Terence Corcoran: Is a plan to build an all-Canadian EV the key to our auto industry's future?
With no federal budget in sight there is no way of knowing which of the Liberal government's grand economic platform strategies and major government interventions are still on Prime Minister Mark Carney's must-do list. The only item on the official agenda at the moment is a July 1 reduction in the middle-class tax rate from 15 to 14 per cent, a move that will cost the government about $5 billion this year and raise the 2025-26 deficit closer to $50 billion.
The deficit could soar in coming months and years, depending on the trajectory of global economic conditions and on whether Carney appears at his desk in the PMO to sign other pre-budget spending orders. On reflection, maybe it's a good thing that the government has decided to postpone budget delivery until the fall. While it would be useful to have an accurate federal fiscal outlook today, the last thing we need now is one of Ottawa's ritual 500-page tax, borrow and spend extravaganzas.
Canadians can be grateful that as the United States charges uncertainly into a probable fiscal mess, Canada can drift through the summer giving careful second thought to some of the Liberal expansions of federal spending. Do we really need and want a $5-billion 'trade diversifications corridors fund' or a $3-billion annual Build Canada Homes plan, or a $2-billion plan to build an 'auto industry strategic response fund' as part of a plan to 'leverage government funding to prioritize and procure Canadian-built vehicles, catalyzing domestic investment to grow the Canadian auto industry.'
The Canadian auto industry dreamscape is a big one that should be subjected to careful study before adding new initiatives to a national industrial strategy that is already off the road. As recent announcements from major auto companies (Honda, Stellantis) indicate, the global auto market is in a state of dramatic upheaval and Canada is in no position to be investing the dozens of billions already committed to a market filled with uncertainty.
Some say Canada needs a dramatic shift in its national approach to the transitioning global auto industry, one that involves creating a Canadian-owned model to produce new made-in-Canada automobiles. One of the leaders of the make-it-in-Canada movement is Flavio Volpe, head of Canada's Automotive Parts Manufacturers' Association (APMA). For more than half a decade, the APMA under Volpe has been working on Project Arrow, a model of a potential fully Canadian EV designed and manufactured in Canada. Volpe told the National Observer earlier this month that it is time 'for a big rethink of the auto sector canon. We can't continue to think conventionally.' With Project Arrow, he added, 'Canada shows it has the technology and the people to do an 'all-Canadian' car.'
Volpe said the Arrow is a 'platform and showcase' that contains 25 Canadian EV technologies, innovative drivetrains, 3D-printed chassis and state-of-the-art navigation systems. Whether the Arrow lives up to all the hype from APMA's 400 parts manufacturers is open to question.
Federal Finance Minister François-Philippe Champagne has in the past supported the Arrow. Speaking as innovation minister prior to a 2023 Arrow promo tour to Las Vegas, Champagne said, 'Project Arrow is a shining example of what Canadian talent can accomplish. We have all the technical know-how and people required to do this successfully.'
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So far, however, the Arrow lacks momentum and faces major competitive realities. The target market price of an Arrow is said to be C$35,000, low by current EV standards in Canada but not by Made-in-China standards, where prices run to C$20,000 or lower. Would Canada continue to need 100 per cent tariffs on Chinese autos? Which is one reason Volpe told the Globe and Mail earlier this week that he would like Ottawa, the provinces and industry to modestly fund a 'feasibility study' into the possibility of getting a Canadian-owned EV manufacturing operation up and running. Such a study, he said, would cost somewhere between $5 million and $20 million. OK. Good idea. Let's do a $20-million study before we bring in a budget with a multibillion-dollar plan to create a new Canadian auto company. We should do that more often.
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