Business
Canada’s risky and misguided bet on EV battery manufacturing

From the Macdonald Laurier Institute
By Tom McCaffrey and Denaige McDonnell for Inside Policy
By investing $52.5 billion in a handful of foreign-controlled companies, the government has failed to create a sustainable, long-term economic advantage. Instead of fostering innovation and building a robust, homegrown supply chain, Canada has committed itself to an outdated model of industrial policy that relies on foreign entities and low-value manufacturing jobs.
Two years ago, Canada’s minister of natural resources urged Canadians “to fully seize” the economic opportunity presented by the country’s abundant critical minerals.
“We must ensure that value is added to the entire supply chain, including exploration, extraction, intermediate processing, advanced manufacturing, and recycling,” Jonathan Wilkinson stated. “We must create the necessary conditions for Canadian companies to grow, scale-up, and expand globally in markets that depend on critical minerals.”
Two years later, the Canadian government has gone all-in with a $52.5 billion dollar bet on EV battery manufacturing in Ontario and Quebec. The decision goes against the recommendations of industry specialists and the government’s own departments responsible for strategic development who advised officials to go slow, steady, and think full supply chain development when targeting incentives.
Why didn’t the politicians listen?
Ottawa’s risky bet on EV battery manufacturing
By 2033, the Parliamentary Budget Officer (PBO) estimates three recent Canadian Government EV battery manufacturing subsidies will cost the country a total $37.7 billion dollars. The Northvolt, Volkswagen, Stellantis-LGES manufacturing facilities are estimated to take 15 years to pay back Canadian taxpayers.
The repayment estimate is 6 years longer than the government originally estimated because the PBO has now used the manufacturers’ production rate estimations, a more conservative number, than the originally used full production rates. In total, the national investment across the full value chain of EV battery manufacturing equates to $52.5 billion into just 13 companies.
The Canadian government is betting big on EVs, but not by investing in innovation, intellectual property, or Canadian technology. It is betting the farm on foreign entities delivering 8,500 manufacturing jobs. Capital investment for the purpose of growth in labour productivity isn’t a new strategy and it can be effective, but at $4 million per job the likelihood of return on investment is low.
Could the Bet Pay Off?
The global EV battery market is expected to surge over the next 10 years from US$132.6 billion in 2023 to US$508.8 by 2033. So far, growth has been slower than expected, and some major players, like Tesla, will be challenged to meet their sales volumes from last year according to analysts – but basing an opinion on a single year of car sales is not wise.
The truth is car manufacturing in Canada is important to our GDP ($14.6 billion) and to jobs (125,000). It is also true that Canada has lost 50 per cent of its market share in manufacturing of cars ($8 billion in 2000 to $4 billion in 2022), but it has maintained it market share in motor vehicle parts ($9 billion).
Canada appears to be betting that it can maintain it’s position in the car automotive industry rather than cementing its place in the battery metals and manufacturing value chain. But is this wager wise?
Sustainable policy development
Governments can encourage economic and industrial development in several ways. Policy-makers can set efficient regulations and approval mechanisms; create frameworks that build a bridge between government and the private sector; support the development of skilled labour and innovation ecosystems; enable direct collaboration and procurement mechanisms between industry, academia, innovation ecosystems, and government; and share a clear vision and pathway for industrial growth.
Governments can also use subsidies and tax credits to create market share, but there is growing concern that using these methods to create or protect markets will cause more harm than opportunity in developing countries. These kinds of investments risk triggering international protectionism and geopolitical trade-offs as nations turn inward rather than collaborating for development.
What’s needed is a sustainable policy approach – one that influences and benefits the largest subset of market outcomes, including start-up development, foreign direct investment, technology development, technology adoption, investment attraction, the creation of circular economy value chains, and more.
Ottawa’s misguided approach to economic investment
In the EV world, a fully integrated supply chain that includes mining, chemical processing, battery production, and recycling is critical. The battery value chain road map published by Innovation, Science and Economic Development (ISED) Canada, and the Canadian Critical Minerals Strategy published by Natural Resources Canada (NRC) both call for government to develop the full supply chain.
In 2021, a standing committee advised how best to develop the full supply chain. That same year Clean Energy Canada wrote a report on how Canada could build the domestic battery industry across the country, and in 2022 another full suite of associations including the Battery Metals Association, Energy Futures Lab, Transition Accelerator, and Accelerate ZEV developed a roadmap to develop Canada’s battery value chain.
The Canadian industrial policies being used to create the EV supply chain are a mix of production subsidies, investment tax credits, foregone corporate income tax revenue, construction capital expenses, and other monetary supports. Though large, the $52.5 billion investment ignores key aspects of the upstream supply chain (mining, refining, etc.) that would allow us to reap full value from EV battery production. Worse, it comes at a time when automakers are pulling back from EV investments due to lower than expected demands, making the investment increasingly risky given changing market conditions.
By flying in the face of the very industries it supports and specialists it employs, it raises the question: why is Canadian government failing to follow its own strategy? Why choose to support an undeveloped strategy that banks on foreign investment and manufacturing jobs when experts across Canada’s supply chain, and two government departments, had a fulsome and balanced approach to supply chain development? Why shun a balanced approach to government investment focused on building out the entire supply chain?
Where Canada continues to go astray
Canada’s investment strategies have long been plagued by short-term thinking, favouring politically motivated quick wins over sustainable, long-term value creation. The government’s $52.5 billion bet on EV battery manufacturing is a prime example—subsidizing foreign companies while neglecting the development of critical upstream supply chains and domestic innovation. This approach leaves Canada reliant on international markets for critical materials, with little to show in terms of intellectual property or R&D growth.
By ignoring expert advice and focusing on politically strategic regions, Canada misses opportunities to build fully integrated industries across the country, ultimately failing to support homegrown solutions that could foster long-term economic resilience. Instead, Canada continues to prioritize high-risk, low-return investments, with little consideration for the foundational elements needed for a competitive, innovative economy.
Research on industrial policy shows countries are better served when governments focus on delivering well-designed policies aimed at improving general business environments than attempting to artificially create new markets. This is why industrial policies went out of vogue more than two decades ago.
It raises the question – are there examples of successful government interventions that seeded new sectors?
How the Asia-Pacific region cornered the semiconductor market
In the 1980s both the South Korea and Taiwanese governments made strategic early investments in companies that were well positioned to accelerate growth of the semiconductor sector. Today, the Asia-Pacific region is dominating the global market share of what has become a US$620 billion industry. Both South Korea and Taiwan were investing in the semiconductor industry in the 1960s. From a policy perspective, the two countries took similar approaches and focused their state-directed capital allocations to companies like Samsung LG and the Taiwan Semiconductor Manufacturing Company (TSMC). Through strong government support, both countries created technology institutes, centres for research and development, infrastructure and tax incentives, tax holidays, and interest-free loans.
Those investments helped to seed highly successful sectors in each country. Both countries continue to invest tax dollars back into the sector to help maintain the competitive advantages they helped to foster. South Korea’s semiconductor industry received a $US19 billion show of support from its government earlier this year to create a comprehensive support program spanning financial, research and development, and infrastructure support. The investment is part of a decades long commitment to the semiconductor industry which now accounts for nearly 20 per cent of total exports and plays a leading role in the South Korean economy. In Taiwan, the semiconductor sector is a powerhouse that accounts for 15 per cent of the national GDP and ranks number one globally for wafer foundry and packaging and testing, and number two for integrated circuit (IC) design.
These successes were largely enabled by government-controlled economies and early, and ongoing support to industry. This support did not waiver for decades. It is unlikely that Canada will be able to maintain this level of stability and government focus.
Other factors like access to cheap labour, willingness to specialize, commitment to product quality, and streamlined manufacturing played an important role.
Policy Challenges: Economic and Political Complexities
The challenge of creating successful industrial policy is that it is complex, long-term, has uncertain benefits, and requires government departments to have deep industry expertise. Experts worry that the current federal government simply isn’t up to the task.
In 2023, more than 2,500 new industrial policies were introduced globally, and more than 70 per cent were subsidies, tariffs, or import/export restrictions. These policies create trade distortion more often than they lead to market creation. Trade distortion can unfairly tilt the playing field in favour of domestic industries, often at the expense of foreign competitors.
With Canada’s recent industrial policy on EV battery manufacturing, we are choosing to distort our own economy.
Industrial policies strain global trade and economic relations. Such policies can have wide-ranging effects on both the implementing country and the global economy. They also appear protectionist even to allied nations.
How can Canada get it right?
Many of Canada’s mature sectors have enjoyed government support or protection at some point in our nation’s history. Past Canadian governments have protected the industries of their time, be it agriculture, steel manufacturing, pulp and paper, aerospace, and even defence.
There are recent examples of small sums of government dollars creating big wins for Canada’s homegrown innovation and sustainability economy.
At the provincial level, one organization that stands out is Emissions Reduction Alberta (ERA), an arms-length provincial organization that has weather several changes in government in its 15 years. ERA uses Technology Innovation and Emissions Reduction dollars to invest in late-stage sustainable technology. To date, the organization has invested almost $1 billion dollars into 277 technologies at a ratio of 8 industry dollars to 1 ERA dollar.
Federally, Prairies Economic Development Canada (PrairiesCan) is an example of a highly innovative approach to economic development. It has invested millions of dollars in repayable interest-free loans and regional innovation ecosystem supports. Ecosystem supports include accelerators and incubators that have exponentially increased the success of start ups and mature firms alike.
PrairiesCan and ERA operate on annual budgets of $300 million and $50–200 million, respectively. These dollars employ various types of expertise and invest across large swaths of the mature and new economy. They look across hundreds of organizations, understand the regional context, varying business dynamics and make strategic investments.
If government persists in committing tax dollars to the growth of the economy, then it should draw inspiration from these kinds of organizations.
Do Governments Make Effective Market Makers?
Canadians are rightly skeptical about Ottawa’s $52.5 billion bet on EV battery manufacturing.
Ottawa is rolling the dice that it will make Canada a leader in battery supply chains. It’s one of the largest industrial policy bets we have seen in our lifetimes. However, industrial policy analysts are warning about the risk of misallocation of funds.
Expert critics say Canada’s economy is too reliant on government-driven innovation policies. These researchers believe that competition creates markets, and that the government should commit to focusing on reducing policy and regulatory barriers. Many still believe in the capitalist ethos – that fostering a cultural and economic environment that naturally supports risk-taking and competition is the best route to success. The same people would note that the natural process of business turnover is essential for innovation and growth.
Conclusion
Canada’s current strategy of picking winners through massive, targeted subsidies is not just risky – it’s short-sighted. By investing $52.5 billion in a handful of foreign-controlled companies, the government has failed to create a sustainable, long-term economic advantage. Instead of fostering innovation and building a robust, homegrown supply chain, Canada has committed itself to an outdated model of industrial policy that relies on foreign entities and low-value manufacturing jobs. This approach ignores the foundational elements that drive true competitiveness – innovation, R&D, and full value chain development.
What Canada needs is a fundamental shift in its investment strategy. Instead of betting the farm on politically motivated, high-risk subsidies, the government should focus on strengthening ecosystems that support innovation, entrepreneurship, and domestic industry. Investments should be directed at building a fully integrated supply chain that includes mining, refining, and manufacturing, while supporting Canadian companies that will keep intellectual property and jobs at home.
If Canada continues down the current path, it risks becoming a player in someone else’s game, perpetually reliant on foreign companies and global markets. The country should seize this moment to redefine its complete industrial strategy, making bold investments in innovation and infrastructure that can secure economic resilience for generations to come. Without this shift, Canada’s $52.5 billion bet may very well be remembered as one of the biggest missed opportunities in modern economic history.
Tom McCaffery, M.B.A., is the CEO and managing director of Two River Advisory and former executive director of policy and engagement for Emissions Reduction Alberta.
Denaige McDonnell, Ph.D., is an accomplished business management strategist and CEO of People Risk Management, specializing in organizational systems, culture, and psychological safety.
2025 Federal Election
As PM Poilievre would cancel summer holidays for MP’s so Ottawa can finally get back to work

From Conservative Party Communications
In the first 100 days, a new Conservative government will pass 3 laws:
1. Affordability For a Change Act—cutting spending, income tax, sales tax off homes
2. Safety For a Change Act to lock up criminals
3. Bring Home Jobs Act—that repeals C-69, sets up 6 month permit turnarounds for new projects
No summer holiday til they pass!
Conservative Leader Pierre Poilievre announced today that as Prime Minister he will cancel the summer holiday for Ottawa politicians and introduce three pieces of legislation to make life affordable, stop crime, and unleash our economy to bring back powerful paycheques. Because change can’t wait.
A new Conservative government will kickstart the plan to undo the damage of the Lost Liberal Decade and restore the promise of Canada with a comprehensive legislative agenda to reverse the worst Trudeau laws and cut the cost of living, crack down on crime, and unleash the Canadian economy with ‘100 Days of Change.’ Parliament will not rise until all three bills are law and Canadians get the change they voted for.
“After three Liberal terms, Canadians want change now,” said Poilievre. “My plan for ‘100 Days of Change’ will deliver that change. A new Conservative government will immediately get to work, and we will not stop until we have delivered lower costs, safer streets, and bigger paycheques.”
The ’100 Days of Change’ will include three pieces of legislation:
The Affordability–For a Change Act
Will lower food prices, build more homes, and bring back affordability for Canadians by:
- Cutting income taxes by 15%. The average worker will keep an extra $900 each year, while dual-income families will keep $1,800 more annually.
- Axing the federal sales tax on new homes up to $1.3 million. Combined with a plan to incentivize cities to lower development charges, this will save homebuyers $100,000 on new homes.
- Axing the federal sales tax on new Canadian cars to protect auto workers’ jobs and save Canadians money, and challenge provinces to do the same.
- Axing the carbon tax in full. Repeal the entire carbon tax law, including the federal industrial carbon tax backstop, to restore our industrial base and take back control of our economy from the Americans.
- Scrapping Liberal fuel regulations and electricity taxes to lower the cost of heating, gas, and fuel.
- Letting working seniors earn up to $34,000 tax-free.
- Axing the escalator tax on alcohol and reset the excise duty rates to those in effect before the escalator was passed.
- Scrapping the plastics ban and ending the planned food packaging tax on fresh produce that will drive up grocery costs by up to 30%.
We will also:
- Identify 15% of federal buildings and lands to sell for housing in Canadian cities.
The Safe Streets–For a Change Act
Will end the Liberal violent crime wave by:
- Repealing all the Liberal laws that caused the violent crime wave, including catch-and-release Bill C-75, which lets rampant criminals go free within hours of their arrest.
- Introducing a “three strikes, you’re out” rule. After three serious offences, offenders will face mandatory minimum 10-year prison sentences with no bail, parole, house arrest, or probation.
- Imposing life sentences for fentanyl trafficking, illegal gun trafficking, and human trafficking. For too long, radical Liberals have let crime spiral out of control—Canada will no longer be a haven for criminals.
- Stopping auto theft, extortion, fraud, and arson with new minimum penalties, no house arrest, and a new more serious offence for organized theft.
- Give police the power to end tent cities.
- Bringing in tougher penalties and a new law to crack down on Intimate Partner Violence.
- Restoring consecutive sentences for multiple murderers, so the worst mass murderers are never let back on our streets.
The Bring Home Jobs–For a Change Act
This Act will be rocket fuel for our economy. We will unleash Canada’s vast resource wealth, bring back investment, and create powerful paycheques for workers so we can stand on our own feet and stand up to Trump from a position of strength, by:
- Repealing the Liberal ‘No Development Law’, C-69 and Bill C-48, lifting the cap on Canadian energy to get major projects built, unlock our resources, and start selling Canadian energy to the world again.
- Bringing in the Canada First Reinvestment Tax Cut to reward Canadians who reinvest their earnings back into our country, unlocking billions for home building, manufacturing, and tools, training and technology to boost productivity for Canadian workers.
- Creating a One-Stop-Shop to safely and rapidly approve resource projects, with one simple application and one environmental review within one year.
Poilievre will also:
- Call President Trump to end the damaging and unjustified tariffs and accelerate negotiations to replace CUSMA with a new deal on trade and security. We need certainty—not chaos, but Conservatives will never compromise on our sovereignty and security.
- Get Phase 2 of LNG Canada built to double the project’s natural gas production.
- Accelerate at least nine other projects currently snarled in Liberal red tape to get workers working and Canada building again.
“After the Lost Liberal Decade of rising costs and crime and a falling economy under America’s thumb, we cannot afford a fourth Liberal term,” said Poilievre. “We need real change, and that is what Conservatives will bring in the first 100 days of a new government. A new Conservative government will get to work on Day 1 and we won’t stop until we have delivered the change we promised, the change Canadians deserve, the change Canadians voted for.”
Automotive
Canadians’ Interest in Buying an EV Falls for Third Year in a Row

From Energy Now
Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index
Fewer Canadians are considering buying an electric vehicle, marking the third year in a row interest has dropped despite lower EV prices, a survey from AutoTrader shows.
Forty-two per cent of survey respondents say they’re considering an EV as their next vehicle, down from 46 per cent last year. In 2022, 68 per cent said they would consider buying an EV.
Meanwhile, 29 per cent of respondents say they would exclusively consider buying an EV — a significant drop from 40 per cent last year.
The report, which surveyed 1,801 people on the AutoTrader website, shows drivers are concerned about reduced government incentives, a lack of infrastructure and long-term costs despite falling prices.
Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index.
The survey, conducted between Feb. 13 and March 12, shows 68 per cent of non-EV owners say government incentives could influence their decision, while a little over half say incentives increase their confidence in buying an EV.
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