Canada Faces Uphill Battle to Get Electric Vehicle Rebate Waiver

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Local auto industry officials feel Canada should play long-term and not be afraid to use critical mineral leverage and trade dispute mechanisms if necessary to obtain an exemption from the threatening proposed US electric vehicle rebate requirements. with damaging the Canadian auto industry.

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The rebates, worth up to $ 12,500 per car, would only apply to electric vehicles made in US plants with a unionized workforce.

The Buy American bill was approved by the United States Congress on Friday and is now heading to the Senate for review.

Automate Canada President Shelley Fellows expressed concern over what US President Joe Biden witnessed at Thursday’s summit of North American leaders in which Prime Minister Justin Trudeau and Mexican President Andrés Manuel participated. López Obrador.

“It was so disappointing that there was no movement or open attitude on the part of the president,” said Fellow.

They have put us in a position that is really an internal process in the US.

“He really blew the Prime Minister after he flew to Detroit (on Wednesday) to redouble the importance of the electric vehicle subsidy.

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“However, I am one of those people who thinks that when you try to make a change, it takes a long time for successes to be made. This is going to take a while to move the needle. “

The fellows said the rebate program would have a devastating effect on the Canadian auto industry and the supporting supply chain. He said the impact would be worse than former President Donald Trump’s steel and aluminum tariffs.

“It is a disincentive for automakers to invest in Canada,” said Fellows.

“It would drain our industry and that has some real consequences.

“It would have an impact on employment, innovation and new investments in technology.”

The president of the Canadian Association of Mold Makers, Jeanine Lassaline-Berglund, said suppliers are closely watching these developments. He added that the uncertainty surrounding the auto industry in the past decade is one reason many in his organization have diversified enormously.

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“As you can imagine, all the producers supplying the automotive sector are watching this unfold,” said Lassaline-Berglund.

“It is important to remember that most of our members have diversified portfolios and may not be 100% dependent on the automotive business today, although a good group still has a high percentage of work in that sector.

“With the work that our government has done to navigate the CUSMA agreement, we are confident that they have put our country’s position on the table to US officials in the strongest possible way.”

The director of the Center for Automotive Research and Education, Peter Frize, fears that Canada has become embroiled in US domestic politics.

Biden’s Buy American platform was a mainstay of his presidential campaign and will not be easily diluted.

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“It is locked in a political process in the United States and there is not much we can do at the moment,” Frize said.

“Elections are coming (in the United States) and each side has its own agenda. They have put us in a position that is really an internal process in the US. “

One ray of hope is that observers feel that there are many American domestic interests that will eventually coalesce around the position of the Canadian and Mexican governments.

For example, vehicles made in the US by Toyota, Honda, Volkswagen and Tesla would not qualify for the rebate since their plants are not affiliated with unions.

With many plants now located in entitlement states in the southeastern United States, Fellows feels regional politics will come into play.

“If I’m the governor in one of those states, I’m not happy about this,” Fellows said. “Those companies that are not eligible for rebates, I hope they create more public scandal.

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“They have made massive investments in the US and this sends them a very negative message.”

Frize said the industry’s tightly integrated North American supply chain will also be a very challenging obstacle to enforcement.

“The supply chain is tangled and it is difficult to determine what is American or Canadian content because the parts come and go across the border,” Frize said.

“It is not practical to untangle it quickly. That would take several years.

“The voice of the industry itself will be important. I’m sure they are making their side of the story known to American officials. “

While persuasion is the preferred tactic, industry observers agree that Canada must be ready to use whatever influence it has.

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Both federal and provincial government officials have sent letters to Washington making it clear that Canada will activate trade dispute mechanisms.

Americans have also been reminded of their desire for a North American supply chain to access critical Canadian minerals needed for electric batteries.

“If they comply with this tax incentive, Canadians will demand that we react equally,” Ontario Economic Development Minister Vic Fedeli said when asked this week whether access to critical minerals should be a bargaining chip in the dispute. .

“Breaking a section of NAFTA 2.0 that was critical for both governments to sign, which could deteriorate and become a serious trade problem. This is a big problem and it also has consequences for US jobs. “

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