Two years ago, Canada’s goal of developing an electric vehicle (EV) battery ecosystem was still in the “envisioning” stage, as Industry Minister François-Philippe Champagne put it. Today, the supply chain build-out is fast becoming a reality, with the country’s first battery and cathode manufacturing plants underway and a record $3.8 billion allocated for the nation’s critical minerals strategy in the latest federal budget. Despite this progress in a short two years, the EY Electric Vehicle Country Readiness Index indicates that Canada lags behind its peers in terms of local EV production and affordability, ranking 13 out of 14 countries.
How does Canada stack against its peers?
The EV Country readiness index was created to help cross-sector players such as automakers, energy companies and governments understand the factors underlying EV readiness. The purpose is to provide insights into how countries can develop robust and successful EV markets in line with global decarbonization efforts. In the report’s second year running, Canada has fallen to number 13, dropping 5 spots from number 8 in last year’s study. This pushes Canada from aspirant to follower in the rankings when it comes to readiness categories.
So, who’s leading? China retained the top position thanks, in part, to their control of production and infrastructure boom. It sits just ahead of a new entrant, Norway, which takes a close second due to a huge uptake in demand and strong regulations. Sweden, Germany and the UK round out the top five respectively.
Battery manufacturing and supply chain control remain the key drivers for China leading the way in EV adoption, as it possesses 122 out of 200 lithium Gigafactories in the world. Backed by soaring consumer demand (51% of Chinese consumer respondents expect to buy an EV as their next vehicle) and widespread charging infrastructure (by 2021, China had deployed 41% of all DC fast chargers), China continues to be the largest EV market globally — even despite having an overall electricity supply deficit.
“Strong regulation in the form of tax benefits as well as the introduction of EV lanes and parking spaces has led to high EV adoption in Norway.”
Norway, on the other hand, has long been a pioneer when it comes to EV adoption. Strong regulation in the form of tax benefits as well as the introduction of EV lanes and parking spaces has led to high EV adoption in Norway. This has led to EVs accounting for more than 70% of all new 2021 car registrations. Sweden’s strong energy ecosystem along with high consumer uptake (more than 40% in 2021, according to EY analysis) and strong manufacturing presence (41% of all cars produced in Sweden are expected to be electric models between 2022 and 2026), means the country remains ahead of Germany and the UK. However, both Germany and the UK have a decidedly strong base of original equipment manufacturers (OEMs), localized battery production and upcoming EV launches deserving of their “leaders” status credited in the report.
What’s holding Canada back?
The top areas for improvement are consumer demand affordability and charging infrastructure. However, progress is being made. The EY Index finds that 46% of respondents planning to buy a car will choose an EV, up 11% from 2021. Further to this — although lagging behind the global average — the EV interest in Canada exceeds purchase sentiment in the US and Australia, though intention varies by region. Respondents in BC (54%) and Quebec (51%) express the most interest in purchasing an EV, while respondents in the Prairies demonstrate the least (25%).
“80% of Canadians are willing to pay a premium and nearly two-thirds of consumers are willing to pay up to 20% more than they would for an internal combustion engine (ICE) vehicle.”
Similarly, cost concerns are beginning to fade. Upfront cost continues to be the biggest inhibitor to purchase (38%), though that number has lowered considerably from 66% last year. In fact, a growing number of Canadians say they’re willing to spend more to get what they want — 80% of Canadians are willing to pay a premium and nearly two-thirds of consumers are willing to pay up to 20% more than they would for an internal combustion engine (ICE) vehicle.
Meanwhile, concerns around limited charging infrastructure have risen in 2022. The lack of easily accessible charging stations along travel routes (36%) and the absence of adequate home and work charging infrastructure (27%) are growing as the top inhibitors to purchasing EVs.
Where is Canada leading?
Canada’s strengths and drivers include our energy ecosystem, favourable policy measures and fleet demand.
We have a mature energy ecosystem, generating 69% of electricity from renewables in 2021, compared to just 21% in the US, 29% in China and 40% in the UK. Companies such as Nuvve, Romeo Power and Nissan are venturing into vehicle-to-grid integration for battery EVs. Energy players such as IBI Group and SWTCH Energy have also collaborated to launch blockchain-based, vehicle-to-building prototypes in the country.
Fleet adoption in Canada is gaining traction due to the CAD$2.75 billion investment from the government for the electrification of the public transit system and buses. This investment is part of a CAD$14.9 billion fund dedicated to new public transportation projects. IKEA, as another example, is also aiming to electrify last-mile delivery in Canada in partnership with Lion Electric — furthering investments being made by private companies.
In terms of favourable policy measures, the Canadian government is supporting the EV ecosystem by investing CAD$880 million to deploy 65,000 charging stations by 2025. The government also announced an investment of CAD$2 billion in the federal budget to accelerate the production and processing of critical minerals for EV batteries. In addition, Canada’s internal combustion engine vehicle ban of 2035 across the country and its target to reach net zero by 2050 are also expected to further promote the adoption of EVs in the country.
How can industry, public and private sector collaboration generate immediate impact?
To capitalize on strong consumer interest in EVs, automakers and dealers need to rethink their dialogue with consumers. By developing new messages, relationships and tools, they will be able to bring the EV experience to life. Next, they need to remain at the front of mind for consumers – this will require a better understanding of the customer decision journey. OEMs and dealers need to develop new ways of making the first contact – be it digital or physical – and smoothly manage the transition between online and offline channels.
Further to this, automakers and dealers who are successful in Canada will need smart new finance packages and ownership models for their customers. These will be imperative to prevent the emergence of a damaging social divide, providing affordable EVs for both low- and high-income groups.
Lastly, the government, OEMs and charging providers should collaborate to develop national charging plans. Greater interoperability and transparency will help allay related fears and encourage adoption. OEMs also need to focus on repurposing and reconditioning EV battery packs as wheel-to-wheel sustainability calls for a holistic focus on the EV lifecycle.
“Environmental preferences are increasing while costs are lowering, creating a ripe opportunity for consumers looking to purchase EVs.”
In conclusion, despite the drop in consumer travel over the past two years, preferences for car ownership — especially EVs — are growing stronger. Environmental preferences are increasing while costs are lowering, creating a ripe opportunity for consumers looking to purchase EVs. In Canada, however, there is still a way to go before the necessary infrastructure is in place for us to achieve rapid adoption across the country.