Subsidies have exceeded 200 billion yuan, and Canada is "making efforts" on power batteries

Canada, which has almost no local battery companies, has a low presence in China's lithium battery industry. If it weren't for the fact that CATL "intercepted" Ganfeng Lithium and paid a higher price to buy Canadian lithium company Millennium Lithium, many people would hardly pay attention to this so-called "middle-sized country".

However, with its rich mineral resources such as lithium and nickel and favorable incentive policies, Canada has attracted more and more companies to invest in the local battery industry. Currently, automobile manufacturers, battery and material manufacturers including Tesla, Volkswagen, Ford, LG Energy Solution, Northvolt, Energen Technology, SK On, BASF, Asahi Kasei, etc. have all invested in building factories in Canada, with a planned battery production capacity of over 160GWh.

It is reported that Canada's subsidies are very attractive. For example, the Canadian government plans to provide tax breaks and subsidies of up to 43.6 billion Canadian dollars (about 227.8 billion yuan) to Volkswagen, Stellantis, LG New Energy, and Northvolt's three battery factories. As a major mineral resource country in the world, Canada's lithium and nickel reserves are 450,000 tons and 2 million tons respectively, both ranking among the top ten in the world.

01

Production capacity planning exceeds 160GWh

Tesla was the first to plan to build a battery factory in Canada. As early as 2021, there were reports that Tesla had acquired a Canadian battery equipment manufacturer and planned to build a battery factory in Ontario, Canada. The factory will be Tesla's first manufacturing base in Canada and will produce the same 4680 large cylindrical batteries as the Gigafactory in Berlin, Germany and the Texas Gigafactory in the United States.

LG Energy Solution and Stellantis are also early companies to deploy battery factories in Canada. In April 2022, the two parties announced that they would invest approximately 5 billion Canadian dollars (approximately 26.1 billion yuan) to establish a joint venture to build an electric vehicle battery manufacturing plant in Ontario. The plant is scheduled to be put into production in 2024, with an annual production capacity of more than 45GWh, which can support the production of nearly 600,000 electric vehicles.

As the most aggressive European automaker in building its own battery factory, Volkswagen announced in March last year that its battery company PowerCo chose Ontario to build its first battery super factory outside of Europe, with a planned production capacity of 90GWh. In April this year, the Canadian government agreed to provide Volkswagen with up to 13 billion Canadian dollars (about 68 billion yuan) in subsidies over 10 years.

It is worth noting that in August this year, Hangke Technology, a Chinese lithium battery equipment manufacturer, announced that the company received a contract generated by Volkswagen Canada through a bidding system, which was an order for lithium battery back-end equipment purchased by Volkswagen Group's battery factory in Canada. This shows that the pace of construction of Volkswagen's Canadian battery factory is accelerating.

Following Volkswagen, Swedish battery manufacturer Northvolt announced in September last year that it would invest US$5.2 billion (about RMB 37 billion) to build a super factory in Quebec, Canada. The factory will also be Northvolt's first battery factory outside of Europe. The annual production capacity of the first phase of battery cells will reach 30GWh and is expected to be put into production in 2026.

Taiwan manufacturers are also building battery factories in Canada. In November last year, Energen Technology announced that it would invest NT$25.5 billion (about RMB 5.9 billion) to build a ternary lithium battery cell factory in Vancouver. It is expected to be completed and put into production in 2028, with a planned production capacity of 2.8GWh and an annual production of 135 million cylindrical ternary lithium batteries. It is reported that the Canadian government will subsidize Energen Technology with nearly NT$4.8 billion (about RMB 1 billion).

In addition to battery factories, Canada has also attracted many companies to invest in building material factories.

In terms of cathode materials, Ford Motor and South Korea's SK On and other companies announced in August last year that they would jointly invest 1.2 billion Canadian dollars (about 6.3 billion yuan) to build a cathode material plant with an annual output of 45,000 tons in Quebec. In September last year, Japanese company Sumitomo Metal said it would invest in Canadian battery material company Nano One Materials to jointly develop cathode materials with lower costs. In addition, German chemical giant BASF also announced that it will produce and recycle cathode materials in Quebec from 2025.

In terms of other materials, Japanese chemical company Asahi Kasei announced in April this year that it would invest about 200 billion yen (about 9.6 billion yuan) to build a diaphragm factory in Canada, with the goal of starting production in 2027. Last September, a subsidiary of South Korean company Solus said it would build a copper foil factory in Quebec for electric vehicle battery production.

However, it is worth noting that not all investment factories are progressing smoothly. Last October, the Canadian government said it would provide up to 1 billion Canadian dollars (about 5.2 billion yuan) to a subsidiary of Belgian company Umicore to help it build a cathode and precursor material factory. The annual production capacity of the factory can be used to produce 35GWh batteries, meeting the battery needs of more than 800,000 electric vehicles. However, in April this year, Umicore said it would stop building a cathode material factory in Canada.

02

Policy support and industry vigilance

In order to achieve the goal of full net zero emissions by 2050, Canada is actively promoting the transformation of the automotive industry to electrification, and is committed to making the country an important player in global electric vehicle battery manufacturing and electric vehicle applications. About 11% of new cars registered in Canada in 2023 are electric vehicles. Bloomberg New Energy Finance predicts that electric vehicles will account for about 70% of new passenger car sales in Canada by 2035.

At the same time, Canada is also increasing the construction of public charging stations and other basic supporting facilities. As of now, there are about 25,000 public charging stations in Canada, and the Canadian government's goal is to have 85,000 charging stations across the country by 2029. The Canadian Automobile Manufacturers Association believes that by 2035, Canada is expected to need about 444,000 electric vehicle charging stations to meet demand.

At present, the Canadian federal government has introduced a variety of tax exemptions and subsidy policies for electric vehicles and batteries. At the same time, Canada has established a customs union with the United States and Europe, and also enjoys huge subsidies from the United States for the manufacture of new energy vehicles because of the North American Free Trade Agreement. According to the US Inflation Reduction Act, electric vehicles that complete 50% of the manufacturing of electric vehicle battery components in North America will be eligible for a tax credit of up to $7,500.

In the upstream of the supply chain, Canada has abundant mineral resources of key raw materials for battery manufacturing, such as lithium, nickel and cobalt. Data shows that Canada has proven lithium reserves of 450,000 tons measured in metallic lithium, ranking sixth in the world. In addition, Canada is the world's tenth largest nickel ore resource country, with proven reserves of 2 million tons. The Canadian government launched its first key mineral strategy in 2022 to achieve key policy goals such as establishing a battery and electric vehicle supply chain.

It is worth noting that although Canada encourages foreign companies to build factories there, it is wary of investments in key minerals such as lithium resources. In the past few years, Chinese companies such as Tibet Everest and Yahua Group have invested in local lithium mining companies through subscriptions, but the Canadian authorities have blocked them on the grounds of "national security." This has also had an adverse impact on subsequent Chinese companies' investments in Canada.