Funding needed for Canada to grow processing capacity for electric vehicles

Government funding will be crucial if Canada wants to catch up in the electric vehicle sector, especially in metals processing, Canadian industry players told S&P Global Market Intelligence.

In a recent opinion piece, Canada's Minister of Natural Resources Seamus O'Regan and Pierre Gratton, president and CEO of the Mining Association of Canada, laid out a vision for the country's nascent electric vehicle manufacturing sector, pushing a Canada-first strategy.

"Here is what the future of mining looks like: critical minerals are extracted using electric equipment. Those raw materials are refined here in Canada, then assembled into batteries — in Canada. Those batteries then go into Canadian-made electric vehicles, completing the value chain," they wrote.

Canadian industry players lauded the high-level outlook in the opinion piece but said it would require significant public sector investment as Canada looks to compete with Europe and China: the former is pushing for electric vehicle manufacturing, while the latter already dominates battery manufacturing and processing key metals and minerals for electric vehicles.

Canada, which made electric vehicle manufacturing a centerpiece of policy as part of a wider push to decarbonize its economy, has a lot of catching up to do.

"We've got the mines. We've got the assembly plants. But we've got an entirely new supply chain," said Trent Mell, president and CEO of First Cobalt Corp., a Canadian startup that received government funding to develop a cobalt processing facility in Canada.

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In its federal budget released in April, Canada committed to a broad range of climate and environmental policies, including a C$5 billion allocation targeted over seven years for a "Net Zero Accelerator" program to expedite decarbonization initiatives and C$36.8 million over three years to fund research and development on processing and refining of critical minerals.

Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers' Association, pointed to the accelerator program as key to boosting Canada's competitiveness in auto manufacturing and, by extension, to metals processing.

"It's a challenge," Kingston said. "But we're in a good situation because Canada does have all the right ingredients."

Kingston noted automakers committed to making electric vehicles in Canada, but the outlook for the domestic supply of metals needed for electric vehicles was less certain. "The question is: how do we actually develop the upstream?" Kingston said.

It remains to be seen where funds from the government's accelerator program will flow, according to Kingston. "It's early days," Kingston said. "We're still waiting [on] the design of the program and the specific focus."

So far, federal government funding has been modest on the processing side of the equation. While Canada hosts significant deposits of lithium, rare earths and other metals that are crucial to electric vehicles, building new mines is never a quick nor simple affair, and processing materials to standards needed in specific applications such as lithium batteries is complex.

There has yet to be substantial government spending on metals processing, but that could change. Mell thinks the federal government recognizes that the processing side is critical to growing a more integrated electric vehicle supply chain.

In recent years, First Cobalt, along with other companies, was consulted by the government on industry issues. "It's been a lot of talk ... over the last year or two," Mell said, "but it does feel like we're getting close to some big announcements."