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March 03, 2022 08:44 AM

Invest in suppliers to make the switch to EVs

Suppliers transitioning to electric-vehicle supplies need financial support from the government just as much as any automaker setting up a new plant to build EVs in Canada

New Jeff Melnychuk
Jeff Melnychuk
Editor-in-Chief of Automotive News Canada
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    The adversities just keep piling up for Canada’s parts makers. COVID-19, border closures, increased costs, the ongoing semiconductor shortage, protectionist U.S. trade policy, stuttering automobile production and, as you’re no doubt aware by reading this issue, a recent blockade of the Ambassador Bridge joining Windsor, Ont., and Detroit.

    And then there’s the bad stuff.

    A story we posted online Feb. 25 details what is likely to be the ultimate challenge for many suppliers in this country: electric vehicles. New, exciting and financially daring for automakers, and also lethal for some parts builders. Not just for those whose component expertise will not be needed to build EVs, but for those short on capital to invest in building different components, presuming they wanted to and could get the contracts.

    Related Article
    Why some Canadian suppliers won't survive the EV revolution

    “This is a substantial change for [automakers],” said Michael Robinet, executive director of automotive advisory services at data company IHS Markit. “It is a monumental change for some suppliers.”

    Even some executives at supply giant Magna International — which has incredible resources, massive income and experience with electric powertrains — are “nervous” about the transformation to EVs. So what chance do mere mortals have?

    The story, by Toronto Bureau Chief David Kennedy, cites a report that nearly 60 per cent of Canada’s 950 auto-parts plants will be affected by the shift to EVs, and 64 powertrain and transmission parts plants are at high risk because they build components needed only for internal-combustion vehicles. Tens of thousands of jobs are on the line, according to the report.

    Even if all current suppliers made the transition, there are far fewer components in electric vehicles. There are no mufflers, catalytic converters, engine blocks, pistons, belts, water pumps, fuel tanks and transmissions. Our interactive graphic — which you can see here or in the related link below — shows many of the major differences in powertrain components between internal-combustion vehicles and EVs. And that’s the big stuff. There are also no belts, pulleys, speedometer cables, and nary a moulded plastic panel to house a gauge cluster.

    Related Article
    ICE vs. EV: Components gained and lost

    Plants that build EVs will also likely turn out fewer vehicles — at least in the near term — and the suppliers that support them will provide proportionately fewer parts.

    We’re in an overlap period now as automakers are continuing to build internal-combustion vehicles while also investing huge sums of money in EVs. For example, Ford isn’t cancelling the F-150 pickup to build the electric F-150 Lightning. The company is building both and will continue to do so for years to come. Same for the internal-combustion Chevrolet Silverado and its new electric cousin.

    That’s likely a bonus for suppliers for now, but with so much money being poured into EV development, there is less allocated to internal combustion. That means when it’s the end of the line for some plants, they will close for good. And also the plants that support those plants.

    The suppliers that carve out an electric future won’t be free and clear, though. They’ll still be subject to the pressures of rising prices, semiconductor shortages, trade conflicts, future pandemics and bridge blockades.

    To make the switch, they’ll need financial support from the government just as much as any automaker setting up a new plant to build EVs in Canada. Don’t forget how many hundreds of millions of dollars the federal and Ontario governments are providing Ford, General Motors and Stellantis for their electrification efforts. Then consider the accepted formula that for one auto-plant job there are roughly seven supplier jobs. That’s not just worth investing in, it’s necessary for the industry.

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