Seven days after U.S. President Joe Biden signed the Inflation Discount Act (IRA) into legislation, Canada’s Justin Trudeau hosted German Chancellor Olaf Scholz and executives from Mercedes-Benz and Volkswagen.
It was a suspiciously well-timed go to, although officers from each Germany-based automakers repeatedly poured chilly water on hypothesis that the battery supply-chain offers they signed with Ottawa on Aug. 23 had any connection to auto sector developments in Washington every week earlier. The accords, all three events insisted, had been months within the making.
Coincidence or not, Mercedes-Benz and Volkswagen — two automakers with no manufacturing footprint in Canada at the moment — have begun exploring battery supply-chain tie-ups in Canada on the exact second these may show most advantageous.
The laws that got here into impact in the USA on Aug. 16 contains an replace to the buyer electric-vehicle tax credit score. It now pins US $3,750 — half the $7,500 worth of the inducement — to automakers integrating into their EV batteries an escalating quantity of fabric from U.S. free-trade companions resembling Canada.
“The timing of this, proper after the adoption of the IRA, to me, it factors proper again to that $7,500 EV credit score,” mentioned Trent Mell, CEO of Toronto-based Electra Battery Supplies Corp.
The qualifying quantity of battery materials from U.S. buying and selling companions begins at 40 per cent in 2024 and climbs to 80 per cent by 2027.
As a result of most battery mineral refining is finished in China at the moment, “there’s simply no approach” most North American-made EVs will attain these eligibility targets with present provides, Mell mentioned.
“Individuals might be clamouring for infrastructure — not simply the mines however the processing,” Mell mentioned. The Germany-based automakers’ early collaboration offers with Ottawa will assist them get to the “entrance of the queue.”
Investments are but to be seen, however the recent curiosity in Canada proven by Mercedes-Benz and Volkswagen seems more likely to result in manufacturing footprints for the 2 automakers at a number of factors in Canada’s battery provide chain. Normal Motors and Stellantis have already dedicated to such tasks. And different automakers, these with and with out present stakes in Canada, are circling the nation’s giant deposits of lithium, nickel and different key battery elements.
Localizing battery-cell manufacturing in North America was a precedence for governments in Canada and the USA even earlier than the IRA was handed, mentioned Mitchell Smith, CEO of Vancouver-based World Power Metals Corp. and a member of the Battery Metals Affiliation of Canada’s board of administrators.
Now, with the U.S. laws offering added impetus for automotive and battery-cell firms to supply materials from North America, all indicators level to additional battery value-chain spending in Canada to come back, he mentioned.
“This can be a nice alternative for Canada to have the ability to push that chance ahead and develop the useful resource house, but additionally be a part of the manufacturing and refining.”
To get “as many tasks on-line as attainable,” he mentioned, the main focus now wants to show towards accelerating allowing processes and addressing different regulatory hurdles.
“Because the trade strikes from area of interest to mainstream, extra authorities involvement is definitely going to be wanted.”