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A battery manufacturing blueprint for Canada

Battery manufacturing is a cornerstone of an accelerating global industrial transformation. Canada has the means to be a North American leader, but only if it acts now
Manufacturing of lithium batteries could boost the Canadian economy, but we are acting too little, too late. Battery technology is enabling important industrial transitions, from electrification of transportation to integration of renewable energy, and whoever controls the battery production will control the value chain.

Despite our battery supply chain potential being ranked 4th in the world, we are the only country from the top 15 in the ranking not to have any existing or announced manufacturing capacity. It’s time for Canada to step up.

Canada should care about batteries
The economic benefits of battery manufacturing are enormous, as this McKinsey research shows.

First, batteries are a valuable technology. In electric vehicles, they are the single largest factor determining the total vehicle cost. They will make a lucrative industry, considering EVs are expected to hit 10 per cent of global passenger vehicles sales by 2025 and, in fact, already exceed that level in some markets.

Second, making batteries requires skilled labour. Much of the battery supply chain is based on value-added manufacturing, such as specialty chemicals processing, electrode production and cell assembly. These production steps promise high-quality jobs and could improve our manufacturing strength.

Canada has starting advantages that not many countries have.

We have the right resources — nickel and cobalt, in particular — to make batteries. We have the relevant processing and manufacturing know-how. With recent deals that will see Ford and Fiat Chrysler build EV assembly lines in Ontario, we finally have embraced EV production, and have a neighbouring autohub in Michigan that is doing likewise. Moreover, we are positioned in a consumer market where cars always will sell in large numbers — 30 per cent of those sold in Canada might be electric by the end of the decade.

From leader to laggard
The manufacturing race started years ago. Unfortunately, Canada still hasn’t joined.

The pace is rather extraordinary. Ever since Tesla began assembling its famous Gigafactory in Nevada, it became clear the economies of scale would make batteries affordable and ubiquitous. This was in 2015. The demand for battery production keeps growing, and there are now over 20 countries developing their local manufacturing capacity.

The Gigafactory, one of the largest factories in the world, used to be a rare sight. Similar manufacturing sites are now being built all across Asia and Europe. Countries are forming critical partnerships with automakers and battery manufacturers almost on a monthly basis. According to Bloomberg, China is set to reach a production capacity of over 1,000 GWh and Europe over 300 GWh by 2025. That equals around 1,300 sizable production plants.

We can learn from the European Union, which in 2017 raised the alarm about their lagging competitiveness in the battery manufacturing race. The response was a quick roll out of initiatives and massive financial investments. It’s now almost 2021, and Canada still hasn’t heard its wake-up call.

The pandemic is our second chance
The COVID-19 disruption to global supply chains can push Canada to develop them locally. Such localization has two benefits — security and practicality.

The battery supply chain is still relatively immature. It has been dominated by only a handful of countries, such as China, South Korea and Japan. Take raw materials — whatever their origin, China controls about 80 per cent of their chemical refining.

In the post-pandemic world, the battery industry will look for greater supply security. According to Simon Moores, managing director of Benchmark Mineral Intelligence, supply chains will shorten and localize within different continents. Canada has a chance to shape the ones in North America.

A localized supply chain is also about practicality. Refined battery materials as well as manufactured components (anodes and cathodes) are all sensitive to air and suffer from long transportation. They are best processed in sequence and then immediately assembled into cells. Cells are best integrated in battery packs and then in vehicles because they are hazardous goods — their shipment is difficult, expensive, and highly regulated.

Benefits of supply chain localization play to our strengths.

Investing to fill the gaps
The federal government is aware of Canada’s potential to make batteries. Minister of Innovation, Science and Industry Navdeep Bains recently called for “the development of the next generation of battery supply chains, right here in Canada.”

Our natural resources are a clear motivator, but the discussion needs to centre on value-added manufacturing.

First of all, Canadian raw materials need to be processed locally, instead of being sent to Asia. Our mining and refining industries need to build long-term relationships with battery manufacturers and automakers to secure stable supply contracts. Federal and provincial governments need to be the catalyst. An initiative of such scale and complexity will require large investments, tax incentives, and help with infrastructure.

The chain then continues with integration of refineries and electrode manufacturing. Again, attracting the likes of LG Chem (major battery manufacturer partnering with GM and Ford) would be crucial. Next, it’s cell manufacturing, battery pack assembly and, ideally, connection with the local EV production. The more steps Canada develops at home, the easier it will be to bring in further foreign investment.

On the demand side, we must be unrelenting in the push to electrify transportation across the country.

Small government projects and initiatives scattered across the sector won’t do. This must be a bold and comprehensive action, aligning all key players at all steps of the supply chain. The action must reflect the high stakes and our lagging position. For example, Quebec seems to be contemplating a $2-billion initiative to set up its homegrown battery industry. Will other governments in Canada follow?

China is currently building an equivalent of one medium-size battery factory a week, and Europe is building one every two months. Canada should no longer stay on the sidelines.

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