Gherson: Now's not the time to give up on Ontario's auto sector

With car companies committed to exclusively making electric vehicles by 2040 and with jurisdictions around the world investing to secure their portion of the multitrillion-dollar climate transition, Canada had to move quickly to ensure the future of its automotive sector.

Canadian governments have somewhat controversially invested billions of dollars in EV projects that take advantage of Ontario’s unique sector ecosystem, but given the outsized role that vehicle manufacturing plays in Ontario’s economy, these investments should come as no surprise.

In the last three years, Ontario has secured $26 billion in automotive and EV-related investments. Simply put, it’s too early to back away, especially across the GTA, where failure to secure investments would be the death knell for Canada’s $16-billion auto sector.

The biggest threat, of course, is our neighbour to the south. Earlier this year, Ford Motor Company announced it would be investing $3.5 billion to build an EV battery facility in Marshall, Mich., largely due to the massive U.S. federal subsidies made available through the Inflation Reduction Act.

According to Ford, the IRA worked exactly as intended, allowing Ford to bring forth 2,500 jobs and the future growth that comes with them.

Ford, of course, isn’t the only car company taking advantage of subsidies to build battery manufacturing plants. Tesla, which had been considering production in Germany, is expected to split $1.8 billion with its battery partner Panasonic, while General Motors and LG Energy Solutions are expected to receive $480 million.

Even companies with no North American manufacturing, such as Audi, have been considering plants in the U.S. Uptake on the program is so hot that Goldman Sachs estimated the subsidies could end up totalling $1.2 trillion US, three times more than U.S. government’s original estimate.

In response, Ontario and the federal government together put $259 million into GM’s transformation of its Ingersoll and Oshawa plants. They combined again to invest over $1 billion in Stellantis for assembly plants in Windsor and Brampton. Ontario even provided $23.6 million in funding to Magna International for its announced $471-million Brampton facility and site expansion investment. And, of course, there is the $13.9-billion investment over 10 years from the federal government for the Volkswagen battery plant in St. Thomas.

This type of support is needed if Ontario is to stand a chance of competing with U.S. jurisdictions.

In comparison back in Michigan, the U.S. Department of Energy provided a $2.5-billion loan to GM and LG Energy Solutions on top of their IRA subsidies. GM also received $666 million in state grants as well as a bargain rate on electricity from the city’s utility.

This is how our neighbours are attracting multibillion-dollar green investments, creating opportunities and good jobs in the new economy.

The risk is that these new investments will not be enough to reinvigorate our declining auto sector.

Global automotive manufacturers are looking to expand their economic footprint in North America. Failing to continue competing for EV projects will hurt Canada’s manufacturing sector and its global competitiveness in the long run. This is especially true when our biggest rivals are pulling out all of the stops to secure these high-value jobs and the productivity gains that come with them. Large-scale business investments may have seemed bold at the time, but pulling out of the race now feels like leaving business unfinished.