Automotive News Canada - January 2022 - 4

4
* JANUARY 2022
As EVs rise, other
issues could fuel
some combustion
By KELLY TAYLOR
WINNIPEG CORRESPONDENT
IF ONE WORD COULD SUM UP
what Canada's auto-industry experts
expect to dominate in 2022, it's " recovery. "
Recovery
from the effects of the
COVID-19 pandemic and recovery from
a semiconductor shortage that's hammering
new-vehicle inventory.
Electric vehicles are also expected
to propel the agenda this year as the
industry lobbies the federal government
to lay out a clear road map to its target
of 100-per-cent EV sales in Canada
by 2035. The key, however, is persuading
U.S. President Joe Biden to detour
around protectionist restrictions that
pose an existential threat to the auto
industry here.
CHARGED DEBATE
CANADA'S AUTOMOTIVE INDUSTRY
is gearing up for a fight over the US
$12,500 EV incentive, which applies only
to U.S.-made, union-made vehicles. The
federal Liberals are threatening a full contingent
of trade remedies, ranging from
court fights and challenges before the
World Trade Organization, to retaliatory
tariffs.
" I think the Americans understand, if
they do their homework on NAFTA and
TPP [Trans Pacific Partnership trade
pact], you can bank on us to do what
we say, " said Flavio Volpe, president of
the Automotive Parts Manufacturers'
Association (APMA). " They do know we'll
follow through. "
Volpe expects to spend considerable
time traveling to Washington to meet with
Republican and Democrat legislators in
Congress. He's not confident of success,
at least unless the 2022 U.S. midterm election
leads to a shift in power favouring the
Republicans, who appear to oppose the EV
incentives.
That we're here at all, with a different
president, is and isn't a surprise, he said.
" On one hand, we knew we had a crazy
president yelling at the moon, " Volpe said.
" Now, we have a rational actor looking
us in the eyes, knowing what he's proposing
is injurious to us and still following
through. "
There's little doubt the incentive violates
provisions of the United States2022
LOOK-AHEAD
Mexico-Canada
Agreement (USMCA),
said David Adams, president of the Global
Automakers of Canada (GAC). His organization
represents foreign
automakers such
as Honda and Toyota.
" It amounts to
a 34-per-cent tariff
against Canadian-made
vehicles. That's higher
than the [25-percent
tariff on Canadian
cars] threatened by
protectionist president
[Donald Trump]. "
" The real struggle
- and [Canada is] collateral
damage - is
between the U.S. and
China, " Adams said.
" China is significantly
advanced from where
the U.S. is [on EVs],
and the U.S. is trying
is caught in
the crossfire
of the United
States trying
to regain some
manufacturing
dominance
from China.
FILE PHOTO
to recapture some of that dominance. "
Although Unifor President Jerry Dias
favours a government's prioritizing the
employment of its own citizens, " you can't
commit suicide while you're doing it, " he
said.
APMA President Flavio Volpe,
foreground, and APMA General
Counsel Gian Paolo Vescio on a recent
trip to Washington. Volpe expects to
make more trips to the United States
to lobby against protectionism.
SUPPLIED PHOTO
" We're dealing with issues that don't
make a stitch of sense, " said Dias, whose
union represents Canadian workers at the
Detroit Three plants.
" We thought that the adult finally got
elected. No question, 2022 will make the
Trump era look mild in comparison. "
Canada's supply of raw materials for
electrification - nickel, cobalt and magnesium
- constitutes another bargaining
chip in the country's favour, said
Brian Kingston, president of the Canadian
Vehicle Manufacturers' Association
(CVMA), which represents the Detroit
Three automakers.
It's especialAdams:
Canada
ly important, given
Canada's commitment
to workers' rights and
opposition to child and
slave labour and the
movement of automakers
to demonstrate ethical
business practices
throughout the manufacturing
process,
Kingston said.
" My key point is -
while the U.S. needs to
look at its own security
- Canada is the best
and most reliable partner
the U.S. can have.
We happen to have
a significant endowment
of raw materials.
Dias: " We
thought that
the adult finally
got elected.
No question,
2022 will make
the Trump era
look mild in
comparison. "
FILE PHOTO
There's no better country to be partnering
with. "
CHIPS ON THE TABLE
KINGSTON EXPECTS A RECOVERY IN
the supply of integrated circuits from
Asia, but he warns that a bump caused
by another wave of the pandemic could
delay production once again. A big effort
is underway in the United States to build
domestic capability in semiconductor
CANADIAN AUTO INDUSTRY
manufacturing, but that won't happen in
2022.
" There were some encouraging [manufacturing]
numbers in the last half of
2021, but the Delta variant in Southeast
Asia again impacted overall production, "
Kingston said. " We will have to see with
this new variant if it will again result in
supply disruptions. "
IN NEED OF A NATIONAL STRATEGY
FEW INDUSTRY EXECUTIVES WOULD
disagree that Canada needs a cohesive
plan for its automotive sector, and now
more than ever with a relatively short
timetable to pivot the industry to EVs,
Kingston, Dias, Adams and Volpe all said
separately.
" We need a comprehensive
auto strategy if
we hope to keep a semblance
of the industry
into the future, "
Adams said.
Volpe and Kingston
both said the federal
government needs to
take politics out of the
EV plan as much as
possible. Volpe wants
an arm's-length electrification
czar who can
drive the plan regardless
of which party is
in power between now
and 2035.
" The default has
been it's the transKingston:
" Canada
is the
best and most
reliable partner
the U.S. can
have, " plus,
Canada has raw
materials vital
to EVs.
FILE PHOTO
port minister or it's the environment
minister, " Volpe said. " But best practices
around the world show us that person
should be an outsider with a concrete
understanding of one or more of the pillars
- generation, manufacturing, renewable
technology.
" Let's put a public-private structure in
place and put someone in charge who isn't
dependent on the political structure. "
CHANGE FOR DEALERS
THE AGENCY MODEL HAS BEEN
common for dealerships in Europe and
Asia for some time. And if executives
such as Hyundai Canada President Don
Romano have their way, it's coming to
Canada.
Under the model, automakers would
retain ownership of new vehicles, and
customers wouldn't be steered to buy
what the dealer has on the lot. Rather,
they would be encouraged to order the
vehicle they want. Instead of profit margin,
dealers would receive a commission
or fee from the sale.
" To me, it's a tsunami
that's building up
out over the ocean, and
it's coming at us, and I
don't think we're paying
enough attention to it, "
Romano said.
" There's a big revolution
coming in the way
we sell and service cars. "
He points to the arrival
of new players in the
market, starting with
Tesla and moving to
other brands that have
adopted or are likely
to adopt new methods
of retailing that don't
involve the current dealRomano:
A
" big
revolution "
in retailing
will relieve
dealers of
the burden
of owning
inventory.
FILE PHOTO
ership models operated by legacy automakers
such as Hyundai. That will
involve online ordering and just-in-time
delivery of cars to retailers, rather than
automakers building large numbers of
cars and selling them to dealers.
" Our dealer network is more important
than ever, but the need for that dealer
network to evolve - quickly - before
that tsunami hits the shore is vital to
their long-term success. "
Without the carrying costs of owning
inventory, Romano said, dealers who
embrace the concept " should be more
profitable. " - ANC
Automotive News Canada - January 2022

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