Government push for EV investment is a bad move, says expert | Canada Tonight
well there’s been another major deal to
build electric cars and batteries in
Canada CBC News has confirmed Honda has
struck a multibillion dollar agreement
with Ontario and the federal
government we’ve landed a new deal it’ll
be the largest deal in Canadian history
it’ll be double the size of Volkswagen
so stay tuned we’ll be announcing it
this week the new facility is expected
to build batteries and assemble battery
powered vehicles it will also process
cathode active materials a battery
component details have yet to be
formally announced but it’s likely to
bring in jobs and billions in corporate
Revenue the premier suggested it will
involve multiple facilities across the
region it’s unclear what government
subsidies Honda may have received in
exchange for coming to Canada well for
more on the economic impact of this
latest EV investment we have reached Ian
Lee Ian is an associate professor at the
spra School of Business at Carlton
University
Ian joins me now so what do you think
this is a multi-billion doll deal it
will be partly subsidized by federal tax
credits do you think this is a good
investment uh I’m very skeptical
Christine um I’ve been teaching strategy
I’m a former Banker years ago full
disclosure evaluating companies and for
the last 35 years I’ve taught strategy
evaluating the competitiveness of
companies and industries and what I’ve
learned as Michael Porter the great
Michael Porter at Harvard uh Business
School taught us is that the companies
that are the most successful are those
that compete in the marketplace where
there’s a winnowing out through price
Discovery supply and demand testing your
ideas putting your own money at risk in
the marketplace in this instance the
this has been kicked out so to speak in
other words governments uh so this isn’t
a partisan issue this is federal and
provincial governments of of each
political party are are undermining that
competitive process that Winn is out and
determines the winners and losers so
they are picking those winners and
losers and the record uh in the past has
has not been uh successful at that and
and the most recent example was
Bombardier great company great
technology backed by go Quebec and
federal government and ultimately it
failed okay so not a proven track record
but you also mentioned supply and demand
and this news comes on the backdrop of
EV sales falling worldwide at the moment
how might this downturn affect the
development of these projects well this
is something else that worries me
there’s only a handful of companies in
the world and this is what the late
brilliant Sergio Mary used to say the
CEO of krysler Fiat he said krysler Fiat
wasn’t big enough to survive he said
because the industry is becoming the
capital needs and the R&D are so
gargantuan and he argued that there’s
only going to be about five companies
the down the the slowing down of the the
slow Market acceptance by large numbers
of consumers in North America is not
going to be the end of EVS let’s be very
clear but what it’s going to do is push
back the widespread adoption push back
the widespread scaling up what does that
mean it means that companies are going
to have to be have very very Deep
Pockets to fund that R&D all those
expenditures at for the next several
years while they’re not receiving
revenues because the sales haven’t yet
taken off and you know go we like to
think Canada is a great big Rich
powerful country we’re 1.5 trillion and
we’re competing against Giants the us at
25 trillion GDP China at 20 trillion GDP
you know Japan uh the the European Union
and and we I don’t think we have that
kind of scale to take on the majors as
again we saw with Bombardier taking air
on Airbus and Boeing two of the largest
companies in the world and they failed
notwithstanding all of the support they
received from government Ian we just saw
Ontario’s Premier Doug Ford there very
happy these plants are providing prom of
thousands of jobs and and billions in in
in money into the industry into Canada’s
GDP how do you really argue with that it
seems like it would still be worth
investing
in um if it was worth investing in and
if there really is a strong market and I
don’t dispute there are there is I’m not
disputing that there is a market then
firms will step up that’s the nature of
private Pro for profit capitalism
companies see a market they will invest
they will go after it they will pursue
it the idea that somehow these very
large corporations and very profitable
corporations called Volkswagen called
Honda need the government to hold their
hand and give them the money to make the
Strategic decision that they would have
made if it was a stellar investment
opportunity it is just isn’t supported
by 300 years of economic history and
reality this isn’t economic theory I’m
quoting you this is the success of the
decentralized the highest and most the
highest income country in the world the
oecd where we have decentralized
economies where individual companies
evaluate the risk and make uh
commensurate investment decisions in
this instance the government has taken
over that risk-taking uh uh uh decision
and and our record in Canada in this
industry is not good we’ve been in
Decline for 30 odd years in auto
manufacturing we have fallen out of the
top 10 anybody can Google this the top
10 countries in the world for autom
manufacturing Canada is not there and so
we’re Niche player yeah you know I hear
you and I guess I guess the assumption
is is that the government is getting
involved because they want 100% electric
electric car sales by the year 2035
which is not that far away and I
understand your point about the big
players but what do you say Canada is
way behind and and can’t compete with
players like China and the us but
shouldn’t we try to build our
manufacturing base so we can be
competitive in the future it it comes
down to the optimal allocation of money
I’m not saying do nothing I’ve never
said that so there’s two issues the one
is the unemployment issue and they say
look it’s going to create thousands of
jobs we’re going to be diverting jobs uh
comp people that are in scarce uh demand
engineers and that sort of thing from
other Industries into this industry so
what we’re doing is we’re just moving
the employers the employees around
remember we’re facing massive labor
shortages for the next 20 30 years
because of the decline of the the birth
rate but the larger issue is there are
other areas where we have huge
comparative advantage such as the mining
industry we should be going there’s only
a handful of countries in the world that
have the critical minerals needed to
make the electric cars so if we’re that
committed then look there’s other
countries that can do a much better job
making the batteries and the cars we
should be going uh as as fast as
possible into the future developing
those critical minerals that are
absolutely essential for electric
vehicles if we don’t have those five
critical minerals that are well known
including lithium then we will not have
electric cars so I what I’m saying is
it’s a misdirection and misallocation
of precious scarce Capital Ian thank you
for this very nutritious food for
thought as
always associate professor at the Sprout
School of Business at the University at
Carlton University that is Ian Lee thank
you CHR thank you
Sources say Honda is expected to announce a multibillion-dollar electric vehicle plant in Ontario after Premier Doug Ford hinted at the deal. Ian Lee, an associate business professor at Carleton University, says that by pushing for investments, governments ‘are undermining the competitive process’ that determines winners and losers in the free market.
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