5 reasons to build electric vehicles and batteries in Ontario

The province’s business environment, available talent and clean energy supply create a highly attractive investment climate for EV and EV supply chain manufacturers

Ontario’s automotive industry is on the cusp of a boom period. With electric vehicles (EVs) likely to increase their global market share through a 1200% increase in sales over the next 10 years—from 2.5 million vehicles today to an estimated 31.1 million in 2030—Ontario’s world-class automotive ecosystem positions the province as an ideal base for production.

From talent to the business environment, Ontario offers ample opportunity to deliver automotive excellence and to do so profitably. Here’s why:

1. Corporate income tax is low

   With a proposed 50% reduction in the general corporate income tax—from 15% to 7.5%—for all zero-emission technology manufacturing operations, the 2021 federal budget sent a strong message to sustainable industries: Canada wants you. For Ontario-based manufacturers, this means that the combined federal and provincial corporate income tax amounts to just 17.5%, making it one of the lowest rates in North America. The plan, which is guaranteed to stay in place until 2031 if approved, incentivizes EV and EV supply chain manufacturers to be early joiners to make the most of the 10-year fixed rate.

2. Electricity costs are low

   The manufacturing, testing, and running of EVs, batteries, and battery components (unsurprisingly) requires a lot of electricity. Both EV and battery manufacturers have stressed the importance of creating a sustainable value chain through clean energy. To create a welcoming business environment for EV manufacturers, battery manufacturers and other energy-heavy producers, Ontario has committed to reducing the cost of electricity to 7.5 cents per kWh. For many industrial consumers, this represents savings of up to 15%, a reduction that’s possible because 94% of Ontario’s electricity came from clean sources in 2020—the highest percentage of any automotive-producing region in North America.

3. Significant financial support from provincial and federal governments

   Alongside reducing the operating costs associated with taxes and energy, both the federal and provincial governments have highlighted the importance of EV manufacturing for the future of Ontario through significant financial investments. For example, Ontario and the federal government provided $590 million in funding to Ford for the company’s $1.8 billion investment to retool Oakville for EV production.

   In addition to directly funding large enterprises, Ontario created the Invest Ontario fund to encourage investments in advanced manufacturing, technology, and life sciences. And Canada created the Strategic Innovation fund, which includes an $8 billion commitment to clean energy projects.

4. Access to an abundance of high-skilled, affordable talent

   Ontario produces 55,000 new STEM graduates every year, making the province fertile ground for automotive employers seeking the next generation of STEM leaders. This abundant talent also comes at a lower cost than other North American counterparts. There are significant savings to be made:

   • manufacturing salaries are between 15-30% lower than U.S. automotive-producing states
   • Ontario has longer average worker tenures (10.1 years vs. the U.S. average of 5.1), which lowers the cost of hiring, training and onboarding
   • health care costs for employers at just a third of the U.S. average due to Ontario’s government-funded model

   And these savings come from industry-leading talent. The craftsmanship and quality of Ontario’s skilled labour force has been key to Ontario assemblers winning about one-third of all JD Power awards for initial assembly quality in North America. The Global Talent Stream offers Ontario-based employers the ability to fast-track work permit applications to hire top international talent within 10 days.

5. World-class, cost-saving R&D

   Ontario’s R&D infrastructure is a mix of collaborative networks that brings together public- and private-sector research and publicly funded research organizations, university labs, and prototyping facilities. To support organizations and individuals, the federal and provincial government created the Scientific Research and Experimental Development Tax Incentive Program, which offers combined tax credits that can drive down the cost by up to 50%—the program provides $3 billion in tax incentives to over 20,000 claimants annually. With a broad scope for innovation across the value chain in EV development, Ontario’s R&D infrastructure provides organizations with a welcoming environment to test, experiment, and take risks without driving up the costs.

Making EV profitable: from idea to execution

The predicted 1200% increase in EV sales over the next decade means companies need to find ways to be innovative, cost-effective, and efficient. The landscape of talent, government support, R&D infrastructure, and low costs give Ontario an edge on their North American competition.