Policy Opinion: Revving up Ontario's Economy

This latest announcement bolsters Ontario’s opportunity to create a full and robust EV supply chain, incentivizing further investment, creating jobs, and getting EVs on the road. Honda Canada’s President & CEO, Jean Marc Leclerc, who spoke last week at Toronto Region Board of Trade’s inaugural climate tech breakfast said: "It’s Honda’s biggest ever [investment] certainly from a Canadian perspective and a North American perspective. We’ve invested $6 billion since [1986] in the three plants that exist [in Alliston, ON]."

While automakers are bullish on Ontario, some recent developments have cast a shadow on the EV sector’s future, at least in the short-term. Auto Trader reported that the interest in purchasing an EV has declined from 68 per cent in 2022 to 52 per cent last year. Additionally, Tesla had a surprising dip in profits in the first three months of this year compared to last year.

As a result, some commentators are concerned that recent lack of demand could spell trouble for the sector, while others question whether big bets like the federal and provincial government’s support of EV manufacturers will pay off in the long run.

But, despite recent dips in the sale and interest in EVs, the trend lines tell a different story. EVs have steadily been taking up more and more of the total share of all car sales in Canada, while gas-powered cars have been losing their dominance in the market. In terms of new vehicle registrations in Canada, ZEVs have risen from 4% of all registrations in Canada in Q4 2020 to 12% in Q4 2023.

Globally, we see similar trends where purchases of battery EVs and plug-in hybrid EVs have skyrocketed from approximately half-a-million of all global sales in 2015 up to more than 13.7 million in 2023. Projections continue to forecast a strong showing from EV sales.

Now, with Honda’s investment, Ontario can contribute to the supply of electric vehicles, both domestically and abroad, as demand continues to increase over time.

When asked why Honda chose Ontario for its record investment, Leclerc pointed to its history in the province. “We’ve been in Alliston since 1986. The relationship we’ve built with the community, the relationship we’ve built with all levels of government certainly helped us through the process... and also give the people in Tokyo the confidence to come to Canada to make that sizeable investment.”

Leclerc also spoke about Ontario’s clean energy grid and the abundance of natural resources, “If we can’t produce EVs and batteries in a carbon-neutral way, then really what’s the point?”

This isn’t to say that we should take our foot off the pedal, though.

Consumers continue to cite reasons for not purchasing an EV such as cost and inflation, lack of available charging, and perceived technology limitations. Ian Klesmer, Director of Strategy and Grants at The Atmospheric Fund, said in a recent interview with the Board that “we’re facing a chicken-and-egg problem where people hesitate to buy EVs...and the private sector is reluctant to invest because there aren’t enough EVs on the road.” Klesmer sees a role for all levels of government to support early investments in charging infrastructure and help break the chicken/egg cycle and improve consumer and business confidence.

Governments can create well-paying jobs in the green economy while leading the fight against climate change, they just need to seize the opportunity.

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