Contextualizing a Turbulent Quarter for the EV Market

Whether it’s a hiccup or just headwinds, something is happening in the electric vehicle market. Despite EV sales in the US and Canada continuing to carve out record shares of the new vehicle market, the second half of 2023 has started to see quite a bit of handwringing on the future of the ZEV industry. 

Debates are raging over how high actual demand is, there are widespread concerns about the charging network, and high-interest rates may be spooking would-be EV purchasers. In the US dealers have written to the President expressing their concern over lots filling up with unsold EVs while in Canada some brands can’t stock EVs fast enough. In response, some automakers have adjusted the pace of their ambitious EV strategies. All this has created uncertainty as to where the EV market is headed and in turn, heated up debate over the Canadian government’s ambitious EV uptake strategies.  

Maybe this turbulence and editorializing can be chalked up to the high expectations set in the past two years. The federal and some provincial governments have gone very far down the track in supporting the EV transition, including through new regulatory measures such as sales mandates and significant investments to attract battery manufacturing plants to Ontario and Quebec.

Maybe we are now finally past the “early adopter” phase and EV uptake is slowing as it expands to consumers with more constrained pocketbooks, more concerned over the charging network, and more wary of making the technological jump. While it is critical to continue to assess the factors affecting growth in the North American EV market, investors and policymakers should not get spooked by recent hurdles. The best bet for Canada is to stay the course, protect our investments, and develop a strong industrial ZEV strategy that will support economic growth and eventually boost Canadian content in North American EVs. 

Canada is uniquely positioned to see wider benefits from the ZEV transition than just higher zero-emission kilometers driven (although that is an important objective).
 

Few, if any, other major manufacturing nations are equipped with the same level of automotive manufacturing expertise, innovators in the advanced battery space, critical mineral reserves, and the clean-power to support extraction, manufacturing and charging. 

Maintaining economic growth, supporting the development of a wider ZEV industry in Canada, and increasing the Canadian content in the EVs being sold in North America will require consistent and balanced support from government and civil society. Battery plants and vehicle assembly plants are victories and will create jobs but without the capacity to build the parts, components, and machines that these plants will need, not to mention the raw materials to feed all of this, there will be a missed opportunity. A strong Canadian ZEV industry will help to boost supply and eventually reduce some of the sticker shock on EVs. Canadian manufacturers are after all global leaders in building affordable and desirable vehicles, a position that must be maintained as we shift to electrified fleets. Canadian IP has been at the forefront of lithium-ion battery technology in the past and Canadian governments need to position our research institutions and start-ups to do so again. Building out the full ZEV supply chain that employs Canadians across the country will have the added benefit of familiarizing Canadians with zero emission mobility, the first step before test-driving and then eventually purchasing them.  

Of course there is turbulence as consumers adopt a new product and a highly complex industry re-invents itself but the dips and divots need to be powered through while taking into account valuable lessons learned. We will need to apply these lessons because the transition to EVs is coming whether Canada capitalizes on the opportunity or not. This is why Accelerate continues to push our message to build out the full ZEV supply chain in Canada by supporting all of its segments.

Our latest report dives further into this discussion and brings you the perspective of key industry leaders in the Canadian ZEV ecosystem.