Components of electric vehicle battery trays are prepared to be welded at Magna's Heart Lake production facility, where they are currently manufacturing battery enclosures for Ford F-150s, in Brampton, Ont., on Aug. 3.Christopher Katsarov/The Globe and Mail
Catherine Beaudry is a professor and holder of the Canada research chair in management and economics of innovation at Polytechnique Montréal.
Electric vehicles and their batteries have shaken automotive business models, but the ecosystem is adapting too slowly. With the environment and circular economy in mind, the time has come to explore new models for creating and capturing value within the EV battery ecosystem.
Electric-vehicle manufacturers are increasingly considering serial lease models with declining monthly charges to account for battery degradation over time and usage. They are basically leasing out “EV batteries on wheels” for as long as they can.
Such leasing does occur in Canada, as in many other countries. But why should Canada, a country with many of the critical minerals essential for EV batteries, not get a greater share of these leasing revenues?
We can take the idea of leasing further and capitalize on Canada’s advantage. If we properly harness and promote this leasing model, we can establish this country not just as a low-level, white-label product or commodity supplier for EV battery manufacturers but a leading brand. What Switzerland is to watches, Canada can be to EV batteries.
Focusing on the functional economy (selling “use” rather than the product), Michelin has been leasing tires for decades. Leasing car parts is therefore not a revolutionary idea.
Moreover, to establish a dominant battery leasing industry would allow domestic companies to extract greater value from them.
Rooted in the principles of the circular economy, Canada’s new Critical Minerals Strategy is based on five segments of the value chain, including advanced manufacturing and recycling. After batteries are no longer fit for use in EVs, they can have a second life, in everything from electric bicycles to large-scale energy storage systems for buildings.
Current dominant thinking still has Canada export most of its critical minerals for mobility purposes. But let’s not kid ourselves: Once raw material is shipped overseas, or once a Canadian-built EV battery has been installed and exported, it will not come back home for a second life or the reintegration of the critical minerals into the value chain.
Missing out on such revenues would not be an issue if Canada were to take part in the functional economy and hold on to the value of its critical minerals and their products.
Among other issues, the small size of our domestic market and the fact that we do not yet have sales quotas for EVs undermine the desire to keep a large part of the value chain in Canada. But Canada can rise to the challenge. With billions of dollars in EV battery investments announced, Canada is now already second in the global EV battery supply chain rankings.
This country must focus its efforts on building up its domestic battery industry. To ensure that Canadians get a bigger bang for their buck, an international standard for the manufacture, use, second use and tracing of EV batteries should be introduced.
Political will ought to compensate for the fact that we do not yet have a domestic battery manufacturer nor a Canadian auto maker. An ecosystemic approach is needed to help small firms assert themselves in the development of international standards and foster value creation and capture.
Unlike oil and gas, which disappear into greenhouse gases once they have been used, critical minerals remain, offering a golden opportunity for multiple monetary gains along the course of their transformation and use.