Assessing the Economic and Labour Market Impacts

Executive Summary:

Canada’s automotive manufacturing sector, a key driver of the country’s manufacturing and economic growth, is undergoing a significant shift towards zero-emission vehicles (ZEVs) production, aligning with domestic and global efforts to reduce carbon emissions and achieve net-zero by 2050. The move from producing internal combustion engine vehicles (ICEVs) to electric vehicles (EVs) in Canada’s automotive manufacturing sector presents both opportunities and challenges. The shift offers the opportunity to develop new domestic supply chains, expand existing manufacturing capabilities, and grow the economic contribution of the sector. However, it poses multiple challenges to the sector and its supply chain including the need to adapt manufacturing processes, manage the fluctuating demand for components, and transition the workforce across industries and sectors. Industry stakeholders must also navigate the considerable uncertainties and risks of this transition.

This transition, and its significance to Canada’s economy, is the focus of this comprehensive report which analyzes its impacts from 2025 to 2040, offering insights to policymakers and industry stakeholders on the potential economic and labour market implications. This report presents detailed analysis of the shift to EV production, particularly battery electric vehicles (BEVs). This involves careful review of the automotive and battery manufacturing supply chains, including the announced plans for new production operations and related changes reaching upstream to chemical manufacturing, mineral processing and mining potential. In addition, the analysis tracks the related decline in assembling ICEVs and the shrinking demand for their components, the parallel aspect of this transition. The timing and magnitude of new production and shifts in the supply chain have been set out in three scenarios that reflect the various potential future outcomes – from rapidly growing BEV production capabilities depicting a successful shift in production over the upcoming years, to a more gradual shift in vehicle production, accounting for the various risks and barriers to EV production and adoption. The EV production analysis estimates specific output and employment changes expected across the different stages of the supply chain. Each scenario presents a multi-layered economic impact:

1. In scenario 1, greater EV consumer acceptance is assumed, with continued success in winning production mandates, in producing and processing rare earth minerals domestically, and in manufacturing EVs and their batteries. In this scenario, significant economic expansion and job market boost is projected, with an output increase of over $50.0 billion by 2040, and nearly 100,000 net jobs created by 2040.
2. Scenario 2 assumes slower consumer acceptance of EVs, translating to a more gradual transition in EVs manufacturing and lower batteries production, which is further accompanied by less success in developing domestic rare earth mining capabilities, and in securing production mandates. These assumptions project a modest economic impact, with an overall output increase of $2.4 billion and approximately 4,250 jobs added by 2040, but also indicate initial job and economic losses in the first years of the transition.
3. Scenario 3, combining assumptions of scenarios 1 and 2, predicts output reaching $13.3 billion and 27,000 jobs added by 2040.

These scenarios highlight the variable impacts of Canada’s transition to EV production on economic output and employment across various industries and the overall economy. Most notably impacted is the gasoline engine manufacturing industry as a result of the weakening demand for ICEV-specific components, a factor of declining domestic ICEV production and exports of ICE components. On the other hand, battery manufacturing, along with industries within its supply chain, are set to gain the most (in output generated and jobs created) as a result of the start up of battery manufacturing operations and its related activities.

While several risks, barriers and challenges may impede the shift in production and adoption of EVs, the successful transition to EV production requires coordinated efforts from industry and government to minimize impacts, and ensure the smooth transition of the workforce.