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Canada’s decision to invest in Battery plants and tilt its focus towards the electric-vehicle industry during the past few years was required to prevent a “decline” in the country’s lucrative auto sector, says Industry Minister François-Philippe Champagne.

“I don’t know if it was by choice or by design, but when I entered the role of industry minister, some were even looking at the demise of the auto sector in Canada,” he said while speaking at the Toronto Global Forum on Oct. 11.

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Champagne said Canada would have seen a “decline” in the auto sector, which supports about 500,000 people, if it hadn’t taken advantage of this “generational opportunity.”

In 2023, Canadian governments signed agreements with battery and car makers such as Stellantis NV, LG Energy Solution Ltd., Volkswagen AG and Northvolt AB to build three battery plants in Canada, with governments offering the companies performance incentives worth billions of dollars in an effort to match incentives provided by the United States.

Champagne said he initially had doubts about whether so many companies would be interested in building such factories in Canada.

“When we started the journey, I was not sure at all that we would even have one giga factory in Canada, let alone three of them,” he said. “Because at the time, people were questioning, ‘Could we really win with the United States? We are not the reserve currency of the world, we cannot outcompete a number of states in the United States.’”

Critics of the subsidies, however, believe the federal government needs to rein in its spending and look at alternative ways to meet its climate targets.

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Greig Mordue, an associate professor at McMaster University’s faculty of engineering in Hamilton, in August said Canada needed to be a bit more “patient” and should have waited until the late 2020s before taking steps to build a battery plant, since there would be a lot more battery plants in the mix and pricing would be a “lot less aggressive.”

But Brian Kingston, chief executive of the Canadian Vehicle Manufacturers’ Association, said the transformation to electrification has created a once-in-a-lifetime opportunity for Canada to grow its share of North America’s auto production.

“There is no other country in the world where automotive companies can assemble vehicles using a renewable energy grid, source mineral inputs from responsible and sustainable supply chains, and access diverse, world-class talent required for new vehicle technologies,” he said on Oct. 11.

Aside from battery plants, Canada has also taken steps to boost its mining sector and encourage companies to mine materials such as lithium, copper and rare earths, which are needed to build batteries that power electric vehicles.

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For example, the federal government allocated a record $3.8 billion to its critical minerals strategy in the 2022 budget. It also introduced policies last year that make it difficult for foreign companies, especially those in authoritarian countries, to invest in Canadian companies looking to explore and produce battery materials.

Despite the government’s investment and the rise in interest in battery materials, analysts believe Canada still has a lot of catching up to do. Countries such as Australia, the world’s leading lithium producer, and Indonesia, the biggest nickel producer, are way ahead, they say.

Some mining executives have urged Canada to speed up the mining permitting mechanism, since the entire process of building a mine here can take up to 15 years in some cases.

Champagne said Canada needed “to do a far better job” in that regard, but added the country has come a long way in the past few years.

“I remember, I used to be trade minister back in 2016 … even as minister at that time it was difficult to get a meeting with Japanese ministers because Canada was not on the map in many ways,” he said. “But today … we stand out.”

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