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Kelly McParland: Justin Trudeau's naive EV plan hands the keys to China
Flooding the world with electric vehicles that Beijing manufactures using power produced by burning coal hardly helps to fight climate change
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First off, let’s be clear that I have nothing against electric vehicles. Never mind saving the planet, who wants to pull up to a grimy gas pump on a howling winter day and risk hypothermia for the privilege of paying whatever ransom oil companies are demanding for another tankful of “dirty” fuel?
So fine, electricity is good. But let’s be serious. Canada is just the latest country to set a firm date for the future to arrive. In our case it’s 2035, when gas guzzlers are out. No high-test for you! It will be a new dawn, an electric vehicle (EV) world. Ready or not, here we come.
Or what? Canada controls precisely zero major car manufacturers. We build and buy cars from companies based in other countries. Should they fail to solve the myriad issues still confronting the EV market, a future Canadian government can do nothing about it.
And there are problems aplenty.
Among auto giants, General Motors has been among the truest of believers. For chief executive Mary Barra, EV constitutes the first two letters in evangelism. Don’t let doubt get in the way, just put your faith in faith.
But there’s trouble in Motor City. GM has backed off a pledge to sell 400,000 electric vehicles by the middle of 2024. It’s also abandoning a US$5-billion joint plan with Honda Motors to develop more affordable EVs. It’s delaying the start of production on electric trucks at a Michigan plant, and bought out half its 2,000 Buick dealerships after they declined to make the investments needed for an all-EV future. GM suspended operations at its self-driving Cruise unit and is diverting US$10 billion to share buybacks to appease nervous investors.
Meanwhile, EV sales are rising, but not at the pace anticipated, resulting in huge backlogs of unsold cars. Ford is either chopping or delaying US$12 billion in EV investments and scaling back a planned battery plant in Michigan. USA Today reported that EV inventories were up 506 per cent from a year ago due to high prices, slowing demand, range anxiety, lack of charging stations and buyers’ growing awareness that EV repair costs can be significantly higher than those for fossil-fuelled cars.
U.S. reports show demand heavily concentrated in a few regions, generally well-off populations in urban areas. According to CarGurus Inc., while prices are falling thanks to excess supply, the average new EV still costs 28 per cent more than an internal-combustion rival, and will sit on the lot 24 per cent longer than a year ago. Even Tesla, the overwhelming market leader, felt the need to slash vehicle prices to keep them eligible for government subsidies.
While the auto giants can retrench, the little guys are getting creamed. A Wall Street Journal analysis of EV startups found that of 43 companies launched between 2020 and 2022, five have gone bust, and at least 18 others are likely to run out of money by the end of 2024. The remainder includes firms strictly focused on the luxury market, well beyond the reach of most buyers.
For reasons left unexplained, Justin Trudeau’s Liberals chose this moment to unveil Ottawa’s new Electric Vehicle Availability Standard, mandating that, as of 2035, all new vehicles sold in Canada must be electric. Only about one Canadian in 10 now owns an electric vehicle, amid signs of waning interest. That didn’t stop Environment Minister Steven Guilbeault from insisting that if someone builds them, buyers will come. Who knows, he may be right, but if so there’s a real chance the factory producing the cars and the batteries that run them will be from a plant located or controlled somewhere in China.
The European Union is so worried about Beijing’s determined push into its vital car market that it’s launching a probe into “huge state subsidies” it says give Chinese models an unfair advantage. Tariffs may follow. The U.S. imposed a 27.5 per cent levy under the Trump administration and is considering an increase under President Joe Biden. China’s SAIC Motors makes a mini-model (in a joint venture with GM) that sells in China for about C$5,500, about a quarter the cost of most EU electrics. The cheapest alternative EV in Britain, China’s largest foreign market, costs about C$13,000 with a top speed of 45 km/h. Canada’s cheapest EVs retail around C$40,000.
In addition to cheap labour and manufacturing capacity, China controls much of the cobalt and rare earth minerals essential to producing EV batteries.
About 70 per cent of the world’s cobalt is mined in the Democratic Republic of Congo, one of the globe’s poorest, most corrupt and unstable countries. Of 19 Congo cobalt operations, 15 are owned in whole or part by Chinese powers. So harsh are conditions that mining operations sometimes require military protection. Beijing works hard to protect and expand its dominance, recently imposing a ban on the export of technology for processing rare earth minerals, another vital battery input it dominates.
It’s no secret that China aims to use technology and commercial access to gain leverage over democracies and western competitors. Dominance in the auto industry would greatly further that goal. A 2023 CSIS report warned that gains for China in global EV markets represents a threat to jobs and industrial competitiveness in Europe and North America. “Increased dependencies on China carry risks,” it noted, given China’s record of using its economic clout “to punish countries that challenge its position in international affairs.” As well, China is by far the world’s biggest greenhouse gas emitter and continues to burn vast amounts of coal. Data group Global Energy Monitor calculates China is building six times as many new coal plants as the rest of the world combined.
Flooding the world with EVs produced by burning coal hardly helps fight climate change. Maybe it won’t happen — maybe Europe or the U.S. or even Canada will find new sources of vital minerals and develop the means and technology (not to mention environmental approval) to extract them competitively with China’s vast low-wage population. Maybe prices can be lowered so people with lower incomes can also buy vehicles after 2035. Maybe someone will sort out how millions of people in high-rise condo towers and apartment blocks will all be able to power their vehicles without individual power stations.
In any case, the Trudeau government says it must happen within 12 years. If it doesn’t, we have no known Plan B. And should the new dawn prove to be beckoning just beyond a cliff? The Liberals are telling us to just have faith in faith.
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