This following is probably the biggest question that’s been lost in our recent tariff kerfuffles: Are we getting enough bang for our battery buck? And, just so I’m being clear in these politically-divided times, by “we,” I mean both Canadian and American taxpayers who have been giving, loaning, and otherwise pledging billions of dollars to build a North American battery-manufacturing industry.
On either side of the border, the numbers are simply staggering. Canada alone has pledged more than CDN$50 billion to battery producers — Volkswagen, Stellantis, Northvolt, and others — to subsidize battery production here in Canada. And those are just the monies promised for future production. Provincial governments — both Quebec and Ontario — as well as the federal Liberals have also ladled hundreds of millions in tax credits and other incentives so battery manufacturers can build the plants we’ll subsidize on a daily basis.
(A bit of context is probably needed here; governments have long incentivized automakers to build plants in their locales, but paying them on an ongoing basis for each product they produce is something new. At least on this scale.)
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South of the border, if you add up all the kilowatt-hours of lithium-ion needed to power the electric vehicles projected for the future, our Yankee friends are on the hook for as much as USD$300 billion. And that’s just how much they will spend over the next eight years subsidizing the production of batteries. And, like Canada, there’s also been lots more — also in the billions — spent getting EV-related projects off the ground.
All this government largess has, as headlines have screeched, run into a stagnant EV market. Oh, contrary to what much of the mainstream media has been pitching, global EV sales are not, in fact, slowing down, and, in some jurisdictions — China, Quebec, and Norway — are still growing rapidly. But in the rest of the world — the European Union, mainstream America, and in any Canadian province between British Columbia and Quebec — sales are no longer on track to reach 100% ZEV by 2035. Actually, it’s not even close, pure battery-powered EVs only accounting for 4.4% of sales in Canada last year, when excepting B.C. and La Belle Province.
The result has been a dramatic retrenchment in the industry. Ford famously paused production of its F-150 Lightning at the end of last year because sales weren’t reaching expectations. It’s also cancelled the three-row battery-powered SUV that was supposed to be built at its shuttered Oakville, Ontario plant. Other EV programs — Ram’s 1500 REV, Audi’s Q8 e-tron, and Volkswagen’s ID.7, to name but a few — have either been delayed, cancelled, or written out of North American product plans.
More telling still is that, in recent months, automakers have been backpedalling away from their previous commitments to banish internal-combustion engines, Mercedes-Benz and Volvo but two of the industry giants that have decided to delay their ambitious plans to go all battery-electric.
Downstream, there has been similar turmoil, even if it hasn’t been quite as dramatically publicized. Stellantis and Volkswagen, at least as we go to press, are proceeding forward with their Ontario-based gigafactories, though there has been some talk that they won’t try to reach full production as quickly as previously promised.
On the other hand, Quebec’s Northvolt project looks far more troubled. European plans have been shelved, bankruptcy has been filed in the United States, and the company’s lawyers are threatening to sue Swedish debt-collection authorities for seizing assets. Company officials claim the plant in Saint-Basile-le-Grand and McMasterville, Quebec is still a go, but at the very least, it will be delayed.
Nor is Northvolt the only battery producer suffering. Indeed, according to Steve Levine, North America’s foremost reporter on all matters battery-related, it is but one of many battery-supply-chain start-ups worldwide that have floundered in recent months. In a turn of events that he describes as the industry’s “Valley of Death,” he counts a number of once-promising next-gen battery start-ups — Cuberg, Freyer Battery, and Our Next Battery (ONE), amongst many others — that have either closed, gone bankrupt, or dramatically reduced expectations. And as Levine details in his newsletter, The Electric, it’s not just a matter of a slowdown in EV uptake.
In fact, the malaise in the American and European battery-production industries is two-fold. The first is that — and this is me paraphrasing; Levine says it far more eloquently — it is comparatively easy to come up with an innovative, even revolutionary, battery chemistry. It’s a far harder thing to produce it at scale. The challenge, he says, is surviving the “period between developing a product and large-scale production.”
The second — and this too has fallen from our headlines thanks to Trump’s impending tariffs — is that Chinese producers have not only mastered that difficult transition to economies of scale, but that they’ve also managed to do so more cheaply than anyone else. Chinese producers can, according to BloombergBNF, make complete battery packs for USD$94 per kilowatt-hour, while the same number in North America is USD$123 per kWh.
It is comparatively easy to come up with an innovative, even revolutionary, battery chemistry—it’s a far harder thing to produce it at scale
Nor is China likely to go quietly into that good night, Xi Jinping’s Ministry of Commerce recently proposing restricting Chinese companies from exporting equipment or know-how to manufacture advanced iron-based batteries, says Levine, hurting Western battery producers’ “chances of competing with Chinese companies.”
Perhaps more important than detailing the extent of their lead in battery production, however, is determining why China has such a commanding lead in battery production, why non-Chinese factories have had such a hard time ramping up their production, and — the question one has to believe all Western automakers are toiling over day and night — what can we do to compete?
Even more importantly — since Donald Trump has, unlike the Biden administration, signalled he would welcome Chinese battery producers on U.S. soil, as long as they employ American workers — how much of their advantage will remain when they have to pay union wages, adhere to USMCA content rules, and respect our environmental regulations?
For the answer to these and other important questions, you’ll have to join Driving into the Future’s latest online panel, Battery Tech in the Spotlight, on February 12 at 11:00 a.m., when Mr. Levine will be one of our featured guests discussing the future of electric vehicles. You can register here for free.
Author’s Note: There are some — many, in fact, south of the border — celebrating the recent slowdown in EV sales. While that might prove something of a respite for local automakers, understand that, even if tariffs do manage to keep Chinese EVs from our shores — and the jury is still out on that one — such protectionist policies will render domestic automakers less competitive in global EV sales. Protect our domestic industry they might, but they could well also signal the surrender of the rest of the global EV market to Chinese automakers.
In other words, figuring out how to build batteries as cheaply as their Chinese competitors is essential if North American automakers are going to compete on the world stage.
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