News

Motor Mouth: Canada is going its own way with fuel economy standards

Motor Mouth: Canada is going its own way with fuel economy standards
Autos
My oh my, wasn’t it an eventful week in Canadian automotive geopolitics? Unifor unionists rejoiced at the news that they’ll keep their jobs, electric vehicle protagonists reveled in the news that Ford will start building EVs in Oakville, and finally, the big guns — the Quebec and Canadian governments — announced plans to design, engineer, and build batteries right here in the Canada so that we might become the North American hub for vehicle battery manufacturing.

For those who missed the news, Ford’s Oakville assembly plant got a new lease on life beyond 2023 — when it will stop producing Edge SUVs — and will start manufacturing as many as five different electric vehicles starting in 2025. The total cost of the retooling and retraining is said to run in the billions, of which the federal and Ontario governments are throwing in $500 million.

Not to be outdone, Quebec and the feds stated their intention of also manufacturing batteries in Canada. “We could be a world leader in [electric vehicle] battery manufacturing if we leverage our natural resources like lithium, cobalt … nickel, aluminum — the key ingredients that are required in batteries,” Innovation, Science and Industry Minister Navdeep Bains told Radio-Canada, “We want to make sure that we manufacture them here and … use them in our trains, our buses, our ships and our planes.” As with most federal Liberal proclamations, there were no hard numbers attached to its ambitions, but TVA claims the Quebec government alone has earmarked $1.4 billion for battery production. As shows of support for domestic auto production and electrification go, proclamations simply don’t get any bigger.

The benefits, of course, are obvious: high-paying unionized assembly-line jobs are being saved, new battery manufacturing plants will supercharge a struggling economy and, most importantly, at least if you’re Justin Trudeau, it allows you to smugly proclaim that “Canada is on track to reduce our emissions by 30 per cent by 2030.”

That explains the why, but the where — as in, where all these electric vehicles and batteries are going to be sold — remains an unanswered question. Automakers do not traditionally build entire plants in Canada just to service our domestic sales. Ditto battery manufacturing, any production facility needing a market far larger than our own to establish the kind of economies of scale needed to be price competitive. So where will they all go?

Motor Mouth: Trump’s fuel economy changes could be disaster for Canada

Not to the United States, our traditional go-to export market. Lost in all the hoopla surrounding electrification is the fact that American plug-in sales have essentially stalled. Nor is this decline simple post-COVID economics; plug-in EV sales actually dipped in 2019 compared with 2018.

As Motor Mouth has previously reported, . The Trump White House has replaced former president Obama’s ambitious Corporate Average Fuel Economy (CAFE) standards with an extremely watered-down Safer Affordable Fuel Efficient (SAFE) regulation. Though the exact directive stretches to a government-standard hundreds of pages long, the basic gist is that while Obama’s dictum required automakers to increase their fleet fuel economy by five per cent annually, thanks to Trump’s largesse, that has been decreased to just 1.5 per cent.

Why that’s important to EV sales is because automakers cannot increase the efficiency of their ICE-powered vehicles by five per cent year over year. To meet that standard, they would need to sell a substantial number of battery-powered (or PHEV) cars. The Trump regs — that 1.5 per cent decrease in fuel consumption year over year — are almost totally attainable simply by improving ICE efficiency. That, of course, allows automakers to meet their U.S. regulatory requirements without ramping up EV production, and if you know anything about the auto industry, it’s that legacy automakers — with the possible exception of Toyota — never make a fuel economy improvement they’re not forced to. Throw in Trump’s decision to kill off EV tax credits and it’s little wonder why electric vehicle sales are tanking in the US.

Why that matters to Oakville assembly line workers — or anyone hoping to land a job at a battery manufacturing plant — is that Canadian fuel economy and emissions standards are essentially photocopies of American regulations. In broad strokes, our CO2 mandates and fuel economy ratings are essentially metricized equivalents of U.S. dictums.

Lost in all the hubbub about COVID-19 is that our Liberal government is, as we speak, long been reviewing whether it should harmonize with those latest Trump standards or forge on with the now-discontinued Obama dictates. Buried deep in something labelled a General Consultation Session on Midterm Evaluation dealing with light vehicle greenhouse gas emissions is the assumption that “companies would comply with a more stringent standard in Canada [i.e. our maintaining of the five per cent increase] by adjusting fleet mix.” In non-governmental jargon, that means if we want to meet a five per cent year-over-year increase in fuel economy when all the gasoline-fueled cars being imported into Canada are only improving their efficiency by 1.5 per cent, we’re going to have to sell a lot more EVs to compensate.

How many more?

Canada, for the first time in recent memory, will set its own automotive emissions standards.

Boat loads, as in roughly four to five times the number sold now. In fact, the government estimates we’ll have to buy 162,056 BEVs and 40,514 PHEVs by 2025 if we want to maintain Obama’s dictates while selling Trump’s gas hogs. In even simpler terms, if Canada sticks with Obama’s 54.5-miles-per-US-gallons regs, we’re going to have to buy a grossly disproportionate share of North America’s electric vehicles.

As happy as that might make fervent nationalists and the legions of anti-Trumpers out there, such a divergence is extremely risky. Never mind the difficulty of attracting outside investment to our increasingly left-leaning economy, or the historic difficulty of allocating plants to satisfy domestic demand, the sheer cost of incentivizing those EV sales will be monumental. Increasing sales of electric vehicles by 400 or 500 per cent in five years will not be accomplished on the back of piffling $5,000 federal subsidies. Ontario, once a hotbed of electric vehicle sales, now struggles to hit single digits since its provincial subsidies were discontinued. Quebec, the only province to come anywhere near the 10 to 12 per cent market share EVs will require to hit that 2025 target, throws $13,000 at every BEV sold in la belle province, not to mention fining automakers if they don’t sell enough EVs.

Taking just the subsidy portion as a benchmark, governments would have to set aside $1.4 billion in 2023, $2 billion in 2024 and $2.6 billion in 2025 to coerce enough Canadians into plug-ins to meet its mandate. Extrapolate it out for Trudeau’s 2030 commitments and the number just grows exponentially. Whether this is brave or foolhardy policy is hard to determine. Norway is always used as the example of a small country that has managed to build a vibrant EV marketplace. But it has a US$1 trillion surplus — the country’s oil-fueled pension fund — to finance its largesse, not the $1.2 trillion debt Canadians will be staring down by March 2021. In the end, one’s trust in such a radical policy shift will depend on your confidence in the politicians implementing it.

Unfortunately, the Liberal government has proven itself so gaffe-prone — especially when it comes to the intersection between virtue signalling and fiscal responsibility — that this decision seems, well, just the latest in a series of well-intentioned miscalculations. I suspect Ford’s assembly line workers are praying that Trudeau has finally got his numbers right.
Read more on driving.ca
News Topics :
RELATED STORIES :
Autos
It wasn’t a banner year for electric vehicles in 2019. After a six year run typified by near exponential growth — EVs averaged an incredible 60 per cent year over year increase from...
Canada
Canadians are being encouraged to drive electric vehicles, but can they trust their local mechanic to know what to do when they need them repaired In fact, demand is growing...
Business
Amidst a steady stream of pledges to deliver more EVs than ever over the next five years, Ford filmed an electric prototype of its F 150 pickup towing an entire freight...
Business
The electric vehicle capital of Canada is a small town in Quebec cottage country, some 95 kilometres northeast of Montreal. The family owned dealership of Bourgeois Chevrolet Buick GMC, located in Rawdon,...
Technology
Toyota is finally diving into fully electric vehicles, striking a deal with China’s BYD to jointly develop batteries, sedans and SUVs for the world’s largest automobile market. Japan’s top automaker...