Auto industry faces dramatic risks from the global transition to electric vehicles and it could soon start impacting jobs, according to a new report

Kevin Martine, Financial Post
February 14, 2020

Canada’s gas-powered auto industry faces dramatic risks from the global transition to electric vehicles and it could soon start impacting jobs, according to a new report.

“There’s been a lot of talk about the production of electric cars. We think that the tipping point is 2025,” said report co-author Peter Hatges, an automotive analyst with management consultancy KPMG.

Canada is behind other countries on electric vehicle manufacturing, accounting for only 0.4 per cent of global electric vehicle production, Hatges said.

After 2025, Hatges said, companies that rely on the internal combustion engine could begin to decline due to competition from electric vehicles, which would start affecting jobs from manufacturers to gas stations. The auto industry directly employs 125,000, while another 400,000 work in in auto services and dealerships, according to government data.

Currently, there are no solely electric vehicles produced in Canada, although some hybrid models are built here such as the Chrysler Pacifica in Windsor, Ont., or the Toyota RAV-4 in Woodstock, Ont.

However, some experts caution the transition to electric vehicles is still years down the road, and will take decades to take full effect.

“There are so few made in the world that I’m not sure how anyone can be ahead of the curve,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc, an industry consultancy.

Electric vehicles make up just two per cent of global car sales, and cars built today will still be on the road for decades, DesRosier said.

“The vehicles bought this year won’t disappear for another 30 years,” DesRosier said. “That’s how long vehicles last today.”

DesRosier said he expects gas-fuelled cars to remain a significant factor in new sales for the next few decades, and that automakers have time to adapt.

“In the next decade, there is very unlikely to be any noticeable negative impact on the global auto sector,” DesRosiers said.

Canadian governments have been encouraging the use of electric vehicles, as part of an overarching plan to cut the country’s carbon emissions. The Quebec government has pledged to have zero-emissions by 2050 and British Columbia also plans to ensure cars that run on the internal combustion engine are off the road by 2040. The federal government has pledged more than $300 million in boosting the sector.

Domestic sales made up only 2.2 per cent of the market in 2018, but that number is expected to rise.

For their part, Canadian manufacturers say they are prepared for any technological changes to come.

“The industry is ready,” said Flavio Volpe, president of the Auto Parts Manufacturers Association. “The only place in North America where a globally relevant automotive cluster intersects with a globally relevant IT cluster is Southwestern Ontario.”

Volpe highlighted domestic companies such as Dana TM4, a Quebec electric-motor firm, and Electrovaya, a Toronto-based electric battery supplier, as proof of the domestic industry’s potential.

Volpe also pointed to Project Arrow, a project launched by the APMA in January to develop a 100 per cent Canadian-made zero-emissions car. Volpe said Project Arrow will showcase the Canadian industry’s ability to design and produce next-generation vehicles.

To attract more investments into the industry, Ontario will also need to cut bureaucracy, Hatges said in the report.

“The province should continue to introduce accelerated approval pathways for developing the next generation of vehicles and thus, demonstrate its willingness to lead,” the KPMG auto analyst wrote in the report, adding that programs to connect automakers with researchers and get funding for innovation would also help.

Hatges also noted positively the technological capabilities of Canadian firms and their potential to attract new investment.

“I think Ontario has an educated workforce that is very much in line with the modernization of vehicles today,” he said.

But he had a stark prediction for those companies that do not start investing in zero-emissions cars soon.

“They’ll go bankrupt,” he said.

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