Ontario prioritizing foreign investment in electric vehicles, no consumer tax credit planned

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Ontario Innovation Minister Vic Fedeli is ruling out matching other provinces’ moves to give consumers tax credits to buy electric vehicles, saying his government’s priority is to attract companies to build battery and EV plants in Ontario.

“The door is open for only a short period of time. everybody’s lining up to find a place to build a battery. Once these places are entrenched, that’s it. The door will close. So we need to be there now,” Mr. Fedeli told The Globe and Mail.

Global auto makers are racing to spend an estimated US$300-billion on EV and battery manufacturing in order to electrify their fleets. Over the past 20 months, Ontario has attracted $12.5-billion of that amount from foreign auto makers – many already well-established in the province – and companies hoping to break into the EV battery industry.

But critics say helping people buy EVs is a missing piece in the puzzle, and a big part of reaching the federal government’s requirement that all car and passenger truck sales be zero-emissions vehicles by 2035.

“The reality is if you want to be a location of choice for these vehicles are built. We also have to build the market,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, said in an interview. While he praised the government’s efforts to attract funding, he said its hesitancy to stimulate uptake could damage Ontario’s green transition over the long term.

To date, Mr. Fedeli said the government has itself invested $2.5-billion in grants for the EV sector, much of which has been spent as matching funds to federal incentives, including hundreds of millions to help Ford Motor Co., Honda Motor Co. Ltd. and Stellantis NV retool plants in Ontario for EV manufacturing.

This is in addition to $7-billion in annual cost savings for Ontario businesses, which Mr. Fedeli said the province found by reducing Workplace Safety and Insurance Board premiums by half, lowering energy and property tax rates, and making further tax cuts. The savings are divided between all companies, not just auto manufacturers. And the Ontario Ministry of Economic Development, Job Creation and Trade did not say what portion of those savings are attributable directly to the auto industry.

“We have at least a half a dozen battery companies, battery manufacturers who are looking at Ontario right now in various stages of development. And we have companies who are looking at making the components that go into batteries,” Mr. Fedeli said. He did not provide further detail about these deals. “We don’t ever, ever talk about our prospects,” he said.

The investments are part of the province’s overall EV strategy: an end-to-end system in which Ontario would mine the materials, build the batteries and construct the automobiles.

The investment is welcome news to an auto industry of 100,000 workers that has faced significant hardship over several decades. Once a driving force behind Ontario’s economy, in recent years the province has seen a spate of towns left behind as large manufacturers closed down plants in favour of cheaper labour in non-unionized jurisdictions.

When asked how many jobs he thinks could be created by the EV sector, Mr. Fedeli could not provide an estimate. But he said that “tens of thousands” could be produced as a result of each of the new mining, battery and EV assembly roles.

Of course, Ontario competes with other markets. Canada evaded a major shadow over the country’s EV industry in July when a U.S. tax credit for purchases of EVs was amended to include those produced in “North America” instead of just the United States. Without this change, the credit would have effectively shut vehicles made in Canada out of the U.S. market, making Ontario an unattractive place to build.

The U.S. is offering a spate of incentives to attract companies – most recently, US$900-million in funding to build EV charging stations in 35 states. But Mr. Fedeli is hoping Ontario’s emissions-free electricity will be enough to sway manufacturers. Unlike some markets in the U.S., Ontario does not generate any electricity from burning coal.

However, it’s not clear yet if Ontario has adequate transmission capacity to support the electricity transfer required to power the plants and the chargers needed to spur EV uptake, said CVMA president Mr. Kingston.

Mr. Fedeli also said manufacturers will be drawn by end-to-end convenience. They will save money by assembling cars close to where materials are mined and batteries made, as these things tend to be heavy and expensive to transport.

While the province has its own deposits of graphite, lithium, nickel and cobalt – all used in EV batteries – it will compete with other markets where labour is cheaper, and with Quebec, which mines some of the same materials. For both provinces, much of this production is still years away and there’s no guarantee supplies will be adequate.

Even so, Mr. Fedeli stands by the provincial end-to-end strategy, although he’s not budging on rebates for now.

Unlike Quebec, British Columbia, Yukon and the Maritime provinces, Ontario still does not offer any rebate for buying EVs on top of the $5,000 per vehicle offered by the federal government. The initial subsidy introduced by Ontario’s previous Liberal government was scrapped by Progressive Conservative Premier Doug Ford in 2018 as a cost-cutting measure. He claimed cancelling the program would save taxpayers up to $1-billion over four years.

The year after the incentive was cancelled, EV purchases in Ontario fell by half, according to a study by non-profit advocacy group Electric Mobility Canada. Meanwhile, in Quebec, where the rebate is highest – up to $8,000 – EVs made up 9.5 per cent of new vehicle registrations in 2021, as opposed to 3.5 per cent in Ontario, according to the Road to 2035 campaign funded by the CVMA.

When asked if he believes in offering rebates in order to incentive people to purchase electric cars, Mr. Fedeli said tax credits for purchasers put more money in the pockets of foreign manufacturers, but don’t help spur economic growth in Ontario.

“If you want to buy an electric vehicle today, they’re not made in Canada. They’re not made in Ontario. Soon they will be,” Mr. Fedeli said, adding he believes Ontario’s taxpayer money is better used attracting investment to create jobs.

But if the Ontario government is waiting for EVs to be built in Canada before offering credits, residents could be waiting for years. Many of the plants undergoing upgrades won’t be operational until 2024 or 2025.