is viable, scalable and profitable.
Third, if continued EV spending is not protected by Canadians, it could mean the end of assembly production for an already challenged domestic industry. Without being owned by any major carmakers and facing two consecutive decades of decline in North American production share, Canada has little to say in EV investment decisions.
Accompanying this challenge is US President Joe Biden’s Build Back Better legislation that provides US consumers with tax incentives for EVs manufactured only with US union labor.
Read more: Congress awaits the CBO for its Build Back Better report – but how did fiscal scorekeepers become so powerful in politics?
Automakers pledge Canadian EV investment
The US buy measure threatens to divert future EV production from Canada, despite the Big Three’s recent promise to make EV investments in their Canadian plants.
Unless Canada secures a portion of the EV investment boom, which is expected to run into the hundreds of billions of dollars, it could lose its auto sector and thousands of direct and spin-off jobs.
Nevertheless, Canada’s potential as a source of EV battery components (for example, cobalt and lithium from Ontario’s Ring of Fire), its excellent production record, its willingness to provide incentives to policy-makers, and production mandates to union leaders. Might be enough for EVs to gain a share of the future.
Read more: Will the sun set on the Ring of Fire due to debt, liabilities and indigenous action?
So far, Canadians have made some significant investment promises, including Ford’s announcement of $2 billion to build up to five EVs at the Oakville Assembly Plant starting in 2024 (with $500 million in funding from the Canadian government). , and includes a promise by Stelantis (formerly Chrysler). Build electric vehicles in Windsor by 2025.
But Canada’s territory still faces an existential threat. It will require some aggressive diplomacy and innovative policy-making by governments and stakeholders to ensure that Canada does not miss out on its most important wave of automotive investment.