I call this meeting to order.
Welcome to meeting number 15 of the Standing Committee on Transport, Infrastructure and Communities.
Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, January 31, 2022, the committee is meeting to study the state of Canada's supply chain.
Today's meeting is taking place in a hybrid format, pursuant to the House Order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application.
Per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during proceedings.
I will take a moment to make a few comments for the benefit of our members and our witnesses.
Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike and please mute yourself when you are not speaking.
For interpretation, those of you who are on Zoom have the choice at the bottom of your screen of either “floor”, “English” or “French”. Those of you who are in the room can use the earpiece and select the desired channel. As a reminder, all comments should be addressed through the chair.
For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can, and we appreciate your patience and understanding in this regard.
Members, appearing before the committee today we have, from the Canadian Vehicle Manufacturers' Association, Mr. Brian Kingston, president and chief executive officer; from General Motors of Canada Limited, Mr. David W. Paterson, vice-president, corporate and environmental affairs; from Global Automakers of Canada, Mr. David Adams, president and chief executive officer; from Lion Electric, Mr. Patrick Gervais, vice-president, marketing and communications; from the Prince Rupert Port Authority, Mr. Ken Veldman, vice-president, public affairs and sustainability; and from Sysco Canada, Mr. Randy White, president.
Welcome back, Mr. White.
As well, from the Vancouver Fraser Port Authority, we have Mr. Greg Rogge, director of land operations, and Mr. David Miller, who is appearing in person today and is senior advisor to the executive director.
We wish now to begin the opening remarks with the Canadian Vehicle Manufacturers' Association for five minutes. The floor is now yours.
Mr. Chair and honourable members, thank you for the invitation to appear here today as part of the committee's important study about the state of Canada's supply chain.
The Canadian Vehicle Manufacturers' Association is the industry association representing Canada's leading manufacturers of light- and heavy-duty motor vehicles. Our membership includes Ford Motor Company of Canada, General Motors of Canada Company and Stellantis FCA Canada.
Canada's automotive industry was responsible for over $13 billion in annual economic activity, 117,000 direct jobs and an additional 371,000 jobs in aftermarket services and dealership networks in 2020. The industry is Canada's second-largest export sector, with $36.5 billion in exports in 2021.
CVMA members are leading a new wave of automotive investment in Canada. Over the past two years, Ford, General Motors and Stellantis have announced $11.5 billion in investment, which will create over 6,000 direct jobs and tens of thousands throughout the auto supply chain. Most of this new investment is dedicated to electric vehicle assembly and the battery supply chain.
Canada's domestic auto industry is competitive as part of the highly integrated North American market. Every day, vehicles, parts and components are shipped across the continent as part of the assembly process. To make this happen, companies invest millions in complex logistical plans that rely on scheduled, uninterrupted delivery to and from the plants. Any delay can impact production and potentially shut down a line, which costs millions of dollars and puts jobs at risk.
Supply chain challenges continue to be a major headwind facing the industry, slowing the return to pre-COVID North American production and sales levels. First-quarter vehicle sales are down 12.7% from last year. North American auto production is expected to reach 15.2 million units in 2022, which is one million units short of pre-COVID production.
These supply chain challenges are driven by semiconductor shortages, COVID outbreaks, the Russian invasion of Ukraine and the recent blockade of the Ambassador Bridge, to name a few. While some of these challenges are outside of Canada's control, the blockade at the Ambassador Bridge exposed weaknesses in our trade infrastructure that should be addressed to make the supply chain more resilient.
The Ambassador Bridge blockade closed a critical commercial border crossing that is responsible for approximately one-third of all Canada-U.S. trade. Almost 7,000 trucks cross each day, and a significant portion of these are tied to the auto industry.
Due to the blockades, automotive companies on both sides of the border undertook extraordinary measures and cost burdens to deal with the sudden trade diversion. Some plants were forced to cease production. Company contingency planning efforts were impacted by a lack of communication and coordination among local, provincial and federal levels of government. Companies were challenged to find an appropriate point of contact that could provide oversight and direction to support decision-making. In the absence of a clear response plan, CVMA had to take the extraordinary step of supporting an injunction against the protesters. The injunction was successful and ultimately led to enforcement action to clear the blockade.
Canada needs to do more to support a safe and reliable trade infrastructure to make the supply chain more resilient as part of the integrated North American auto market. Failing to act now could impact our competitiveness for existing and future investment.
With that, we recommend five things for your consideration today.
First, identify a clear federal lead to provide guidance and direction when there is any threat to cross-border movement of commercial goods. This person or entity should have the authority to coordinate with other levels of government and counterparts in the U.S. to ensure decisions are made quickly and disruptions are dealt with swiftly.
Second, reinforce efforts to complete the Gordie Howe International Bridge and access to it via the construction of direct access from Ontario's Highway 401 to prevent future disturbances.
Third, increase border service agent staffing to ensure all lanes are consistently open at high-volume ports of entry. This should be accompanied by investments in training opportunities for border staff to support improved consistency and interpretation of bulletins or regulatory changes.
Fourth, enhance marine port infrastructure to facilitate vehicle loading and unloading, support the supply chain and ensure our domestic industry can reap the benefits from Canada's trade agreements.
Fifth, ensure that any new customs administrative processes that are introduced take into consideration the lead times necessary to make complex customs system updates and mitigate any undue cost increases or administrative burden that would impact the competitiveness of businesses.
Thank you so much for your time today. I would be pleased to answer any questions.
Thank you for the invitation to speak with the committee and for your interest in our story at General Motors Canada.
As you may be aware, GM Canada is making large investments in Canada with the reopening of our Oshawa plant and the transformation of our plant in Ingersoll, Ontario, to be Canada’s first full-scale electric vehicle manufacturing operation, starting later this year.
We have grown to more than 1,000 engineers doing R and D, software and technology testing in Canada, and significantly we recently announced a half-billion-dollar investment in Quebec with a joint venture partner. We will build a factory to process cathode active materials from critical minerals needed for our General Motors Ultium EV battery supply chain in North America.
At GM we not only depend on well-functioning supply chains; we are often the purchasing customer at the top of the chain. As you study supply chains, it is often useful to follow the money.
At GM, our supply chains are much more than containers moving parts to our factories on boats, trains and trucks. In the auto sector, supply chains are global. Our supply chains have not only been disrupted by COVID pandemics, wars, the effects of climate change, sanctions and disruptions at the Canadian border, as Brian has mentioned; they have also been impacted by the new CUSMA agreement, or USMCA; by other regulatory changes; and by changing technology. The wider shift from a goods-based economy to a digital or intangibles economy also has impacts that policy-makers need to understand.
I would like to offer a few initial thoughts.
First, it may be human nature to focus on the problems in supply chains. I think, however, that the disruptions that we faced in the past few years are actually far less remarkable than the supply chain solutions that have been found to keep things moving. Supply chains are about infrastructure, logistics and technology, but mostly they are about people solving problems.
For example, when the pandemic hit, General Motors was able to quickly leverage our expertise and our supply chain partners to quickly make ventilators at scale to save lives, and here in Canada, we quickly secured a medical manufacturing licence at the Oshawa auto plant and made 10 million medical masks for first responders across Canada. When semiconductor chips were scarce or when bridges were blocked at the border in Windsor, the solutions to keep our factories working were, frankly, remarkable.
My point is that there is amazing capability and resilience in our supply chains and the people who run them. If we work together with the private sector to learn, prepare and adjust, we can remain competitive.
A second thing I encourage you to consider is that supply chains are changing as our products and services change. General Motors is rapidly shifting to electric vehicles and self-driving vehicles. This has led us to re-examine our traditional supply chain approaches to now take a more integrated hands-on approach, including new partnerships and investments.
Part of our electric vehicle strategy has been to own our own battery technology, branded Ultium, as we innovate to reduce costs and benefit our customers. As we ramp up to make millions of electric vehicle batteries, we want to be purposeful in building a sustainable EV supply chain in North America, including critical minerals, processing and battery systems development.
This presents a generational opportunity for Canada with its distinct abundance of key minerals and our very good fortune, since the 1960s, to have our auto sector fully integrated into the North American market. As the new EV market grows, we in Canada have the opportunity to not only mine and move critical minerals; we should also process them, recycle them, and purposefully develop the technology and intellectual property all around them so that we're no longer Harold Innis’ hewers of wood and drawers of water.
As I noted, we are very excited to be back manufacturing in Quebec, where we plan to begin processing materials for EV batteries by the start of 2025.
In this regard, we welcome the budget’s $3.8-billion critical minerals plan. Now the challenge will be to think carefully not just about how to best to spend that money; we must also follow the money and the market. If Canada and the United States are to be the best of integrated EV supply chain partners, we will need to align our approaches to regulation and supply chain resilience.
Supply chains, therefore, are not just a challenge. They are a generational economic and environmental opportunity, but we will need to get the policy framework right.
Thank you very much. On behalf of the 15 members of the Global Automakers of Canada, I appreciate the opportunity to appear before you today.
Our members include Canada's largest automaker, Toyota, which last year produced more vehicles than Ford, GM and Stellantis combined, and Honda, Canada's second-largest automaker, in addition to 13 exclusive Canadian distributors of their brands in our country.
Last year our members represented 62% of all vehicle sales in Canada and 65% of all light-duty vehicle production in Canada. While our members have traditionally been characterized as importers, approximately 56% of the vehicles that are sold by our members in Canada are produced in the traditional CUSMA-USMCA region.
As a result of the composition of our membership and where they produce vehicles and ship from, they have significant experience with supply chain infrastructure by truck and rail, running both north and south in the NAFTA region, east and west across Canada and with the port authorities on the east coast and the west coast, as well as the Port of Montreal.
Suffice it to say that there have always been long-standing infrastructure issues within Canada that need to be continually monitored, addressed and modernized if we, as a trading nation, wish to continue to create a hospitable environment for foreign direct investment in our country. Substantive efforts at federal and provincial levels to attract investments to Canada can be undermined by infrastructure that is congested and at times lacks the reliability and predictability that investors seek to ensure they can secure the necessary production inputs into their facilities as well as get finished goods to market.
I think it is important for the committee to note that, perhaps like other industries, Canada's supply chain infrastructure issues may be somewhat masked by the impact of the pandemic over the course of the past couple of years.
For instance, automobile production in Canada fell 28% in 2020 from 2019 levels, and 2021 production was down fully 33.5% from 2019 levels. Likewise, vehicle sales in Canada fell 20% in 2020 from 2019 levels and were still down 14% last year from 2019 levels. The automotive manufacturers in Canada export roughly 85% of what is built here and, conversely, Canada imports about 85% of what is sold here.
These substantially lower shipping volumes over the past two years suggest that existing challenges will be amplified as both production and sales volumes return to more traditional levels. The return to more traditional levels of both production and sales is expected to happen at a very modest pace, however, owing to the ongoing shortage of semiconductor chips, which has resulted in lost vehicle production globally of about 12 million units.
This lack of vehicle production has resulted in low inventories of new vehicles for the past two years, which has had the secondary impact of higher prices for new vehicles and subsequently for used vehicles as well.
Increasingly, our supply chain challenges are not related simply to things like port congestion or rail strikes, but can also be tied to the challenges around our changing climate, where fires and flooding compromise or destroy key pieces of rail, road and port infrastructure that are not often quickly or easily rebuilt.
Our members have also been working with their supply chain partners to ensure higher throughput of electric vehicles at port facilities through the installation of charging stations and other modifications, as well as railcars equipped to transport these vehicles.
In this regard, as our industry transitions to zero-emission vehicles, we were pleased to see the announcement of the clean growth fund in last month's federal budget, with a commitment to restructuring critical supply chains, as well as $1.5 billion allocated under the critical minerals strategy for infrastructure to support the development of a critical mineral supply chain that will be essential to maximizing Canada's resources and opportunities to become a critical component globally of materials and minerals necessary for the development of electrified vehicles.
I wish to thank the committee again for the opportunity to appear before you today. I would be pleased to answer any questions you have.
Thank you, Mr. Chair and committee.
As you may know, Lion Electric is the leader in electrification of transportation. We're an OEM and we build medium- and heavy-duty all-electric trucks and buses. Every day, we help make Canada one of the cleanest economies in the world and help the country reduce its greenhouse gas emissions.
Of course, financial incentives and strong policies are essential when we want to develop a new sector, such as the electrification of transportation, just as it is necessary to be ambitious to achieve our objectives. However, none of this will have a real local economic impact if our businesses are disadvantaged compared to our American, Asian and European neighbours. There is no need to tell you that the competition is fierce for the Canadian flagships.
We believe it is essential to advocate the creation of a strong Canadian supply chain not only in the electrification of transport but for all other manufacturing activity, a complete ecosystem from natural resources to the production of finished product and all the way to recycling. All of this needs to include local purchases.
We as Canadians have always distinguished ourselves with innovation. A strong Canadian supply chain will continue developing our cutting-edge expertise to serve generations to come and create really well-paid jobs.
We're asking to develop regulations that require assembly in Canada in RFPs, and financial assistance programs. This is currently what every country in the world is doing in developing policies to encourage the local economy. It is quite normal for governments to encourage their domestic businesses and the creation of jobs in their territory, especially when it comes to the development of a whole new economy like the electrification of transportation. We need to abolish the lowest-bidder policy. The lowest bidder is an innovation killer.
Without a strong signal from the Government of Canada on assembly in Canada, local companies will find themselves at a competitive disadvantage compared to foreign companies. We have also seen the impact of the pandemic. It is important that as a country, we become more independent and more vertically integrated.
The electrification of transportation alone can have a major effect on the creation of a new, growing green economy. Through innovative public policies, the Canadian market for zero-emission vehicles could grow from a value of $1 billion in GDP and the creation of 10,000 jobs in 2015 to a value of more than $150 billion in GDP and the creation of millions of jobs by 2040.
These changes will improve our energy security and positively impact the return on investments that electric fleets will experience through less maintenance, a longer life cycle and lower maintenance costs.
Building our supply chain is also a solution to fighting climate change. Transportation is one of the biggest GHG emitters, and working with local companies means less transportation and net GHG emissions.
Let's put the odds on our side and start building a strong Canadian supply chain, because we are already behind.
Thank you. I will be happy to answer any of your questions.
Good morning from the traditional territory of the Tsimshian people on the north coast of British Columbia.
As many of you will know, the Prince Rupert Port Authority is responsible for the overall planning, development, marketing and management of commercial port facilities within the Port of Prince Rupert. We're proudly Canada's third-largest port, and growing. We currently have over $2 billion in our advance project portfolio, either under construction or nearing the end of environmental assessments and final investment decisions.
The Prince Rupert gateway is a strategic trade corridor for Canada, and it continues to facilitate critical international market access for western Canadian exports and ensure the direct connection for consumer imports destined throughout Canada and the United States. Currently, the port facilitates these exports and imports through six primary terminals that provide intermodal, dry bulk and liquid bulk capacities and handle diverse commodities, including consumer goods, manufacturing inputs, biorenewable and transitional energy, forestry, and petrochemical and agricultural goods, to name just a few.
Building upon the natural advantages of Prince Rupert, including being the closest west coast port to Indo-Pacific markets, the port has continued to grow and diversify our cargo volumes, unlock private sector investments in new infrastructure capacity and add value to Canadian trade. The port has handled approximately $60 billion in trade value annually and supports over 6,000 gateway operation jobs throughout northern B.C., resulting in over $500 million in annual wages and $145 million in annual government revenue contributions.
Our growth and success have been thanks to our strong relationships and collaboration with local community and indigenous partners. Local indigenous residents, indigenous governments and indigenous-owned businesses have participated significantly in the economic opportunities presented by growth and expansion of the Prince Rupert gateway. Our long-term sustainable growth is directly correlated to the continued collaboration and participation of our indigenous partners.
We've witnessed major climate change events impacting communities and domestic supply chains in southern B.C., the ongoing impacts of COVID, supply chain and market disruptions and global conflict. As disruptions will continue to occur, we need to ensure that Canada has reliable and resilient supply chains to ensure the free movement of Canadian exports so that communities across the country can better manage economic and social challenges that flow from those disruptions.
To build greater resiliency, we must work to have greater redundancy in our west coast supply chains, ensuring that both major gateways, Prince Rupert and Vancouver, can provide Canada with enhanced trade capacity and logistics capabilities as disruptions occur.
The recent global conflict in Ukraine has highlighted Canada's need to support global partners. As Indo-Pacific and western European nations are looking globally for new sources of energy, Canada needs to expand energy export capacity to provide our global partners with access to clean, responsible Canadian energy. Prince Rupert's connectivity to western Canadian energy production centres and ongoing support for low-carbon energy trade to those markets make Prince Rupert a logical focus for growth of critical energy export infrastructure.
As the committee undertakes this important work on ensuring the strengthening of our supply chain capacity and resiliency, I leave you with these recommendations:
One, we need to ensure we are developing not just new terminal capacity, but just as importantly, logistics and transloading capabilities that provide more value, competitiveness and flexibility for Canadian trade. In Prince Rupert, this is a strategic focus for us, and we have been working to finalize major export and import transloading services through the Ridley Island export logistics project.
Two, to support and achieve the international market transition to renewable energy and provide global partners with access to Canadian energy, a focus on enhancing export capacity is necessary. Prince Rupert has become a leader in energy transition, thanks to the development of Canada's only west coast LPG export terminals, and we're looking to expand on this success with the development of the Vopak Pacific Canada terminal.
Three, to meet Canada's current and future supply chain demands, we need to have more transparent and efficient regulatory processes that ensure appropriate and timely decisions are made on vital trade infrastructure. Delays in regulatory processes have hindered the development of port projects that would have provided much-needed supply chain relief.
To be clear, we're not advocating less robust review, but more timely, more certain and more transparent processes.
Thank you once again for the invitation to appear today to discuss the important role that the Port of Prince Rupert continues to have in Canada's supply chain and trade agenda. I look forward to answering your questions.
My name is David Miller. I'm senior adviser to the executive at the Vancouver Fraser Port Authority. I'm joined from Vancouver by my colleague Greg Rogge, director of land operations.
It's our pleasure to be here today to provide the port authority's perspective to your review of issues facing Canada's supply chains.
As a Canada port authority, we're federally mandated to enable trade through the Port of Vancouver while protecting the environment and considering local communities.
The Port of Vancouver is Canada's largest and most diversified port. We're about equal in size to the next five largest ports combined. The port handles the most diversified mix of cargo of all North American ports.
In 2021, despite the ongoing pandemic and global supply chain challenges as well as the extreme weather events in B.C., cargo volumes through the port increased by one per cent over the previous year. Also, 2021 saw record container volume for the fifth consecutive year, and despite the severe drought on the Prairies, record volumes in the first half of the year meant we still had the second-highest volume of grain exports in history.
While we continue to deal with challenges and unpredictability across the supply chain, the port is operating efficiently, and we've been able to weather the storm better than many ports around the world. We were also very pleased that in April we were able to welcome cruise ships back to the port after a two-year absence.
Our port has been a major beneficiary of the national trade corridors fund and its predecessor programs. By working together with our customers, the terminal operators, railways, trucking companies, municipalities and indigenous groups, we've been able to set priorities and access significant funding to address bottlenecks, thereby improving the capacity, efficiency and safety of our supply chains. The government funds have unlocked billions more in private sector investment in new and existing terminals and rail and highway corridors.
The past two years have highlighted a number of supply chain vulnerabilities that require action.
First, we've seen how the acute industrial land shortage in Vancouver and the Lower Mainland is constraining Canada's core supply chains. That's been brought into focus as Canadian exporters of containerized goods have faced challenges in accessing the empty containers that they needed in order to export goods. The container issues are globally based but have been exacerbated by our region's land challenges.
A second point I would emphasize is the importance of data sharing among all the supply chain players. We're leading the data-sharing and analysis project in the gateway program and need the co-operation of all port users to ensure its success.
The most consequential vulnerability we're facing is that Canada's west coast is on track to run out of container terminal capacity as early as the mid-2020s. If that happens, as a country we're staring at a future of prolonged supply chain congestion. It also means a loss of trade sovereignty, with greater reliance on U.S. ports for Canada's market access. Effectively, we'll see a repeat of the supply chain challenges Canadians are experiencing today due to global factors, except those challenges will return as a made-in-Canada problem.
There are currently four container terminals at the Port of Vancouver: two in the inner harbour, one in the Fraser River and one at Roberts Bank. Roberts Bank is of particular importance. With container ships continuing to grow in size, the largest ships cannot pass under the Lions Gate Bridge to reach the inner harbour and are able to access only Roberts Bank Terminal.
For more than 10 years, the Port of Vancouver has been focused on the solution to this capacity challenge, with strong support from our indigenous partners. The port authority is leading the Roberts Bank Terminal 2 project, which we've designed under our public interest mandate, leveraging our deep experience in building sustainable infrastructure to meet Canada's needs and ensure capacity and competition for Canadian importers and exporters. This project will be built on the same basis as previous major projects at the port, including the existing terminal at Roberts Bank. The port authority will build the terminal and lease it to a terminal operator, with the lease covering the cost of construction.
In anticipation of this project, significant gateway and private sector funding has already gone into a number of road and rail projects specifically focused on building grade separations and new roads to mitigate the impact of increased traffic on the communities along the rail corridor to Roberts Bank.
This is a critical project for Canada and Canadians, and we're hopeful for a positive decision this year.
Thank you for the opportunity to appear today. We look forward to your questions.
Thank you to all of our witnesses for joining, and some for rejoining, given our that our committee was cut short last time. I appreciate it.
On that note, Mr. White, I want to give you the opportunity. We finished last with your comments in the last committee. You talked about some of the operations you have in the U.S., which basically help run food supply for emergency disaster relief in many states. You essentially have warehouses of trucks ready in case of a hurricane.
I want you to remark a little bit not just on getting food or key supplies across that border, but also on some of the bottlenecks you faced, such as the border regulations and the red tape.
Could you expand on that and perhaps provide a suggestion to the committee about how we can alleviate some of that?
Thank you. I'll be brief.
I appreciate the opportunity to come back today after Friday's abrupt closure of the meeting.
On the topic and the question asked, across the U.S., Canada and parts of Europe we represent the food service distribution logistics business, supplying food products to the food-away-from-home industries that we all enjoy, whether it's restaurants or hotels, as well as health care locations and whatnot.
In particular to this question, we faced challenges a few times recently due to extreme wildfires and flooding in Alberta and British Columbia. The challenges we faced and suggestions related to access into and out of the U.S. of North American food products in order to serve British Columbia more effectively in a crisis were highlighted.
As we think about the challenges and the recent appointment of a minister of crisis management, the recommendation is to look at ways to work in co-operation with the U.S. border and the U.S. government to expedite decisions on opening and allowing the free movement of food and emergency goods into and out of our countries in a crisis. This is the topic we bring to the table as being important.
We don't have suggestions on how to build second and third rail lines and highways into and out of British Columbia. That's the real problem that exists. That's why we have this challenge today. It comes back to allowing a swift and efficient opening and closure of border access.
We found that during the most recent challenges—the floods in British Columbia—the Canadian government was very supportive of conversations for working through border access into and out of Canada to allow support for B.C., but the pandemic challenges at the same time created the red tape that prevented us from moving into and out of the province swiftly.
Food needs to move by the hour, not by the month. Especially in a crisis, in getting food to hospitals and locations in dire situations in British Columbia, we were hindered by these challenges. That's—
I'm absolutely happy to, and thank you for the question.
I have seen commentary to that effect, but the facts are clear when you look at the automotive industry. Significant costs were incurred by companies to come up with solutions to work around the Ambassador Bridge. We saw shipments being routed to the Blue Water Bridge, for example. Ultimately, we did see production shutdowns on both sides of the border, which had an immediate impact on jobs. Volumes did go down in the auto industry with respect to shipping. There was a job impact and there was a cost impact.
I also note that comparing the data this year to the data last year really isn't an adequate comparison. We're in a unique environment right now because of all of the supply chain challenges related to COVID. Overall trade volumes are down quite significantly from pre-COVID levels.
I don't think those comparisons are adequate. I can assure you the impact was serious and significant.
Sure. I'm happy to start on that.
Automakers are investing hundreds of millions of dollars into, first of all, building an electric vehicle supply chain as part of the integrated North American automotive market, and with that, more resiliency is being put into the auto supply chain.
One simple example is the semiconductor shortage I mentioned. Automakers have been making announcements with respect to joint ventures and partnerships with semiconductor manufacturers to have a more direct line of sight into that manufacturing process. In addition to that, in the United States the CHIPS act is going forward with $52 billion to enhance U.S. domestic chip manufacturing, which will have a very, very positive impact on the North American industry. A lot is happening to make automakers' supply chains more resilient.
I'll build a bit on something Dave Miller said. We are facing waves of inconsistency, so you get what you plan for. In terms of resiliency, we work very closely with incredible partners in the rail industry and others to be able to very quickly respond when things take place.
To your earlier question, the impact was hundreds of millions of dollars because of the Ambassador Bridge. It's not just the Ambassador Bridge. We face rail strike threats and blockades, and we have to be able to respond to these things quickly. The more that you can plan in advance for these things, the better.
One other aspect, building on what Brian said, is that with a technology change to electric vehicles, for example, the supply chain will change as well. While we have sourced engines and transmissions for 100 years, we're going to now source batteries. The batteries will need to source minerals. Some companies have different strategies for how to approach that, but in our case it will involve more ownership or investment in some of the aspects of that supply chain.
As we would describe it, we have these enormous tiers of suppliers—often three or four—but we'll be more engaged and even take equity positions, as we're doing in Quebec, where we're building cathode active material processing.
My first questions are for Mr. Gervais, from Lion Electric.
You mentioned earlier that, during the pandemic, you used strategies like stocking more of some products needed to put together your orders and getting more suppliers.
First, do you feel these hardships will continue over the long term, or is it a short-term situation?
Second, in your opinion, to what extent do you feel the government could introduce policies to help you deal with these types of situations?
To accelerate the electrification of transportation, we truly believe there are several factors involved: legislation, incentives, the supply chain and speed.
Regarding the third factor, the supply chain, if you develop more local expertise, you're going to increase volume and reduce costs. We aim to do that.
We want to create ecosystems. We already have a lot of expertise and knowledge in this area. In Canada, we're very innovative.
Policies that promote local business development would help expand our local expertise and supply chain. I'm not necessarily talking about Canadian companies. I believe we also need to attract foreign investment if we want foreign businesses to set up shop here.
I'm talking about the chain from ore and critical mineral development to recycling. We feel it's very important to attract investors, to get people to set up shop here and increase production volume. That will lead to reduced costs. The sooner we do that, the more competitive we'll be in the local and international markets.
I will answer your question in English.
The investments we're making are being made with our suppliers and in joint venture. These are new supply chains in many ways.
In the electric battery world, much of the supply of what has gone into electric batteries has been sourced traditionally from Asia, in places ranging of Indonesia to China, etc., so we have a really historic opportunity to localize the electric vehicle battery industry in North America. That has all kinds of geopolitical benefits. It has business benefits and the like, but they have to be predictable. They have to be competitive..
The good news is that Quebec is extremely competitive for the processing of minerals because of our abundance of affordable, low-GHG power and excellent infrastructure, etc. We've been incredibly impressed with Quebec and the work that is being done there. We will develop our supply chains in partnership there.
I can. Thank you, Taylor.
Obviously there was a very unexpected event there. Especially with our partners at CN, we were able to divert several shipments that otherwise would have been bound into and out of Vancouver for a number of products, including agri and coal containers. Certainly a lot of additional resources were dedicated to that, not just from a port perspective but from a railway perspective, to ensure that we were able to be part of that solution in terms of keeping that commerce moving and responding as effectively as possible during that time.
In a larger sense, what it really spoke to was the value to Canada of developing that redundancy, if you will, on the west coast. The value of ensuring that we have the capacity and capabilities to manage those situations as nimbly and as effectively as possible was really brought home.
Certainly that isn't just in case of emergency. The reality is that capacity competitiveness and having flexibility and options for shippers—not just in terms of a geographic supply chain that's being used, but different modes—adds value at the end of the day to our exporters and our importers. On an ongoing basis, that's going to be really key for Canada's future, especially when you start to look at the development of the Indo-Pacific region.
As I said in my opening remarks, we've seen remarkable growth over the last 10 to 15 years, really to the benefit of Canada, and we expect that our next decade will be just as dynamic. Certainly on the intermodal side of things, we're seeing already significant expansion again. Our partner, DP World, will be completing a container terminal expansion in July of this year that will add significant capacity, and we are entering another phase of expansion at Fairview container terminal. As well, we have entered into a feasibility assessment agreement with DP World to look at an additional terminal in the future that would bring another 2 million TEUs of capacity to the Prince Rupert gateway.
But it's not just all an intermodal story. It's also very much a bulk story, and in particular as we see Canada transition to being a leader in lower-emission or zero-emission energies, the export supply chains for that are going to be absolutely critical. Prince Rupert has been playing a leading role already, particularly in terms of LPG exports and propane. We've had two terminals developed by both AltaGas and Pembina within the port of Prince Rupert in the last two years.
As we start to look at future fuels, whether that be other LPGs, whether that be methanol, etc., we're very well placed to be able to do that. One of the things that makes us really well placed is our very sustainable approach to development, both environmentally and with our partnerships with indigenous communities, but there's also the fact that we've got room to grow. That room to grow, as you've heard from my colleagues in Vancouver, is a challenge in Canada, and certainly the north coast of B.C. does offer some really unique opportunities to be able to do that and do it within a master infrastructure plan that we continue to execute here to ensure that it's done sustainably and safely.
Yes, the supply chain issue has become a common verbiage, from Home Depot to car dealerships to everything else these days. What it's indicative of is the fact that manufacturers have obviously conveyed to their dealers the challenges around securing product. This is owing to comments that Mr. Paterson and Mr. Kingston and I myself made concerning the issues relating to the pandemic. The most obvious challenge has been chip shortages, but the industry has really been fraught with all sorts of different challenges.
Mr. Gervais mentioned glue, for instance. There have been a myriad of different supply chain challenges. This is obviously causing production delays for vehicles of all sorts, whether they be EVs or ICE, which is resulting obviously in lower inventories at dealer lots, which is probably the reason dealers are notifying their consumers that they will challenged to supply vehicles for the foreseeable future.
Thank you. I'd be happy to.
I mentioned the size of our investment portfolio earlier. We have private sector investment ready to be deployed. The reality is that we have projects, whether export logistics transload or Vopak Pacific Canada and their proposal to move more transitional fuels on an export basis. These are absolutely critical in terms of time.
To be clear, the suggestion is not to remove red tape but to make these processes become more efficient and transparent. These are small projects that don't meet the threshold for a full, designated project under the Impact Assessment Agency, yet it continues to take years to complete an environmental effects evaluation. We just need it to be faster.
These global supply chains are critical to Canada's competitiveness. We often think about it on an export basis, but what we're hearing today is that it's also on an import basis. In order to be able to develop these kinds of competitive capacities within Canada, we need to have a fully integrated, leading-edge supply chain. As we look to bring in these critical pieces of trade infrastructure, lagging behind our competitors in being able to put these capacities and capabilities in place is to our own detriment. The rest of the world is moving very fast. We have to find ways to be competitive on a timely basis as well.
We were first among the auto companies to make a significant processing announcement, but we're certainly not the only one. There are a number that are moving quickly. We see that different provinces are moving in this area, but they're doing so because of their constitutional responsibilities. Quebec perhaps moved the most quickly and impressively in this regard. Ontario is taking some steps as well. We need to align our federal processes.
Some of these issues are going to be not dissimilar to what we just talked about with regard to the port of Vancouver, and that's going to be the timing of being able to accelerate current reserves that are in place. For example, in the electric battery area, one of the areas that Canada has a distinct advantage in is nickel. It's one of the most essential of the processed materials, particularly for cathode active materials. We don't have huge resources in the United States or Mexico in that area. There are some, but that's just one example of where we're blessed with some competitive advantage.
Being able to move or accelerate those reserves and being able to then coordinate the processing of them means integration between federal and provincial governments. It's about resources and regulatory timing to be able to move forward.
I have to say that I am impressed with Quebec being on the front foot to try to just solve problems day in and day out. I'm doing this half of my day every day to move those things forward. When you look at the opportunity, it's huge. We'll probably see a significant uptick from what we're doing already.
My next question is to the port authorities, maybe to Mr. Miller or Mr. Rogge, who I guess is the land person in charge at the Vancouver port authority.
We talked about the potential challenges to ports and the congestion there. What are the opportunities that are available at our inland ports? Calgary, in my riding, has the airport. We have CP headquartered here in Calgary, with a connection to Vancouver, but we also have the CN spur line. What are the opportunities from the port's perspective here in Calgary or in Edmonton, given the shortage of land in Vancouver?
My question is for Mr. Kingston from the Canadian Vehicle Manufacturers' Association.
Over the past few months, I've noticed that your association has been critical, to say the least, of steps the government has taken to electrify transportation. In particular, you have been critical of the targets.
In your opinion, why doesn't the industry have the resources to electrify transportation? Do you think the government has a strategy for reaching those targets?
I'd like to hear your comments on that. Then I will ask you some more questions.
As I've outlined in my remarks, the industry and CVMA members are investing billions into electrification. You're going to see more and more vehicles coming to market, and many of these vehicles are going to be built right here in Canada.
The challenge we're seeing with the government strategy is on the demand side of the equation. We're being very successful in building an EV supply chain here in Canada, but in order to achieve the targets that the government has set out, we have to help consumers make the switch to electric.
We know what those barriers are. They've been very well documented by government surveys and by industry surveys. It is the cost of electric vehicles. They are more expensive than gas-powered vehicles. As we've outlined, due to some of the supply chain challenges, you are actually seeing the prices increasing. On top of that is charging infrastructure. No one will buy an electric vehicle if they don't think they can charge it at home or access convenient public charging infrastructure.
While we're completely aligned with the government on the ambition to get more Canadians into electric vehicles, the government's approach is to introduce a regulated sales mandate to regulate the vehicles that Canadians buy. That is not the right approach. Leading jurisdictions around the world, the top four countries that are leading in ZEV adoption, don't use the regulatory sales tool to do that. What they've done is build comprehensive charging infrastructure and a range of incentives to help every Canadian purchase and make that switch to electric. We'd like to see more done on that. We have plenty of ideas on how to achieve that and ultimately work with the government to get to the sales targets that they have laid out.
I'd like to pick up right where Mr. Barsalou-Duval left off with some questions to Mr. Paterson from GM, for no other reason than that I drive a GM electric vehicle, and it's been doing really well for my family and me. I'm keen to ask some questions about these electric vehicle mandates.
Canada's climate plan leans heavily on the adoption of electric vehicles to meet the emissions targets. They want 20% of light-duty vehicles sold by 2026 to be zero-emission vehicles. Right now we're at 5%, so we're not going to hit 20% with the current policies that are in place and with the current patterns of adoption.
Around the world we see jurisdictions that have these mandates in place, and I think, a little bit contrary to what Mr. Kingston said, we tend to see these jurisdictions have higher adoption, and they have more supply of vehicles for a consumer. Certainly in Canada, most of the electric vehicles sold are in Quebec and B.C., the two provinces that have supply mandates.
My questions are for Mr. Paterson from GM. First, what is GM's position on a national ZEV supply mandate? Second, putting yourself in the shoes of the federal government, given the goals that we have and given what we see around the world, why wouldn't you put in place one of these supply mandates to make sure consumers have access to the vehicles they want to buy?
First of all, I completely agree with what Mr. Kingston just said. Being able to move Canadians to electric vehicle purchases is not simply a function of pushing demand. My company is all in on electrification. We're going to have all of our light-duty vehicles electrified by 2035, and we have a slew of them coming into the market right now. We're making a $35-billion bet on this, and it will be a complete disaster if we cannot sell those vehicles.
What's different in the electric vehicle area is consumers. Consumers have to make this decision. As Brian just said, if the consumers are not able, in the transition period while EV batteries and vehicles are more expensive, to have some assistance to move EVs, or if there is no sufficient charging—you can't charge in your apartment or you can't charge on your street—people are going to make decisions with their wallets and with their sensibility.
We have to join the dots between these policies. Countries like Norway are famously talked about as having the highest EV adoption level. They don't have sales mandates and they are oil-producing countries. What they do is have very smart incentives for consumers to get them attracted to electric vehicles. We need that to take place or else our electrification strategy will fail, and we need to make sure the electric grid is going to be ready to go for those things.
You have to join the dots. The comparison to this adoption of EVs was famously made to asking all Canadians to lose weight because we need to cure obesity.
I want to thank all our witnesses for their testimony. I wish it was broken up into two sections because there's a lot to ask of both, whether it's about the port or the automobile business.
I want to ask a question of Brian and perhaps the fellow from General Motors.
I have Honda manufacturing in my riding. I'm very proud. They got some funding lately.
What I've heard from some of the people in the industry—and I've heard it before—is that it should be industry-driven and perhaps government-driven. Are we looking enough into hybrid vehicles as a better way to move forward, to get that out there and to get to the spot to where we want to be? We're putting in so much effort. That's what I'm hearing. I'm hearing that this is what we want.
I think it's the right way; don't get me wrong. However, as an example, I have people in my riding who buy four- or five-year-old cars all the time, just because they can't afford anything else. We know inflation is up. There are costs and there's a huge segment of society that is going to have to buy used vehicles down the road, which will certainly be difficult.
Do you think from the manufacturing side that they're discounting the hybrid section?
Thank you very much for your question, Mr. Dowdall. I appreciate it.
You're right that when we look at the challenge that's before us—and it speaks to the previous question as well—what we need to look at is a wide range of options to get to where the government wants to go. I think the whole industry is of the view that our focus should be on the reduction of greenhouse gas emissions from transportation, and not on a particular technology that gets put on the road.
This is going to take, as you say, the wide spectrum of electrification, from conventional hybrid electric vehicles to plug-in hybrid electric vehicles to pure BEVs and fuel cell electric vehicles. We need all of that, and then we also need, frankly, renewable fuels and low-carbon fuels for the existing vehicles on the road.
Thank you very much for that question. I appreciate it.
Yes, I can answer part of that.
There are two components to it.
First of all, no, we don't have the infrastructure. We're not even close. The federal government committed to 50,000 public chargers in the most recent budget. According to our estimates, a fully electrified fleet will require upwards of four million publicly accessible chargers, so we're not even remotely close to what will be required.
Second, from an electricity generation perspective, it's very important that the federal government is coordinating with utilities, provincial governments and grid operators. If we do achieve the levels of ZEV adoption that the current targets are putting us on track for, there will be a spike in energy demand. We have to make sure that it's managed appropriately, because the last thing you want to do is have someone make a shift to an EV and then be frustrated by energy prices or by a lack of charging and then go back to a gas-powered vehicle. We must avoid that outcome.
This industry exists because we have a long history, since the 1960's, of regulatory alignment with the U.S. We build cars for a North American market. Not only has the government chosen to put in place the ZEV sales mandate, but it is out of line with the federal U.S. That's the key.
You are right that some states have this, but at the federal U.S. level, there is no ZEV sales mandate, so we are now coming out of long-standing regulatory alignment with the U.S., which is very serious and should be avoided. That is a significant change.
Not only that, but the government has now misaligned its sales targets for the United States. We were currently on track, previous to the emissions reduction plan, to target a 50% ZEV sales rate in 2030. The federal government has changed that to 60%.
What underpins all of this is that we have aligned emissions regulations with the federal EPA. We cannot move out of alignment. It would make investment in Canada a challenge, and there is no reason to do so. The Americans are on the same track as us. We have to work with them and keep our alignment in place.
I'm going to stay on this topic because I appreciate the conversation we're having, and I think it will inform the study on the supply chain crunch.
Mr. Kingston, you agree that we are infusing the electric vehicle market with incentives at the manufacturer's level, at the consumer level and at the infrastructure level. Can you talk a little bit about what the companies that you represent are actually doing to push adoption and sales on their own? That's not to mention that in most provinces, particularly the one that we happen to be sitting in, incentivizes or frankly pumps money into electricity to the tune of $7 billion. At every point there is tax money infused into this.
Can you talk a little bit about what you think the industry should do, without government help, to get people to adopt this?
We've asked for a couple of things. First of all, we'd like the federal government to have a stronger coordinating role with provinces and utilities to figure out where we need infrastructure and how to prioritize the spend. We saw the $50,000 commitment, but we don't have a detailed plan. Other jurisdictions that are doing this put out annual reports with detail right down to a postal code level of what infrastructure is going to be required, what the energy generation demands will be and what grid capacity is needed. We're not doing that in Canada. That's the first ask.
Second, we need a more ambitious target. As I said previously, 50,000 chargers are not going to cut it. They're going to have to invest more and build more charging infrastructure.
I want to make one final note. We do not expect that this is all going to be on the public sector. Of course, as more ZEVs become available on the road, the overall market will grow and there will be a strong private sector imperative to build charging infrastructure. However, right now, of the total vehicle market and the total fleet on the road, only 0.2% of those vehicles are electrified. That's why you need the government to play a role to make this investment happen now and, as Dave Adams said, to overbuild now. Eventually, as the ZEV fleet increases, you'll see a lot of private sector capital flowing into that space.
I thank the witnesses for being with us this morning.
My first question is for Mr. Kingston.
Some automakers have argued that mandating autonomous zero-emission vehicle sales will put Canada out of alignment with regulations in the United States, among others, and that could have consequences for our country in terms of investment, jobs and the supply chain for that type of vehicle.
However, we know that most automakers have already indicated that they intend to shift their entire production to zero-emission vehicles in the coming years. The federal government has partnered with the industry to make significant investments in batteries and electric vehicle manufacturing in this country.
Is there no zero-emission vehicle, or ZEV, standard to support this green transition? Can you give us more details on that?
I would say that over time we have constantly faced disruptions in the supply chain. Famously, the automotive supply chain is a just-in-time supply chain, and there's no inventory on the floor of our vehicle plants. We count on everything arriving just in time.
That has been challenged because of climate change effects, as we saw in British Columbia, and impacts on ports. We saw the border challenged at the Windsor bridge. Over time we've had these challenges quite frequently, and we've built resilience into our people management of supply chains. The answer from the automotive perspective, in my view, is just to keep doubling down on the planning to get ahead so that we're ready to respond to things as quickly as we can.
With the Ambassador Bridge, our companies lost hundreds of millions of dollars because of that pinch point being too narrow. We need to double it up and fix that infrastructure, and there's work being done to do that.
The blessing that we have in North America is that the auto sector, our second-biggest industry in Canada, is integrated with North America. We can sell to a market 10 times the size of ours. That integration is critical, so alignment and doing it together with the United States is what gives us that enormous economic advantage for all of Canada.
My question is for Mr. Kingston.
I asked you earlier what could be done to get more electric vehicles to dealerships and accelerate electrification. You told me there needed to be greater demand.
I have something to say to you about that. I recently contacted two different businesses because I wanted to buy an electric vehicle. I wanted one. I was ready to test-drive one and buy it. I got the same answer from two different businesses, that they were no longer taking orders and that they were sold out. They said vehicles whose price has yet to be announced are already sold out. I have a hard time believing that.
When you turn on the TV, all you see are electric vehicle commercials. However, when you want to acquire one and you make a call to do that, you're told there are none. If there are no electric vehicles, people will buy something else and demand will shift.
Isn't that the root of the problem? Do I have it all wrong?
I will ask you again: What can be done to get more electric vehicles out to dealerships?
Thank you for the question.
There are couple of things to note. First of all, when you look at the overall fleet, you see that only 0.2% of all vehicles are electric. Sales last year were 5.6%, so yes, we are seeing an increased interest because of all of the new vehicles that automakers are bringing to the market, but we are far off from widespread adoption and acceptance.
The average transaction price of electric vehicles is significantly higher than a gas-powered vehicle, so we need to do more to make this transition work for everybody. We're very far from being.... Even a 20% adoption level is going to be a big climb without incentives that work for all Canadians, as well as more charging infrastructure.
Suffice it to say that it's frustrating to hear the reluctance on the part of the auto manufacturers. I sincerely hope that this federal government follows through on its promise to bring in mandates for production to get those vehicles onto lots so people can buy them.
I wanted to direct my next questions to Mr. Miller, who's been sitting here patiently listening to all this testimony about electric vehicles, which is probably not super-relevant to the port of Vancouver, although I know it is a major gateway for both imported and exported vehicles.
My question is around the Roberts Bank T2 expansion. This is a very controversial expansion in the estuary of British Columbia's most significant wild salmon river. There was a proposal for industrial development in the estuary of the Skeena River, the second-biggest wild salmon river in B.C., and it also saw widespread opposition. In the case of the Fraser, we've already seen 70% of the estuary impacted by industrialization. We have major problems when it comes to killer whales, wild salmon and all of these things. I understand that scientists have come out with very serious concerns about this expansion.
The port has promised to offset the impact on habitat by building new habitat elsewhere, but we know that this approach is very problematic. In fact, a 2016 study said that of other initiatives to offset habitat loss in the Fraser estuary, only 30% of them functioned ecologically over time. Even in those examples, the number of native species had declined significantly.
In light of this, how are we to trust that the plan that the port has put forward for this expansion will not result in serious impacts on things like migratory birds, shore birds, killer whales, chinook salmon and the other species that have been highlighted, given the situation we're in with that vital ecosystem?
Thank you very much, Mr. Miller, and thank you very much, Mr. Bachrach.
Next we have Mr. Jeneroux, who's been waiting patiently.
Before I pass the floor over to Mr. Jeneroux, I would just like to say, Mr. Kingston, that I know you have a hard stop. We appreciate your presence here today. On behalf of the committee, we thank you very much.
Mr. Jeneroux, the floor is now yours. You have five minutes.
Shoot—all my questions were for Mr. Kingston. I guess I'll change it on the fly here.
Mr. Paterson, you talked a little bit about what I was going to ask Mr. Kingston. He spoke a bit about a federal lead on what the supply chain would look like. I'm curious to know if you perhaps have any insight on that, being one of his members.
You also made some comments about impacts at the border. I'm hoping you can share what you know or what those real stories are, and not necessarily from the shipping perspective. He was looking for increased border staff. What's the situation now?
Mr. Adams can probably chime in on some of that too.
Very quickly, I think Brian is correct that we need to anticipate and that we need to have clear leadership in different areas. These issues are complex. It comes down to issues of drivers maxing out their time when they do get into a holdup situation. We need infrastructure like the Gordie Howe bridge.
We need to make sure that we support our amazing border crossing people. I'll tell you, when it comes to the solutions they helped us put together to get vehicles across the border when it was blocked, they're my heroes. They're incredible. They just need our support. We need to really make sure that we continue to align some of the world's best customs planning processes for high-volume industries like the automotive sector.
We have the tool kit. We have very smart people. I think we just need to keep aligned between jurisdictions and make sure, as the junior partner in the auto sector, as one-tenth of it, that we take the initiative to be on the front foot in ensuring that we don't have holdups.