Thank you, Mr. Chair and committee, for inviting me to speak.
My name is Moe Kabbara, CEO of The Transition Accelerator. We're an independent, non-partisan organization that's focused on working with industry, government, indigenous communities and finance. Really, our focus is to make sure that Canada comes out more competitive and stronger as a function of the energy transition happening globally.
I'll start by talking a bit about EVs. To bring us back to 2017, I would say that when we look at what happened in the EV market, we hadn't really started this experiment until the Model 3 came out. Before that, we had EVs, but they were expensive. They were short-range. So we've really been running this experiment for only eight years.
What happened in those eight years? EV sales were one in 50, and last year they were one in four globally. They're expected to be one in two in four years. We can argue about whether that will happen. Maybe it will take four more years. Maybe it will be one in two in eight years instead of four, but the trend is clear. The trend, I would argue, is not really driven by emissions or climate anymore.
Let's look at Ethiopia. You're probably wondering why I'm mentioning Ethiopia. Well, it's one of the lowest-income countries in the world, but last year, six in 10 new vehicles sold there were EVs. What's the reason for that? They're saving $4 billion on foreign currency fuel costs. So when we see that, it's not just about the “tech bros” in San Francisco driving Teslas anymore. It's about a longer-term trend based on technology that is superior in cost and performance.
What does that mean for Canada? I'll talk about four things, and I'll try to be quick.
One area is charging infrastructure. I think for charging infrastructure, the role of federal dollars, the role of the federal government, is to make sure that we grease the wheel so we can get to a sustainable model with a market assessment or market demand for charging infrastructure based on a good business case. An investment tax credit is a much more effective way to deal with that instead of the programs.
We have to distinguish that there are two buckets for charging infrastructure. There are charging networks, which will make money because they're in high utilization areas, but there are areas where they'll never make money. It's kind of like the broadband stuff in rural areas. We just need them as a public good. This is where I think program support can focus.
Another area is GHG standards. We know about the electric vehicle availability standard. The new auto strategy signalled that we're going to have GHG standards to have the equivalency of 75% EV sales by 2035.
I would just advise the committee that the focus here shouldn't really be on environmental stringency or environmental compliance. These standards are useful for two things. They're useful for signalling demand with enough certainty for investors in charging and investors in grid upgrades. The balance here should be to try to get the standards calibrated so that we don't end up in the same situation we did with the EV availability standards, where they're not really viable or realistic, but they're not also so loose that they actually lose the investment anchor. That's the challenge there. I would advise the committee to consider that.
The third thing I want to talk about is that EVs are really an industrial policy play for Canada. When we look at our auto sector, we were making three million vehicles in 1999. Last year, we were making 1.3 million vehicles. That's a more than 50% drop in manufacturing those vehicles. There are lots of reasons for that. Mexico getting in on the game is one of them.
The disruption happening to the auto sector globally with EVs is an opportunity for us to potentially reverse this trend, because now what is part of the auto sector is not just the vehicle assembly; it is the battery cell manufacturing, the cathode manufacturing and the processing of lithium. This is an opportunity that would go beyond just southern Ontario. It would help expand the potential economic opportunity all across Canada.
A practical thing that I would advise the committee on is what's being considered in the remissions framework with the auto strategy. The idea is that we would allow automakers to generate credits that they could use to basically import vehicles tariff-free.
The auto strategy signalled that it's looking at basically allowing that system for companies that are making investments in Canada. I would advise that this definition of investment be more comprehensive and include not just vehicle assembly but also other parts of the supply chain, including battery assembly, battery processing and material processing.
The last point I'll make is on China. China exported a million vehicles in 2020. Last year, it exported seven million vehicles. Let's just let that sink in for a second. That's seven times more in five years. Whether China is going to enter the North American market is no longer a question. I think the question is, when and how, and how does Canada make sure that it's to its advantage?
The selective exposure that we've had with the recent negotiation and deal with the Chinese is a good model. We're not letting the floodgates open and allowing vehicles to come in and hurt our domestic market, but then the question is, what do we do moving forward?
I think joint ventures are something we need to consider. The security concerns—and we'll hear from Neil on this—are real. We can't really ignore the cybersecurity concerns, but there are ways to help mitigate them. If we start from the point that we're not going to be able to avoid this in the long term—maybe we can for five more years, but longer term, we're not going to be able to stop the Chinese from coming into the North American market—how do we do that?
I'll leave you with those four points. Thank you.