Canada tops China in global rankings for battery supply chains, research firm says

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Canada dethroned China last year as the world’s most promising jurisdiction for manufacturing lithium-ion batteries such as those used in electric vehicles, according to a global ranking released Monday.

While Canada produces barely any batteries today, BloombergNEF, a research organization focused on low-carbon technologies and commodity markets, singled it out as the best placed of the 30 countries it monitors to participate in future global battery supply chains. The strength of its raw materials sector, recently announced large cell manufacturing plants, and rising domestic demand for batteries all helped push Canada ahead.

“That doesn’t mean that Canada is better overall than China: What we’re saying is that within the lens of 2023, Canada performed better than China,” said Kwasi Ampofo, BloombergNEF’s head of metals and mining. He added that the ranking reflects the country’s potential in six to 10 years’ time.

Canada’s strong showing reflects the tens of billions of dollars of subsidies announced by the federal government as well as Ontario and Quebec to attract battery manufacturing plants (sometimes referred to as “gigafactories”) and related suppliers.

BloombergNEF emphasized recent investments in Canada by major multinational companies including Ford, Stellantis, Volkswagen, LG Energy Solutions and Umicore. Mr. Ampofo said government policy – be it around critical minerals, fostering local adoption of EVs, fostering innovation or subsidization – powerfully influences countries’ relative standings.

“This is exactly what we’ve seen in Canada,” he said. “Umicore, Stellantis, Ford – all these are foreign companies that historically, probably would have taken their business elsewhere.”

BloombergNEF’s rankings give equal weight to five key areas: the state of the country’s stocks of raw materials; its ability to produce battery cells and components; demand for batteries from the local market and friendly foreign markets; innovation and infrastructure; and environmental, social and governance credentials. BloombergNEF argues all five factors are coveted by global investors.

Mr. Ampofo said that at first, BloombergNEF’s researchers were surprised by this year’s output of its own models. But thanks to its tight integration with the U.S. auto sector, Canada benefited powerfully from the U.S. Inflation Reduction Act. The IRA offers lucrative tax credits for battery-related investments and aims to promote “friendshoring,” the practice of shifting production from geopolitical rivals to allies. The IRA also supported the rankings for Mexico and the U.S., which placed 19th and third, respectively.

Environmental, social and governance factors also played a critical role. China’s credibility has always been weak here, BloombergNEF found, whereas Canada’s has been generally strong. (The top five, though, are all European countries: Norway, Finland, Sweden, Germany and France.)

“Whilst other countries are making progress, unfortunately, we have not seen progress across Asia,” Mr. Ampofo said. “And that is really what is hurting them.”

Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing, an Ontario non-profit which promotes manufacturing, said BloombergNEF’s findings are just the latest indication that efforts by the federal and provincial governments to promote the manufacturing sector are beginning to bear fruit.

“From 2005 to 2015, we weren’t taking it seriously,” he said. “I don’t think we were doing well in these types of ratings. But now, the fact that people are actually putting their money where their mouth is, we’re seeing that reflected back.”

It’s the first time China has been unseated in the four editions for which BloombergNEF has produced the ranking. It found that China’s strained trade relations with important markets such as the U.S. and the European Union, along with policies that thwart international companies from expanding into the Chinese market for electric vehicles, also diminished China’s status this year.

But Mr. Ampofo added that the rankings reflect only developments in 2023, and that actions by other countries in this competitive market – or future inaction on the part of Canada – could result in upsets in the years ahead.

“Across all the metrics, it’s a race where in a year where you decided to do nothing, other people bypass you.”