A barrage of bad news hit Canada’s ambitious plans to grow its electric vehicle (EV), battery and supply chain sectors in the latter half of 2024, but it's not all doom on the horizon. In fact, a number of major projects are completing, or continuing to move forward.

Investment into the EV supply chain has been a cornerstone of economic policy in recent years in Canada, receiving over $50 billion in federal and provincial support. The money has flowed into EV manufacturing and batteries, mainly to facilities located or planned for Quebec and Ontario.

Then, projects were delayed, partnerships abandoned, Northvolt declared bankruptcy in the U.S., and Quebec’s Lion Electric Company made major layoffs and entered a restructuring phase. E-One Moli pressed pause on its $1-billion battery factory in B.C., and Umicore hit the brakes on the construction of a $2.7-billion EV battery facility near Kingston, Ont.

Doubts were raised about the billions of dollars in spending, with the Macdonald-Laurier Institute calling it a “risky bet” which followed a “misguided approach”.

But not all the projects have come to a halt, and new ones are still sprouting up. Volkswagen’s PowerCo subsidiary is on track to open its St. Thomas, Ont. battery plant by 2027. General Motors signed a supply agreement for synthetic graphite with Norwegian company Vianode AS and is exploring Canada as a site for a new factory, as reported by Electric Autonomy. Canadian companies NEO Battery Materials Ltd. and Linamar in January have announced plans for EV-related developments in Ontario.

These are just some examples.

“I think that there’s just been exaggerated fears that EVs are just a thing in the past,” Danny Huh, senior vice-president of strategy and operations at NEO, said in an interview with Sustainable Biz Canada.

Technology transitions are rarely smooth

Canada is dealing with an auto industry experiencing a drastic energy transition, which accounts for some of the challenges, Clean Energy Canada’s vice-president of policy and strategy Rachel Doran, said in a separate interview.

EV adoption has been moving at a “predictable increase” but is “no longer skyrocketing”, which led companies to pause or cancel plans, she said. But project timelines have largely been pushed back, Doran observed, not entirely withdrawn.

Then there are the growing pains. Some of the companies that have made waves for the setbacks — Northvolt, Ford leaving its Becancour joint venture, Lion Electric — have plans for, or are based in Quebec. That province that does not have a history of automaking like Ontario.

“Quebec had no auto industry when we looked earlier this decade. So it's trying to play into a space that's emerging, and because it's emerging, it may be unpredictable,” Doran said.

Law firm Dentons suggests Canada needs more investment into its EV supply chain to catch up to Asian peers that have been heavily funding their own industries in “an international industrial race”.

The demand for batteries and critical minerals will remain an “area of great opportunity” as the world gradually shifts to electricity from fossil fuels, Doran explained, even if some companies will not succeed.

Canada still has major advantages as it continues efforts to grow the battery manufacturing sector, she said. The country earned the No.1 placement on BloombergNEF’s list of countries most well-positioned in the global lithium-ion battery supply chain.

“I’m not sure that we should ever have thought the energy transition was gonna be that smooth or that uniform,” Doran said, as technology disruptions have historically been subject to significant peaks and valleys.

NEO is bucking the fears

One company which has avoided any serious pratfalls, at least so far, is NEO.

The firm plans to manufacture silicon anodes to enhance the capacity of a battery, a feature that sets it apart from many others in the industry. That distinction has helped NEO, Huh said, as he argues silicon anodes are the only practical material in the short- and medium-term to increase battery capacity.

Thus, this unique niche means companies like NEO have continued to attract funding “even during the EV chasm.”

Though he agrees EV growth has slowed, Huh said the entry of more affordable EVs will spur growth. NEO expects EV adoption to continue, and expects “explosive growth” by end of 2025 or the start of 2026.

How U.S. trade barriers affect the battery industry

If that comes to pass, it will occur despite the latest issue to hit the sustainability sector as a whole: U.S. President Donald Trump. His threat of heavy tariffs on Canadian goods and opposition to the EV industry complicates plans.

Sales to the U.S. would be pricier and EV adoption rates may decelerate, putting the economics in question.

Emphasizing national security and energy independence could be one way to maintain support.

Ajay Kochhar, the CEO of Toronto-based Li-Cycle Holdings Corp., a battery recycling company with U.S. facilities, wrote recently that the U.S. president’s executive order, Unleashing American Energy, will need critical minerals to be carried out. Thus, investing in “domestic battery supply chains is essential to advancing America’s national security and energy independence goals.”

Critical minerals, he continued, “are essential to America’s national security and key to reducing the country’s reliance on foreign entities for its energy needs.”

Saad Dara, CEO of Delta, B.C.-based Mangrove Lithium, specifically mentioned “energy independence amid rising geopolitical uncertainties” as a selling point for its lithium refinery that is under construction.

As inflation and ongoing higher interest rates impact new car sales, competition from China heats up and countries take a protectionist turn on trade, Doran said this is a critical period for Canada's nascent industry.

“This is kind of a make or break moment to see if Canada has what it takes to compete,” he said.