Canada’s ambitious electric vehicle (EV) manufacturing strategy, touted as a generational opportunity for economic growth and environmental leadership, has spectacularly failed. The federal and Quebec governments’ $4.6-billion investment in Northvolt, a Swedish EV battery manufacturer, has ended in bankruptcy just two years after the initial $7-billion announcement. Quebec’s $270-million investment in Northvolt’s parent company is now considered ‘lost.’ The head of Canada’s Building Trades Unions criticized the subsidizing of foreign workers building the EV battery plant in Windsor, Ontario, calling it ‘a slap in the face’ to Canadian taxpayers.
The strategy appears to be a $57-billion politically driven initiative disconnected from economic realities. Despite promises of job creation, the reality is that modern EV and automotive factories rely heavily on automation and robotics, with only 7% of a car’s value going to labor. Foreign firms like Volkswagen and Stellantis are exempt from paying taxes on Canadian taxpayer-financed investments, while Canadian companies continue to pay taxes without receiving similar subsidies. This disparity incentivizes Canadian businesses like Electrovaya to expand in the U.S. rather than Canada.
The Economic Reality
In today’s innovation economy, foreign direct investment (FDI) benefits the owners of intellectual property (IP) embedded in the technology, not those who implement it. Canada previously owned EV technology developed through publicly funded research at Dalhousie University but lost control of it to foreign firms. Unlike traditional production-based economies where FDI brought technology, expertise, and jobs, FDI in the innovation economy is extractive, draining Canada’s resources.
Missed Opportunities and Future Directions
Canada’s EV strategy overlooked significant geopolitical and technological shifts. China’s BYD has risen to become a leading EV company by investing $38-billion in strategic patent filings and lower-cost battery technology. In contrast, Canada’s nearly $60-billion commitment over two years has yielded no ownership, minimal control, and fewer than 10,000 jobs that are already being automated. The current approach to counter U.S. automotive tariffs by handing out up to $8-billion in countertariffs to foreign-owned automakers is likely to fail, continuing Canada’s disastrous non-sovereign strategy.
