The electrification of transport is gaining momentum around the world and countries are setting ambitious goals towards fully transitioning to zero-emission vehicles in the coming decades. Batteries constitute a key component of electric vehicles (EVs) and the reinforcement of the global battery supply chain will be necessary on the path to successful electrification. The supply of batteries presents major challenges. These challenges include technological issues, production cost concerns as well as complex supply chain and industrialization considerations (particularly those related to critical minerals, chemical products and the materials necessary to produce batteries). Currently, the battery supply chain is mainly Asia-focused. Western governments, guided by various strategic and geopolitical motivations, are intervening heavily to support the development of their local battery supply chains and to help strengthen their related private sector.

In this ongoing race amongst nations to develop local battery capabilities, Canada is emerging as an international leader in the EV battery ecosystem and is ideally positioned to play a leading future role in all segments of the supply chain. The country’s position as an emerging battery supply chain leader is being recognized worldwide; the BloombergNEF annual global lithium-ion battery supply chain ranking placed Canada as the second-best battery supply chain in the world in 2022, behind China and ahead of the United States.

The opportunity appears to be ripe for Canada to position itself as an international hub for the EV battery industry. While we are mindful that such aspirations present important challenges, here are  a few key reasons why we believe Canada has the potential to be amongst the EV battery supply chain leaders of the future.

1. Abundance of critical minerals and a solid mining sector

Canada has all the critical minerals required to manufacture EV batteries, as per the currently common battery chemistries: graphite, nickel, aluminum, copper, lithium, cobalt, manganese, molybdenum and rare earth elements. In addition, Canada has a proven track record as a major mining powerhouse, which can be a key differentiator in helping boost the growth of its local battery sector.

2. A strong manufacturing base to support the development of a local battery industry

Canada offers manufacturing expertise, comparatively lower costs to similar nations and strong R&D capabilities, that situate it as a global leader in the field of manufacturing. Canadian expertise is coupled with efficiency: Canadian manufacturing costs are the lowest in the G7. Canada’s strength as an industrial power has already allowed it to attract significant interest and investments in the manufacturing of key chemical components for batteries, such as battery cathode and anode active materials. Important announcements have been made recently in this space:  the recent investments by BASF and Ultium – a joint venture between General Motors and Korea’s POSCO Chemical –  in Bécancour, Québec, and the CA$1.5 billion investment by Umicore in a cathode active material facility in Kingston, Ontario, are evidence of Canada’s attractive position as an industrial leader and an integral part of the North American EV battery supply chain. In addition, several local players of the battery ecosystem across Canada, such as Nano One, Nouveau Monde Graphite, Li-Cycle and Lithion, to name a few, continue to expand their operations and will play a key role in the development of the industry.

3. Presence of necessary elements to create ethically responsible batteries with low carbon footprint

Environment, Social and Governance (ESG) is at the heart of the electrification shift, and as part of that focus, it is important to ensure that the battery supply chain itself has the lowest footprint and a commitment to ESG principles. Canada is an ideal ESG-minded location to develop EV batteries. Canada’s natural resources development and manufacturing projects are subject to high-standard environmental and social responsibility protection measures and oversight when compared to many other nations. Low cost clean energy, such as hydro-power, is abundant in Canada and is ideal to power energy-heavy battery supply chain production facilities. In fact, Canada has one of the largest hydroelectric developments in the world. As the world’s third largest producer of hydroelectricity, Canada provides the EV battery supply chain with an abundance of renewable and affordable electricity, allowing industrial clients to benefit from some of the lowest North American utility costs. Moreover, the proximity to raw materials and other elements of the battery supply chain, including the availability of low carbon aluminum, would allow for the creation of a tightly-knit local North-American EV and battery ecosystem. The potential integrated and efficient Canadian EV battery industry will limit the necessary transportation within the EV supply chain, thus drastically reducing the industry’s carbon footprint.

4. A historically strong vehicle manufacturing industry committed to electrification

Thanks to the existing and easily transferable Canadian automobile manufacturing ecosystem, the world’s largest automakers have already committed to source Canadian batteries and Canadian-built EVs. A robust network of original equipment manufacturers , including Ford, GM and Stellantis, have committed billions to manufacturing EVs in Canada. Volkswagen AG and its battery company, PowerCo SE, recently selected St. Thomas, Ontario to establish Volkswagen’s first overseas gigafactory for cell manufacturing. Canada is also already home to a network of zero-emission bus producers, including New Flyer, NovaBus (Volvo), Lion Electric Company, GreenPower Motor Company and Vicinity Motor Corp. (Grande West), who are all currently manufacturing in Canada.

Canada further offers a renowned network of over 700 auto parts suppliers, many of which, including Linamar and Magna International, already supply parts for hybrid and electric battery vehicles. The strong Canadian aerospace industry as well as recreational vehicle manufacturers (such as BRP and Taiga Motors) are also active players in facilitating the transition towards electrification. In addition to the great market opportunities in the neighbouring United States, all of these Canada-based stakeholders could constitute ideal potential customers and partners for any cell or battery manufacturer willing to establish its presence in Canada. 

5. Strategic positioning

Canada is at the crossroads of the critical North American,  Canadian-European and Asia-Pacific free trade and supply chain zones. Benefiting from robust rail and marine transportation systems, as well as a series of accessible ports linking the Atlantic ocean to the great lakes, East and Midwest regions of the USA, Canada is uniquely positioned to serve as the epicentre of the global EV battery ecosystem. The corridor between the Saguenay region in Québec and Windsor in Ontario, is establishing itself at the heart of the Canadian EV battery supply chain. Comprised of major metropolitan areas, including Greater Montréal, the Greater Toronto Area and the National Capital Region, as well as key industrial regions, including Saguenay, Trois-Rivières, Bécancour, Kingston, Oshawa and Windsor, elements of all segments of the EV battery supply chain are serviced in this corridor that was already home to one of the world’s largest automotive industries.  

6. Human resources and R&D capabilities

Canada offers a qualified and multilingual workforce that is born from its renowned network of universities and research institutes. It also remains a popular immigration destination for qualified work force, which will be an essential part of the industrialization process required for a vibrant battery manufacturing ecosystem. University innovation centres that have been at the forefront of many industries, including the technology hub at Waterloo University as well as the  research and innovation institutes at the University of Toronto, McGill University, Concordia University and Université de Québec à Trois-Rivières, to name a few, will be playing a key role in the study of electrification and energy storage. Research costs in Canada are generally the lowest in North America, and government support for R&D is also very generous. Innovation will be a key driver for the battery industry, as various companies, start-ups, and well-established ones alike, are working to unlock technologies that can manufacture better-performing batteries for the most affordable price, with a view to solving the battery cost efficiency challenge. The Canadian R&D base can play a major role in helping to advance this cause. A culture of innovation is well-rooted in Canada and has helped shape internationally-renown innovation and industrial hubs in various sectors throughout the country. The same level of success can certainly be envisioned for the young and emerging Canadian battery ecosystem.  

7. Governmental and popular support for the development of the battery supply chain

In the past three years, the federal and provincial governments (especially Québec and Ontario) as well as municipalities and regional authorities have actively supported the development of a local battery supply chain. This support has included active diplomatic efforts at the highest levels to attract foreign direct investment, promoting strategic international alliances in the sector with allied nations and significant funding commitments to projects of various sizes in the battery supply chain. Moreover, ambitious regulatory schemes to enforce a transition to zero-emission vehicles by federal and provincial authorities are motivating the industry to move even faster. It would be fair to say that, overall, these efforts have played a key role in helping to boost the emergence of the battery and EV supply chain in Canada. Moreover, the development of a local battery cluster has generally received a positive reaction from the industrial and investment community as well as the general population. The growth of the battery cluster is viewed as a driver for the creation of high-quality employment, development of a local green innovation-driven economy and the return of manufacturing jobs to communities in need of developing their local economy. Social buy-in as well as federal and provincial government support, all of which are key to the development of major industrial projects, certainly seem to be present.

Conclusion

Recent developments indicate that Canada is seizing the opportunity to realize its potential as a battery supply chain leader. Canadian Industry Minister, Francois-Philippe Champagne, recently categorized Canada, and those investing in the country, as entering a “generational opportunity.” Indeed, the development of the Canadian EV ecosystem truly is a generational opportunity to contribute to the emergence of a global EV and battery powerhouse. However, it would be naïve to assume that the establishment of a still nascent battery industrial base, with all of the challenges that exist for the industry, will be a simple or rapid process. Canada has the required assets, as well as government and community support, to realize its full potential. However, the path towards developing local cell and component manufacturing capacity, which is still in its infancy, requires hard work, commitment, continued support by all the players involved and, of course, major investments.  

As Canada forges forward to establish its local battery and EV supply chain, stay tuned to our newly launched Dentons Battery & EV Bulletin to remain abreast of the latest battery and EV legal and policy developments. The Dentons Canada national Battery and Energy Storage group has been proudly involved in providing legal, strategic and government relations advice to various local and international players of the battery supply chain in collaboration with a strong network of experts/partners in public policy. We look forward to continuing to be a partner of our clients’ success in this path and contributing to the establishment of this industrial base in Canada. Do not hesitate to reach out to us to learn how we can help you in this industry.

The authors would like to specially thank the Honourable Philippe Couillard, 31st Premier of Québec, for his collaboration on this article.