Zero emission vehicles are table stakes

Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I’m your host Lisa Raitt, former cabinet minister in Stephen Harper’s government from 2008 to 2015. I’m here now at CIBC Capital Markets and in this podcast, I’m going to share insights on current hot topics in the areas of public policy, politics and business with some guests along the way. My guest today is Flavio Volpe. Flavio is an internationally recognised champion of Canada’s automotive industry, and he leads the Automotive Parts Manufacturers Association. Flavio came to my attention this week in a Globe and Mail column, whether we were talking about Buy America and the impact that it would have on Canada’s transportation industry. I know that Flavio worked very closely with officials on the NAFED renegotiations, and he ended up actually getting an unexpected and unprecedented increase in regional value content for Canadian automotive suppliers in the new USMCA, which is a significant win for Canada. What we’re going to talk to Flavia about today, though, is his latest project. It’s called Project Arrow, and we’re going to talk about what is needed to make sure that Canada is well positioned for a net zero emission economy by 2050, including in the transportation energy. Flavio, thank you so much for joining me today. I really appreciate it and we’re going to get right into it. I’m going to ask you a simple question that I think people really want to understand, which is you use the term zero emission vehicle. Other folks always tend to talk about electric vehicles. What’s the difference?

Flavio Volpe: Well, zero emissions vehicles is about targets. You know, what we want to make sure is that nothing comes out of the tailpipe. At some point, we’re going to reduce that carbon emission and then at some point it’s a zero electric vehicle is one solution. So usually when you’re talking to government and listen, I served on both sides of the sphere in government, you’re looking for solutions and you’re looking for maybe to dictate the solution in industry. We say, don’t tell us what technology to use. Now, most of the industry is going to go to electric vehicle, but does a lot of the industry that’s betting on fuel cell vehicles? And frankly, I don’t like to predetermine what new technology is going to be developed five years, 10, 15, 20 years from now. What’s the objective a clean tailpipe or no tailpipe? That means it’s zero emissions. Period.

Lisa Raitt: Yeah, that makes a lot of sense. In the United States. They talk about electric vehicles in Canada, we talk about electric vehicles. It’s obviously going to be one of the pathways to getting to zero emissions net zero and 2050. Canada seems, though, to be well positioned, I think, for some work, especially in the electric vehicle space. What do you think Canada’s strengths and opportunities are?

Flavio Volpe: Those two don’t necessarily overlap perfectly on the opportunity side, as much of this zero emission matrix is going to be electric vehicles. You know, we need batteries, and those batteries need materials like lithium cobalt, graphite, Nickel. And Canada has the biggest deposits of most of those in North America and probably a top three mix of deposits around the world. And so it’s in the ground and it’s great. But, you know, we’ve got to get it out. We’ve got to extract it profitably. Otherwise, none of these mining companies are charities. We’ve got to process it. And then we’ve got to turn it into battery cells and then pack them and put them in cars. What we’re missing is this processing piece in the middle, who’s going to be the ones that turn it into cells and who’s going to do it in the next two to three years when all these companies make commitments on where they’re going to buy these cells from? This is where there’s a role for the balance sheet of the public Treasury saying, OK, look, doesn’t matter how much money you have. If the stuff’s not in the ground, you’re not in the game. So don’t worry about that part. And frankly, the automakers are already here and the parts. Makers are here. Build that bridge in between help to process those minerals, help to invest in the processing industry Minister Champagne said to me, Tell me who those companies are, and I said, Well, think about Quebec and think about the aluminium companies in Quebec.

Flavio Volpe: Those aren’t the cell makers, those are the processors. Somebody taking that bauxite and turning it into a metal, a malleable metal that we can use. And so we need to get there. And then the other thing I always say is electric or zero emission vehicles, that’s just the table stakes. The whole world is going there because every major jurisdiction is about to mandate one hundred percent zero emissions by the twenty thirties. What’s the difference between an electric vehicles? Lets use electric for this zero emission vehicle and internal combustion engine. In your regular car, you’re at 40 volts of power. You know, you start the car with a 12 volt battery and now you’re 40 volts and you can do all kinds of stuff from 40 watts like your infotainment systems. But in a hundred kilowatt Tesla, you’ve got eight hundred volts of power. So an electrified vehicle is a connected autonomous vehicle in Canada. Has so much technology knowhow in that space, including how do you process that data in real time? We are an AI capital where a machine learning capital. When everything is electrified, we should be the centre of connected autonomous vehicles, at least in North America, at least this side of the globe.

Lisa Raitt: In my introduction to you today, Flavio, I said that you caught my attention because of a couple quotes you had in an opinion column in the Globe and Mail this past week, and it was around by America and the concern that you had. Now you have huge experience dealing with NAFTA. You’re there at the negotiating table and you help shepherd it through. Thank goodness that we ended up getting NAFTA two or CUSMA, but what are you seeing from the buy American provisions that are being floated in the United States and should we be concerned?

Flavio Volpe: Yeah, thanks for that. Every president, at least since I’ve been alive, starts with I’ve got a new Buy America package. I’m going to drive economic growth and stability in this country using industrial policy, and all of them either get watered down by Congress or  they back off a little bit? And so there’s no surprise that Joe Biden would say some of the same things that Donald Trump did. The surprise for us is that it’s gone this far, that we have bills in front of Congress right now that have within them a provision that says if you buy an electric vehicle made in a U.S. plant comma, especially a UAW plant, you can get up to twelve thousand five hundred dollars U.S. as an incentive for that purchase. What that does is, wow, yeah, it’s crazy. It’s about the equivalent of about thirty three percent of the average vehicle price in the U.S. So what that does is it motivates a consumer to buy a U.S. made car rather than a Canadian made car, which is a problem for us and certainly a problem for Mexico. Seventy five percent of the cars we make go there, so we think it runs counter to their new CUSMA obligations and of course, the WTO.

Flavio Volpe: You can’t discriminate by country of origin if it goes through. It’s worse than anything that Donald Trump has threatened us with, and it threatens to unravel any of the gains any of the three countries got through the the new trade agreement. We’re hopeful this week we see the prime minister heading down on Thursday to meet with the two presidents. I’ll be there. They need to back off and if they don’t, sure we’ll challenge them. But one of the things they’re going to do is they’re going to mess up the U.S. auto parts industry, which is something I think they don’t understand. If you make a car in Ohio and you sell it to a customer in New York or Kentucky and sell to California, that car never crosses a border. Therefore, it’s never subject to any of the regional content value obligations in their trade agreements. It’s just a domestic car. And so they don’t have to achieve. American based automakers don’t have to achieve a seventy five percent content. They can go with Chinese, Vietnamese, Malaysian great parts, but from somewhere else. And why wouldn’t you?

Lisa Raitt: Yeah, that’s interesting. So you mentioned the prime minister’s going down for the three amigos. I didn’t know you were going down. That’s going to be that’ll be intense. It’s glad to see that you’re going to be on the agenda at least talking about this Buy America issue. But you have something else that I think is really exciting and you’ve launched something called Project Arrow. Can you tell us a little bit about that and whether or not that’s unique in North America?

Flavio Volpe: So the prime minister challenged us all to think about 2050 net zero economy then said, what can you do in your own industry? We’ve been demonstrating new transportation mobility technologies on cars that were lent into programmes from Toyota Canada, and we’ve been doing it for six or seven years. You know, you take a Lexus R X and you put a bunch of stuff on it and you take it to other automakers or Consumer Electronics Show and all kinds of, you know, encryption, technology and telematics. And well we said to the prime minister’s challenges. We make everything in this country. I’m going to prove it to you. We’re going to design, engineer and build a one hundred percent Canadian zero emissions vehicle and not a virtual build, not just the virtual built. Because we’re doing a virtual build and digital build, we’re building an actual car. And we hired away the chief engineer at Aston Martin to be our chief engineer, and he’s working at Ontario Tech University with our great partners there. And we hired away the chief technical officer at McLaren and working with the Centre of Digital Build at Windsor Essex Development Commissions VR Cave. We are going to show this car to Canada first at the probably November December of twenty twenty two and then it’s going to go on a tour where four hundred and thirty eight companies have signed on to demonstrate the technology they have. So all these car companies are in the world, they’re going to build all these zero emission vehicles. We’ve got everything from bumpers to lighter, and I’m very, very excited about it. And we named it after the Avarero. You know, there was a generational feat there that we always talk about its demise. But in it, Canadians who built a fighter jet that was twice as fast flew twice as high as anything anybody else had after they cancelled the project. Those Canadians worked for the Mercury and Apollo programmes, but Americans in space and on the moon, and we’re hoping these Canadians who are working on this arrow stay in Canada to build the future of zero emission vehicles.

Lisa Raitt: That’s very exciting. I know your big public policy “Wonk” as we call them. I know that you love public policy, even though you’re advocating for the private sector now, so I’m going to ask you a public policy question. Zero emission vehicles, electric vehicles, specifically, if we are successful in getting people, encouraging them to purchase electric vehicles, whatever policy tools do, we have enough grid for everybody to plug in? Are we going to be missing that piece of whether or not there’s enough electrification?

Flavio Volpe: We do not. And if our target is 2035, we’ve got to pull in various sectors of the economy and civil society. Now, if we plugged in all our cars tonight, we blow the transformer on our street. We need to talk to generators, distributors we need to bring in. I always say this and people kind of shake their head when I say this, but the oil and gas industry has this incredible network of real estate where we show up with our cars to fill up with gas. Why can’t they be our charging partners? We need to partner with them with that real estate is is this unredevelopable anyway to be part of that solution? We’ve got to talk to the mining industry. We’ve got to change our retail and service models. We’ve got so much work to do. You can get the auto sector to get there, but people vote with their wallets. If you think that you’re going to blow the transformer that’s on your front lawn, you’re not going to buy an electric vehicle. And if you do buy an electric vehicle and it does happen, you’re going to start looking for options. Fifteen years is so I mean, Lisa, you know, you blink and it’ll be twenty thirty five. We need partners in this and the whole economy’s got to get behind it because the objective. Back to your original question is zero emissions rather than let’s prescribe the technology. What’s our objective? We want to decarbonise our society so we all have to pay a little bit and we all should win. Otherwise, we’re not going to get there.

Lisa Raitt: I think those are wise words, and I appreciate that and I agree with you that we make sure that we use the right type of vehicle in the right place for the right purpose. And we’ll definitely get there and we have the ingenuity. Before I let you go, though, Flavio, I want to say thank you very much. At the beginning of COVID, you took a very strong and positive leadership role to make sure that manufacturers were able to use their private sector contacts or private sector facilities in order to produce and distribute PPE and whatever else we needed for the COVID at the beginning. And I want to say congratulations and thank you. You rose to the occasion, and it’s one of the beautiful things that I love about our private sector and civil society working with public sector. When it works, it works really well. So thank you for that.

Flavio Volpe: I appreciate that that was very thoughtful.

Lisa Raitt: Great talking to you. Thanks very much, and I appreciate all of your wisdom. I’m sure our clients will as well. Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at [email protected]. Your interactions actually will make this better. I’m your host, Lisa Raitt, and this has been The Raitt Stuff. I’ll talk to you next week.

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