The Future of Canada’s Auto Sector: How Ontario Can Lead in EVs

Imagine the unimaginable: three major US auto manufacturers are ordered to move their entire production from Ontario to the US. Such an extreme scenario could not have been imagined just last year, and yet, trade tensions and rampant economic nationalism are at the core of an increasingly belligerent and unpredictable set of US policy directives.

With “malice towards all and charity for none,” punitive tariffs directed at allies have become the preferred weapon of choice in the exercise of US trade policy. 

The US Commerce Secretary Lutnick has already delivered the “unimaginable” scenario, saying “North America is not going back to the free trade regime that existed for decades, and the US is no longer interested in Canadian-made cars.” 

The time has come to shake off the comforting narrative of a deeply integrated supply chain as a bulwark against a disruptive and highly protectionist US trade policy, entirely indifferent to the mutual benefits of trade. A “Damocles Sword” hangs over the Canada-US trade relationship with potential for massive disruption to Ontario’s auto sector. 

Canada’s Auto Sector Faces a Historic Turning Point

A new pathway for the future of the Canadian auto sector, anchored in Ontario, is to accept the inevitability of this disruptive force and, with urgency, chart a fundamentally different direction. The manufacturing architecture offered by the existing Big Three US automakers is on its way to becoming a historical anachronism. The internal combustion engine will no longer prevail in the transport sector, in Canada or globally. The curtain on the dominance of the existing US auto sector, wedded to gasoline, is closing fast. 

Globally, the momentum is irrevocably moving towards electric vehicles (EVs), intelligent connectivity, and the emergence of “transport-as-a-service” (TaaS) in urban contexts. The industry is at the cusp of an accelerated transition to electrification because, globally, automobile manufacturers have established cost competitiveness and large economic and environmental benefits of electrified transport. 

By the end of this year, global EV sales will reach twenty-two million units, up 25% from 2024, and EVs now account for 1 in 4 new vehicles sold globally. By 2030, EVs are projected to make up 40% of global auto sales under current policies. In 2025, China leads in EV production (14 million), far surpassing the combined production of gasoline and EV cars in the EU (9 million) and the US (1.7 million). China’s EV production is forecast to increase to 25 million by 2030, in sharp contrast to US production, which declined from 4 million in 2015 to 1.7 million. The EU is shifting rapidly towards electrification, while the US lags in both EV and gasoline-powered auto production, indicating an industry in decline. 

Tariffs, misguided as they are, will deliver the “coup de grace” to an aging, lumbering giant of an industry with its feet firmly planted in the past. The US’s lack of a competitive edge in EVs is notable and well recognized. It is now in Canada’s interest to shape a fundamental transformation and renew its auto sector. 

The Canadian Advantage in EV Batteries, AI, and Smart Vehicles

First, Canada holds significant reserves of nickel, lithium, and cobalt. Integrating mining, refining, and cell manufacturing can create a domestic battery supply chain while reducing reliance on imports that are vulnerable to tariffs or geopolitical risks.

Second, automakers, through public-private partnerships, can augment direct investments into assembly lines dedicated to the production of the future (EVs and plug-in hybrids), while retooling existing plants with flexible platforms.

Third, as the industry moves toward producing smart, connected vehicle capabilities, the automobile becomes a platform for integrating intelligent applications, autonomous driving systems, and data-driven services. Blackberry’s in-vehicle software platform, used in EVs to enhance optimization and cybersecurity, exemplifies this potential. 

Development of joint ventures and partnerships with Canada’s AI hubs in Toronto and Montreal will provide automakers with a competitive edge in intelligence, cybersecurity, and in-vehicle user experience. Beyond applications in Canada’s auto sector, these platforms are at the core of an intangible economy, delivering massive gains in productivity and new wealth creation.

Building Industry Clusters to Strengthen Canada’s Auto Sector

The threat of job losses in the existing auto sector must be converted into an opportunity for the growth of industrial clusters. Fostering cluster formation is a strategy for concentrating related firms, suppliers, talent, research institutions, and services in a narrow geographic area, providing a powerful signal to international investors and customers who are drawn to the intangible benefits that clusters deliver. A revitalized Canadian auto industry, through joint ventures with global entities, can become an export base for Europe, Asia, and South America. The strategy is a hedge against US policy swings in favour of diversification. 

Canada’s existing strengths in sustainable low-carbon energy generation, advanced manufacturing, and artificial intelligence are part of a digital transformation of new industries, allowing us to leverage a skilled workforce, abundant natural resources, and a strong research ecosystem. An expanded value chain from R&D to design and smart manufacturing will deliver more value to Canada, rather than us continuing to be captive to low-margin assembly-line production of unprocessed raw materials. 

A Smarter Future for Canada’s Auto Sector

If governments can provide policy certainty, a compelling response to the threat of massive disruption in the auto sector is a vision of the industry evolving from traditional assembly-line operations into a technologically advanced, low-carbon mobility ecosystem.

strategic necessity for Canada to decouple its automotive industry from shifting U.S. trade policies by embracing a domestic, technology-driven future.