Innovation is a necessary part of Canada’s economic future, but Canada doesn’t have the best record. In 2016, the Organization for Economic Co-operation and Development named Canada 47th out of 49 countries in its Doing Business Report, noting our paltry competitiveness on tax and labour policies.
Only one province, Ontario, moved up at least two spots in the ranking that measures all the measures business owners cite when considering where to set up or expand. High costs and high taxes are two of the most common irritants for businesses wanting to expand in Ontario.
That is the story behind the populist backlash against the single-province electric vehicle policy announced by Premier Doug Ford, announced on August 8. One thing is certain: It is not really a story. As discussed in this column, the provincial policy creates the potential for even more investment in “battery-fuelled” vehicles. The policy change has been structured to create an incentive structure that will be much more attractive to automakers and consumers alike. It will help create a domestic auto industry and high-paying jobs that have been sorely lacking.
The new policy changes are similar to Ontario’s economic policies in the areas of the key industries to nurture in the 21st century — but with electric vehicles.
The announcement will help remove barriers to the construction of a new electric vehicle industry — and once that is done, global competitive opportunities for producing electric vehicles will open up.
Two million of the fastest-growing, most-profitable markets for electric vehicles are in Europe and North America, where carmakers and consumers are embracing these technologies. A shift to electric vehicles will create a domestic manufacturing platform for profit. To make the most of these opportunities, Canada must work to improve Ontario’s position within these rapidly growing markets. If Canada wants to stay relevant in these regions, it must address the investment barriers currently preventing Ontario companies from being a leading provider of electric vehicle technologies and manufacturing.
Ontario’s announcement is timely and necessary. One year ago, electric vehicle sales globally were less than two per cent of total vehicle sales. In June, in the United States, sales reached 20,057 electric vehicles for a share of 1.4 per cent of total sales. This level of electric vehicle adoption is a significant step forward for this important industry, and one that Canada needs to make in order to remain a competitive supplier of electric vehicle solutions.
More business models are needed
Electric vehicles are not the only new technology that we need to move forward. To be a successful leader in the 21st century, we also need new business models to complement existing ones. Take, for example, a company looking to open a new manufacturing plant. There are many questions one would ask before committing to an investment. Should it use an existing resource or invest in a new one? Should it use internal-combustion or battery technology? A smart business leader would ask if the investment is necessary, what kind of return it could provide for the long term, and how much risk the company has in doing so.
New business models can be developed to create new possibilities that will meet all the objectives of the business. But first, a business needs to have a clear picture of what it is trying to achieve. In Ontario, the answer is clear: The government of Ontario’s policy change will create a path to grow our economy and create good, high-paying jobs.
Ontario is an advanced manufacturing and automotive centre of excellence that produces diverse components for vehicles.
Now, the new policy provides an opportunity for those vehicles to be designed and manufactured in Ontario for a long time to come. And when companies plan for a profitable future, that future is good for all Ontarians, including future electric vehicle manufacturers who will want to come to Ontario.
Electric vehicle adoption will continue to play a key role in the long-term sustainability of our economy, driving significant growth in renewable energy and the worldwide low-carbon economy. Let’s encourage Ontario to play a role by standing behind its announcement.
Provincial governments should challenge themselves and their industry partners to deliver on the most essential economic tenets of business: competition, and fairness, for all, offering a competitive advantage to those who deliver real solutions, not just rhetoric.
It is good news that Ontario has a policy that fits this philosophy. And it could help open the doors to prosperity for more businesses and all Ontario consumers.
Dr. Frederick Wolff is the Deputy Director of the Institute for Advanced Studies at the University of Waterloo and has worked as a manager at the Ontario International Trade Centre since 2003.
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