The electric vehicle industry in Canada has seen setbacks in major EV and battery projects across Ontario, Quebec, and British Columbia. These projects have been delayed, cancelled, suspended, substantially changed, or even led to bankruptcy due to lower-than-expected demand from automakers and suppliers.
Volkswagen’s PowerCo battery plant in St. Thomas, Ont., has pushed back its production timeline to 2029 due to evolving market demand. Questions have been raised about whether Canada overestimated the growth rate of the EV market. Critics suggest that the demand may not reach the necessary levels to support the scale of battery production that governments aimed to attract.
Grieg Mordue, a former Toyota executive and retired McMaster University professor, highlights two issues with Canada’s EV investment strategy related to scale and location. The St. Thomas plant was initially planned to produce enough battery cells for approximately one million EVs annually. However, concerns arise as Volkswagen’s major assembly operations are located in the southern United States and Mexico, making the transportation of batteries from St. Thomas inefficient.
Despite the challenges, Volkswagen reaffirms its commitment to the St. Thomas plant as a cornerstone of its North American battery strategy. The delay allows for the integration of newer battery technology and scaling production in tandem with market demand. This delay could also reduce the subsidy bill for taxpayers, as the incentives are tied to the plant’s battery production.
While some question the current EV demand, others argue that these investments are long-term strategies to stay relevant in the evolving auto industry. Signs of recovery in Canada’s EV market have been observed, with an increase in new registrations of battery-only EVs in recent quarters.
Canada’s pursuit of building domestic battery capacity is essential for maintaining competitiveness in the global auto industry’s shift towards electric vehicles. The potential market for these batteries extends beyond EVs to grid-scale storage and balancing supply and demand in expanding electricity grids.
University of Guelph economics professor Ross McKitrick raises concerns about the sustainability of the EV market and the scale of government interventions. Scrapping EV sales requirements in 2026, Canada is now focusing on repealing the federal mandate and introducing new emissions standards. Despite government incentives, electric vehicles still represent a minority share of new vehicle sales in Canada, indicating a niche market with selective consumer adoption.