New York, New York, USA: 2022 Ford F-150 Lightning electric pickup truck at the New York Auto Show

Many forces are driving electric vehicle interest much higher. Is the industry ready?

I’ve always looked at the timeframe for the transition to electrified transportation through the lens of “it’s happening faster than the industry believes it will, but slower than many in the environmental community and government think it is going to.”

Well, now it seems that a week can’t go by without some major announcement in North America about a new electric vehicle production line, or a new battery plant, or a new complementary battery component facility being built.  

The pace of investment in the new decarbonized automotive industry in Canada, North America, and around the world has been nothing short of dizzying. 

In my 35 years in the Canadian industry, and essentially all of my life growing up in the industry, there has never been a time when as much money has been invested in Canada as there has been over the course of the last 18 months or so. The most significant investment is the $5 billion Stellantis/LG Energy Solutions Windsor battery plant, representing the largest single investment in Canadian automotive history.

Higher battery prices are doubly problematic when the market is just starting to see the introduction of electrified pickup trucks and SUVs in the market, which, because of their size and their capabilities, require larger batteries. 

And while the transition to electrified transportation is happening fast—which is a challenge from a capacity perspective in and of itself—the unanticipated war in Ukraine, and three-decade-high levels of inflation across most of the globe, have only served to exacerbate the raw materials challenges for batteries. 

This applies to both near term, and through to 2030, with a projected global shortage of almost 150 ktons of cobalt by 2030, demand for nickel increasing six times by 2030, also outstripping supply, and lithium demand increasing five times by 2030, outstripping supply for that metal as well.  

In the short term, the International Energy Agency noted, in its report “Global EV Outlook 2022,” that in May of this year lithium prices were seven times higher than at the start of 2021, and the IEA also noted that Russia supplies 20 per cent of the global high-purity nickel, putting more stress and inflationary impact on an already stressed system. 

So rather than continuing to “march down” the cost curve for batteries, the IEA contends that EV battery packs could become 15 per cent more expensive this year if prices for battery constituent materials remain elevated. 

Higher battery prices are doubly problematic when the market is just starting to see the introduction of electrified pickup trucks and SUVs in the market, which, because of their size and their capabilities, require larger batteries. 

While the IEA noted that the average battery capacity of BEVs was 55 kWh and 14 kWh for PHEV in 2021, Rivian’s pickup truck has 135 kWh battery pack, and the Ford Lightning pickup has a similar battery pack in its extended range offering, with standard range being almost 100 kWh. GM’s electric Hummer has a battery pack more than double that of the standard range Ford Lightning at 212 kWH! 

Therefore, to the extent that 80 per cent of Canadians will still choose to drive an SUV or light-duty truck, if and when they purchase an EV, at the current battery price of around $132 kWh, that translates into batteries that comprise between $13,000 and almost $28,000 of the total cost of the vehicle, before any cost increase. 

If we add the 15 per cent price premium resulting from battery component shortages and premiums, that adds another almost $2,000 to the cost of the battery at the low range, and $4,200 at the high range. In this context, it is easy to understand why some automakers either increased their EV prices, or tried to before reversing course in the face of public backlash. 

Now this cost impact can be somewhat mitigated by the contracts that automakers have with their battery suppliers, however, the point is that EVs are not getting cheaper any time soon—especially in the light truck segments where the majority of Canadians purchase their vehicles.

McKinsey has suggested that to meet the projected global sale of EVs in 2030 (40 million, up from 6.5 million last year) the world will require another 200 gigafactories in addition to the 130 that are already in place. McKinsey also highlighted that these new gigafactories are not without their own challenges, from year long construction delays to ensuring the maximization of operational efficiency—which can make or break a new Gigafactory.

If we add to this constrained electrification model a significant uptick in consumer interest in EVs with the arrival of $2.00 plus/litre of gasoline, then it should be no real surprise to any consumer that the wait time for a number of EV models can be months or even into the next model year. 

McKinsey has suggested that to meet the projected global sale of EVs in 2030 (40 million, up from 6.5 million last year) the world will require another 200 gigafactories in addition to the 130 that are already in place. 

In some ways, the microchip shortage and other supply chain challenges that have constrained production and limited inventories at dealerships for ICE vehicles have assisted in conditioning customers to the idea that the process of purchasing a car of any sort, is not going down to the dealership, looking at dozens of the same model in different colours with slightly different equipment and trim levels until you find the one you like, and picking it up the next day.   

The pandemic and subsequent supply chain challenges may in some ways permanently alter the way we buy any car in a way that is more consistent with how consumers have traditionally bought EVs—you put in an order and you wait. 

I should add here, that a Zero Emission Vehicle Mandate isn’t going to get products to market any faster, so such a measure is not going to increase availability as some mandate proponents suggest.

Automakers are bringing on EV capacity as fast as they can, but the reality is, it takes time to build up a completely new automotive industry, with a completely new propulsion system, with its own supplier base. And it’s a supplier base that is focused on a number of critical and rare earth minerals for which we need to find a way to expeditiously get out of the ground, refine, process and integrate into battery packs. 

These new vehicles are also going to be completely dependent on the electrical grid, and the growth and hardening of that to support that more than sixfold growth in annual sales of EVs by 2030. Will the grid be ready? It is an open question.    

Finally, there is charging infrastructure. Neither the industry nor the planet can afford consumers having a bad experience with their EV purchase, such that they wish to revert back to a gasoline powered vehicle. 

Whether consumers can charge their EV quickly, where they want to, and when they want to will be a large determinant of both consumer adoption and satisfaction with the EV experience. 

It is estimated that Canada has about 16,000 chargers and the federal government has committed about $1.1 billion to install 50,000 chargers, however that target has not changed, even though the 2030 requirement ZEV sales of “at least 60 per cent” of all new car purchases by 2030 has increased, as a result of Canada’s Emissions Reduction Plan. 

Even if Canadian sales stay lower than they have typically been over the last few years, and are around 1.5 million in 2030, that suggests that in 2030 alone there would be 900,000 EVs put onto the road.

Using a conservative global metric of one charging station for every 10 EVs, that suggests that we’d need at least 90,000 charging stations for just the EVs sold in 2030—not to mention all of the other EVs that will be sold between now and 2030, so our infrastructure ambition, and the price tag for that ambition, will be much higher and that investment needs to be made right now. 

So while there is much excitement, and enthusiasm around the warp speed transition to electrified vehicles, if we don’t insert some patience and on-going assessment with respect to how all of the pieces of the puzzle are coming together—especially in the current economic context—we risk this transition being at best bumpy, and at worst coming off the rails.

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Since 2005, the Canadian Automobile Dealers Association (CADA) and iA Dealer Services, a leading provider of financial, consulting and training for new car and truck dealers in Canada, have partnered for the annual CADA Laureate Dealer Recognition Program.

The Laureate award, which is the highest honour bestowed upon Canadian dealers during the course of their careers, is awarded each year to only three out of Canada’s 3,200 plus new car dealers. The Laureate program is distinguished by a three-phase selection process that is administered by a third party. Each of the winning CADA Laureates is ultimately selected by the Ivey Business School at Western University.

AMBASSADORSHIP

The Ambassador category finalists embody a strong commitment to serving their communities and industry. 

Frank G. Howard

• Capital Auto Group
• St. John’s, Newfoundland and Labrador
• Brands represented: BMW, MINI, Subaru, Genesis, Mitsubishi, and Hyundai
• Years in business: 40 years in the industry
• Number of employees: 300+

In his own words I thought I was prepared for the call, and the acceptance, but man, I got the cold shivers. It was fantastic. My inspiration to do this work came from my mother. She always said that if you give, you’ll always get that tenfold back. Our business has been so successful for myself and my family, so we just started giving. It started in the early years, when we began a program where we contributed $25 to the community for every car we sold, and we got up to selling 4,600 cars a year. It’s something that we do, and just love doing it. We’re not looking for any awards from it. Without the community we would be nothing in the car business. They support us, and I think that’s the way every dealer feels. We wouldn’t be successful if it wasn’t for the community. So it’s great to give back.

Judge’s comments Of the five finalists, Frank Howard of Capital Auto Group in Newfoundland and Labrador is exceptional. Frank has led provincial and national dealer associations, advises and works with the provincial government, and actively supports education – essential to develop tomorrow’s business leaders. Frank played a critical role in protecting the community during the COVID-19 pandemic. He worked with CADA, ADNAL, and the Department of Transportation to provide safe transportation for the community. In addition, he developed and implemented programs to raise tens of thousands of dollars for food banks to provide for those who need it most. Frank’s social and environmental leadership is also exemplary, from making multiple business changes to reduce waste and protect the environment, to developing an electric vehicle education program for customers and the general public.  — (Kirk Kristofferson, Ivey Business School)

Sponsor comments To be recognized as an Ambassador Laureate, a dealer must go above and beyond in service to the community and the industry, and that’s Frank Howard in a nutshell. Early in his career, Frank learned that helping others gave him his greatest satisfaction. Since then, he has really committed to supporting healthcare and wellness, especially for children. Frank has served on the dealer councils of multiple manufacturers, and served multiple terms on federal and provincial association boards. He’s also had every GM in his group complete the Automotive Business School of Canada’s executive management program. Frank is a true ambassador for the industry.  — (François Blais)

BUSINESS INNOVATION

The Business Innovation award is for exceptional leaders who have built long-term success by focusing on employee growth and development, and listening to and meeting the needs of customers. 

Adil Ahamed

• Destination Auto Group
• Burnaby, British Columbia
• Brands represented: Toyota, Honda, Mazda
• Years in business: 10 years
• Number of employees: 365

In his own words I was very surprised and humbled when I got the call. My dad actually won the Laureate Award for Innovation three years ago, so this is a very meaningful validation of our vision and our approach. And I’m very honored to be recognized as a contributor to advancing innovation in our industry. A lot of the innovative work that I’ve done has been more on the entrepreneurship side of the company, processes, procedures, HR, looking ahead, what’s coming down the pipe. In my dad’s time it was more around buildings and external facing-type things. So we innovated, I think, in very different ways. I share this distinguished accolade with all our associates at Destination Auto Group, our friends at Toyota, Honda and Mazda, and our business partners. I am also deeply grateful to my family for their trust and mentorship, and my wife for her relentless encouragement and support.

Judge’s comments Among the five CADA Laureate finalists, the innovations of Adil Ahamed at Destination Auto Group in British Columbia stand out. Novel tools that enable data-driven decision-making include financial planning and analysis that models in real-time how various teams are performing relative to budget. This critical tool for senior leadership measures performance and helps identify issues as they arise, and is managed by a Chief Information Officer. Innovations in information technology have greatly reduced the group’s average issue resolution time, which enables staff to focus on business growth. It should also be noted that Destination Auto Group’s commitment to its employees’ training and development is exceptional.  — (Kirk Kristofferson, Ivey Business School)

Sponsor comments Adil carries on a commitment to innovation at the Destination Auto Group that began with his father Aziz, who is also an Innovation Laureate. When Adil took the helm, he committed to outside-the-box thinking, knowing that innovation can be a difference-maker in an industry that is changing quickly. At the core of Adil’s strategy are three key areas: creating the right structure for leadership and continuity, focusing on data to drive better decision-making and sustainability, and inspiring a high-performance culture. The results include impressive business growth, and real successes in employee retention and gender balance – challenging issues for all dealers.  — (Alnoor Jiwani)

RETAIL OPERATIONS

The retail operations of the Retail Operations Laureate winner are very impressive and are truly the gold standard for fellow dealers to aspire to.

Sonia Koller

• Otto’s Subaru
• Ottawa, Ontario
• Brands represented: Subaru, BMW, Otto’s Collision
• Years in business: 24 years (as a dealer principal)
• Number of employees: 190

In her own words I was so surprised when I found out, and that turned into being overjoyed, and then just deeply honored and really, really proud of our team. Our basic business philosophy is something that I was taught from my parents, who built this business from the ground up. They had this beautiful philosophy of ‘first and foremost, take care of the people you work with. And when you take good care of them and you care about them, they will help you take good care of your clients. And then from there, we can do good things for our community’. I think it’s the most sustainable business model, because if people are part of the solution, and you let them take ownership of that, and you respect their individual needs, they will do that for customers, who will keep coming back.

Judge’s comments Sonia Koller’s Otto’s Subaru in Ontario is exceptional, delivering impressive performance and consistency across all retail operations categories for many years. Koller’s operations are either at or near the top for the Subaru brand in Canada across multiple measures, including vehicle, parts and service sales, profitability, and customer satisfaction. Otto’s began as an independent shop built on customer service, and this legacy is reflected to this day in its customer satisfaction performance. The attention to and celebration of staff accomplishments and advancement also stands out. Otto’s Subaru has industry-leading employee retention, and has worked as a family in community service and support of its employees. Under Sonia Koller’s leadership, Otto’s Subaru has implemented sophisticated technology and systems processes across the organization.  — (Kirk Kristofferson, Ivey Business School)

Sponsor comments When Sonia and her mother took over the business after the passing of Sonia’s father Otto in 1998, some people doubted they would succeed. Almost 25 years later, Otto’s Subaru has been the top volume Subaru dealer in Canada for sales, service, and parts for the past seven years. It’s a tremendous success story. Sonia also has a long track record of championing female empowerment, allowing young women and girls to believe they can have a future in the automotive industry. She has fostered an incredible team that is committed to being the best, and the numbers show that Sonia’s strategies are very successful.  — (Gwen Gareau)

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Mercedes-Benz Canada completed the sale of its corporate-owned Mercedes-Benz dealerships in the Greater Toronto Area to a new ownership team: the AWIN Group of Dealerships and Zanchin Automotive Group.

Eva Wiese, President and CEO of Mercedes-Benz Canada, said the completion of the sale marks the next chapter in this story. “We are excited to see how the AWIN and Zanchin teams will push even harder to deliver the highest level of customer experience for our loyal customers every day.”

The OEM first announced its selection of the new ownership group in December. The company sold all of its Toronto Retail Group locations: Mercedes-Benz Downtown, Mercedes-Benz Markham, Mercedes-Benz Thornhill, Mercedes-Benz Maple (Mercedes-Benz Maple Van Centre), Mercedes-Benz Midtown, Mercedes-Benz Mississauga (Mercedes-Benz Mississauga Van Centre), and Mercedes-Benz Etobicoke.

The AWIN/Zanchin groups both own and operate Mercedes-Benz dealerships. AWIN’s Sylvester Chuang owns and operates Mercedes-Benz Oakville, Mercedes-Benz Victoria and Mercedes-Benz Nanaimo, while the Zanchin Automotive Group owns and operates Mercedes-Benz Newmarket and Mercedes-Benz Durham.

Mercedes-Benz Oakville, Mercedes-Benz Newmarket, and Mercedes-Benz Durham were all recognized with Star Dealer awards in February by Mercedes-Benz Canada.

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The Canadian used vehicle wholesale market remains relatively flat—up only 0.09% for the week ending on February 25, according to Canadian Black Book’s latest update. The market average from 2017-2019 for the same week was -0.14%.

The overall car segment (+0.14%) is up for the sixth consecutive week and continues to outperform the overall truck/SUV segment (+0.03%), the latter of which for the first time in six weeks saw prices increase slightly. In the U.S., the overall car and truck segments were down 0.61%, with the volume-weighted car segments down 0.75% compared to -0.82% the prior week.

“The Canadian wholesale market has continued to remain stable overall. Newer vehicles tend to be outperforming vehicles aged three years and older,” said CBB in its report. “Supply remains low while demand continues to weaken on both sides of the border.”

The compact car category experienced the largest price increase for the week (+0.50%), followed by near luxury cars (+0.43%) and sub-compact cars (+0.39%). And two categories saw prices decline for the week: prestige compact cars (-0.66%), and mid-size cars (-0.10%).

For trucks/SUVs, full-size vans managed the largest price increase (+0.66%) for the second straight week, followed by minivans (+0.66%) and compact vans (+0.57%). However, pickup trucks continue to struggle; full-size pickups saw the largest price declines for the second consecutive week (-0.77%), followed by small pickups (-0.47%) and full-size luxury crossovers/SUVs (-0.25%).

On retention, CBB said its Used Vehicle Retention Index finished at another historical high in February, at 163.6 points—up 1.5 points or 0.9% from January 2022.

“Year-over-year, the Index is up 43.5% from 162.1 points in January 2021,” said CBB. “Commercial vans, both full-size and compact vans saw the largest increases. Full-size pickup(s) and small pickups segment saw the largest decline for the month of February.”

In other news, CBB said it anticipates that non-residential capital expenditures and repairs will rise 8.6% to $298.2 billion in 2022. And the Canadian dollar increased slightly against the USD and finished the week off at $0.79.

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Hyundai Motor Company plans to accelerate its electrification plan, with the goal of selling 1.87 million battery electric vehicles (BEVs) annually by 2030 and targeting 7 per cent of the global electric vehicle market share by that date.

“Hyundai is successfully accelerating its transition to electrification and becoming a global leader in EVs despite a challenging business environment caused by the global chip shortage and ongoing pandemic,” said Hyundai Motor President and CEO Jaehoon Chang.

The OEM plans to strengthen its BEV lineup by introducing 17 new BEV models by 2030: 11 for Hyundai, and six for Genesis. It also plans to optimize its manufacturing capacity, and become more hardware and software competitive.

“Along with our seamless efforts to improve EV value, Hyundai Motor will continue to secure its business sustainability as a ‘Mobility Solutions Provider’ through advanced technologies of not only hardware but also software,” said Chang.

By 2030, the company wants to reach an operating profit margin of 10 per cent or more in EV businesses, by boosting competitiveness in hardware and software capabilities with its expanded lineup of models. “On a consolidated basis, it aims to secure an operating profit margin of 10 per cent,” said Hyundai.

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The Russian invasion into Ukraine will further strain supplies of semiconductor chips in the United States during a period of global shortage, according to CNBC. They say both countries are “critical sources” of neon gas and palladium, which are used to produce the chips. Techcet President and CEO Lita Shon-Roy told CNBC “This will have an impact. It will continue to constrain the chip source going into the automotive industry.” (Source: CNBC)

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The conflict in Ukraine led to a rise in gas and diesel prices in the United Kingdom where they have now reached record highs, according to Auto Express. Simon Williams, a RAC fuel spokesman, said “Russia’s actions will now push petrol pump prices up to £1.50 very soon. The question then becomes where will this stop and how much can drivers take just as many are using their cars more and returning to workplaces.” (Source: Auto Express) Read the original story…

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Tesla reportedly plans to start working on a new manufacturing plant in Shanghai, China next month as it aims to double its production capacity in the country. “Once the new plant is fully operational, Tesla will have the capacity to produce up to 2 million cars per year at its expanded Shanghai facility, the company’s main export hub, according to the people, who asked not to be identified in discussing still-private plans,” said Autoblog. (Source: Autoblog) Read the original story…

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The NHTSA is investigating approximately 1.73 million Honda Motor vehicles over reports of unexpected braking that could increase the risk of a collision. The U.S. transport safety regulator said it received 278 complaints that allege braking incidents “occurring with nothing obstructing the vehicle’s path of travel,” according to Driving. Of these, six allege a collision with minor injuries. The NHTSA is looking at the 2018 and 2019 Honda Accord, and 2017–2019 Honda CR-V. (Source: Driving.ca) Read the original story…

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Tesla CEO Elon Musk may lose a water supply contract for its German manufacturing plant. The Gigafactory continues to experience delays—another one being the possibility of losing the contract if environmental groups win a court case that challenges the automaker’s license. “If the groups win, WSE said it must cancel its contract with Tesla, and negotiations will begin again on where the plant could source its water—likely a lengthy process with no guaranteed solution,” said Driving. (Source: Driving.ca) Read the original story…

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A recent research poll by KPMG in Canada found that 71 percent of Canadians will consider an Electric Vehicle (EV) for their next purchase and half of those who responded reported that their desire to buy an EV is “greater today than it was a year ago.” 

KPMG is a full-service Audit, Tax and Advisory firm, and their findings echo research results from last year in which 68 percent of Canadian respondents “who plan to buy a new vehicle within the next five years said it would likely be either a pure or hybrid EV.”

KPMG’s findings showed that EVs were particularly appealing to those consumers in British Columbia and Ontario; with 77 percent and 74 percent respectively saying they would consider buying an EV the next time they’re purchasing a vehicle. 

Seventy-seven percent of Canadians aged 25-34 and 76 percent aged 35-44 years old also said they’d consider an EV as their next vehicle purchase. Seventy-six percent of two-car households and 75 percent of households with an annual income between $50,000 and $150,000 would also “consider buying an EV the next time they buy a vehicle.”

However, consumers stated serious concerns around driving range, recharging times, electrical grids, battery performance in winter weather, incentives, and the ability to charge anywhere, anytime. In fact, one in five survey participants said they “wouldn’t wait any longer than five minutes for their EV to charge at a non-home based charging station,” and 90 percent of survey participants said they needed to do “a lot more research,” to find the EV that’s right for them.

The poll also found that 79 percent of participants said they wouldn’t “even consider an EV that doesn’t have a driving range of at least 400 kilometers,” up from 77 percent compared to last year’s survey. 

The survey also found that a major challenge for the EV industry lies in consumer perceptions around battery performance in winter. Of the respondents, “64 percent believe EVs aren’t reliable in Canada’s cold harsh winters,” and women (69 percent) were more skeptical than men (60 percent) about winter battery performance.

According to KPMG’s research, the top two brands that prospective Canadian EV buyers are most likely to purchase from are Tesla and Toyota, with Honda as a distant third choice. 

The research also found that the auto sector is important to 89% of respondents, who said they “want action taken to grow the country’s EV production and defend the industry against external threats that would harm Canadian exports,” however three in five Canadians said they would prefer to buy an EV from “a company specializing in battery-powered automobiles, none of which currently manufacture in Canada.” 

KPMG also found that 49 percent of survey respondents “would buy an EV made by a major technology company,” which was noted as a “trend that automotive executives are already anticipating…[as] a majority of auto industry executives expect Google, Apple, Amazon, Huawei and Samsung to enter the car market with their own branded vehicles.”

Tammy Brown, partner and national leader, industrial markets, KPMG Canada said that the poll findings “show that Canadians appear not only eager to buy EVs but willing to embrace new technology entrants,” adding that “the auto industry of tomorrow will not resemble the one we know today or grew up with.”

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The Government of Canada has announced a $1-million investment in the Government of Yukon to support the installation of up to 200 EV chargers across the territory. The investment is funded through Natural Resources Canada’s Zero-Emission Vehicle Infrastructure Program (ZEIVP), and is expected to help the country achieve its climate targets. 

As part of the initiative, the Government of Yukon will install EV chargers in “public places, multi-unit residential buildings, on streets, at workplaces or facilities for servicing light-duty vehicle fleets throughout Yukon by March 31, 2023.” Recipients of the EV chargers will be selected based on demand in a transparent process. 

Brendan Hanley, Member of Parliament for Yukon told the press that the “installation of 200 EV charging stations in Yukon [will] reduce our emissions and will help make it possible to travel to all road-accessible communities in the territory using electric vehicles by 2027.”

Since 2015, the Government of Canada has invested $1 billion to make EVs more affordable and charging accessible. “These investments support Canada’s target of ensuring all passenger vehicles sold in Canada are zero-emission by 2035 and are critical to achieving Canada’s ambitious climate change goals,” the government announced in its press release, adding that the EV chargers in Yukon will contribute to “the establishment of a coast-to-coast network of fast chargers.”

To date, over 125,000 Canadians and Canadian businesses have taken advantage of federal incentives to purchase zero-emission vehicles. “Investing in more charging stations, like the ones announced…in the Yukon, will put more Canadians in the driver’s seat and on the road to a net-zero future,” the Honourable Jonathan Wilkinson, Minister of Natural Resources said.

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