WINDSOR, Ont. — One of the auto industry’s foremost consultants and forecasters has a warning for smaller Canada-based suppliers.
“If we choose, as a region, to ignore what’s happening in China, we do so at our own peril,” says Michael Robinet, managing director, automotive advisory at IHS Markit.
China is leading the world in electric regulation, Robinet told an audience of suppliers at the Automotive Parts Manufacturers’ Association (APMA) here. North America is the third horse in the three-horse race, behind Europe and China, when it comes to electrification of vehicles, Robinet said bluntly.
“China is really important and needs to be understood by the supply base,” Robinet said. “We are a bit of an island in North America. The problem is that we, as a rationalized production location…we may not be leaders in EV technology. China is moving more quickly to an electrification structure.
“If you’re a global supplier, that needs to be part and parcel of your strategy.”
Linamar CEO Linda Hasenfratz says the bulk of China’s pollution comes from coal plants producing electricity. So, eliminating vehicle emissions is only part of the solution.
“China is most interested in new-energy vehicles, because their trying to solve a problem.” she said.
Robinet estimates that there are eight or nine “super Tier 1 suppliers” — Canada’s Magna International is one of them and Bosch is another — that have quickly recognized China’s emergence as an electric leader and expanded there.
But Robinet is more concerned about the small North American Tier 1 and some Tier 2 suppliers that haven’t made the leap. As China pulls away, it applies pressure on supply companies on the other side of the world in North America.
Robinet said electric- and autonomous-vehicle technology are the two biggest disruptors to strike the auto industry since the Detroit Three had to respond to the fuel crisis by developing unibody vehicles in the 1970s.
EV sales in China have remained explosive for years. In 2018, they jumped 62 per cent to almost one million, nearly all from domestic brands.
Dozens of EV startups have emerged across China in the past few years. Some, including Nio, WM Motor, and Xpeng Motors, started selling their first products last year.
By contrast, global automakers have been slow to introduce EVs to China. To date, only a small number — General Motors, Nissan Motor Co. and Hyundai Motor Co. — have launched EVs in the market.
Volkswagen, the largest auto brand in China, won't start selling its first batch of EVs until the middle of this year. And China already accounts for 40 per cent of Volkswagen’s annual global sales.
Robinet said electric advancements usually make the jump to Europe from China before eventually coming to North America.
“China is going to drive electrification,” Robinet said. “China, from an industrial sense, is definitely going to drive that.”
EV sales in China have been so good the government there is set to wind down a subsidy program for electric vehicles and plug-in hybrids by the end of 2020 after cutting the incentives more than 50 per cent in March.
Robinet said the North American auto industry and governments here “must pave the way for acceptance of EVs.”
“This is not going to be an easy transition,” he warned.
A problem in Canada is that every province has its own EV rebate — or none at all — and the federal government has also implemented its own incentive of up to $5,000.
Robinet says Canada needs the United States as a partner in driving EV acceptance because the technology needs “availability and scale,” something America can provide.
“The U.S. is critical to this,” he said. “If Canada decides to row its own boat on this, it’s a lot more difficult.”
With files from Automotive News.