How incentives revived Ontario

In committing billions of dollars to their Ontario assembly plants, the Detroit 3 have signaled that they see Canada as central to their electrification plans — thanks in part to enhanced government incentives.

In January, General Motors committed to a $781 million investment in CAMI Assembly in Ingersoll, Ontario, to build its new BrightDrop EV600 all-electric cargo vans starting in November. That announcement came just a few months after Ford Motor Co. and Fiat Chrysler Automobiles, now Stellantis, vowed to spend up to a combined $2.58 billion on two of their plants to build electric vehicles this decade.

"It's part of the whole package of Canada becoming an electric vehicle center," said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions. "There's a wave of investment going into Canada now to become a center of excellence for electric vehicles."

But that wave was not inevitable. Indeed, until recently, many industry observers thought the scenario unlikely.

What changed? To a great degree, it was the government's willingness to provide financial incentives.

Canadian auto manufacturing, particularly among the Detroit 3 automakers, was in rough waters. Canada was the world's fifth-largest vehicle producer by volume in 1999, with 3.05 million vehicles built. But by 2019, it ranked No. 12 globally, with 1.91 million vehicles assembled, according to the International Organization of Motor Vehicle Manufacturers.

Ray Tanguay, who was the Canadian and Ontario governments' auto industry adviser from June 2015 to April 2018, recalled visiting the Center for Automotive Research's annual conference in Traverse City, Mich., early in his tenure.

"We were not on the map at all. Zero," he said he learned there.

"Everyone was talking about the U.S., Mexico, China, and when I was pushing to bring up the Canadian story, nobody was listening."

Tanguay said the new multibillion-dollar investment plans by the Detroit 3 prove that Canada's global profile is on the rise.

Along with the Canadian union Unifor and many auto analysts, he attributes Canada's turnaround at least in part to a strategic decision by the federal and provincial governments to step up their financial incentives to lure EV production to the country.

The governments have committed a combined $464.5 million of Ford's $1.46 billion investment in its Oakville, Ontario, assembly plant, which will exclusively build EV models after the investment. The government incentives will cover about 33 percent of the planned costs.

That is a significant boost from what the governments previously covered for auto manufacturing projects. For example, when Toyota Motor Corp. announced plans to invest $1.1 billion in its Ontario assembly plants in 2018, the federal and Ontario governments each committed $86.6 million, covering about 16 percent of the total cost.

The Liberal federal government, which has made addressing climate change a priority under Prime Minister Justin Trudeau, has signaled to automakers that it is willing to offer stronger financial incentives for EV projects. And the Ontario provincial government, led by Conservative Premier Doug Ford, is willing to do the same since it sees an opportunity to build up an EV battery supply chain in Ontario.

That was not lost on GM when the automaker was considering where to build its new electric commercial vans, Unifor President Jerry Dias said. (Government incentives for GM and Stellantis have not yet been announced.)

"GM watched the Ford announcement, and they saw the prime minister and premier come out very quickly in support of it," Dias said. "General Motors saw that the Canadian and provincial governments, really for the first time, were being very active as it relates to electric vehicles."

GM Canada President Scott Bell, speaking on Automotive News Canada's weekly podcast, said the automaker sees itself being "aligned completely" with the Canadian government on climate issues.

In January, GM said it aimed to sell only emission-free vehicles by 2035.

"It's a natural fit when you put it all together," Bell said.