Canada Bet Billions on an EV Boom. Was It Too Much, Too Soon?

The federal and provincial governments bet billions on the rapid rise of the electric vehicle industry. But major EV and battery projects in Ontario, Quebec and British Columbia have since been delayed, cancelled, suspended, substantially changed — and in one case, gone bankrupt — as automakers and suppliers adjust to weaker-than-anticipated demand.

Volkswagen's PowerCo plant: two-year delay to 2029

The latest setback landed in late September when Volkswagen's PowerCo subsidiary confirmed its St. Thomas, Ontario battery cell gigafactory will start production in 2029 — two years later than the original 2027 target. The company cited "evolving market demand" and said the delay allows time to incorporate newer battery technology.

When announced in 2023, the plant was slated to produce enough cells for roughly one million EVs per year. Governments committed up to $13.2 billion in production subsidies (federal share: one-third; Ontario: two-thirds), with payments tied to output volumes. Innovation, Science and Economic Development Canada says $700 million in federal construction funding has flowed so far.

A pattern of setbacks across three provinces

The St. Thomas delay is the most recent in a growing list:

• Northvolt (Quebec): The Swedish battery maker cancelled its planned $7 billion plant near Bécancour in late 2025 after filing for Chapter 11 bankruptcy protection in the U.S.
• Umicore (Ontario): The Belgian materials supplier suspended its cathode plant project in Kingston in 2024, citing market conditions.
• NextStar Energy (Windsor, Ontario): The LG Energy Solution–Stellantis joint venture plant opened in 2024 but has run below capacity; hiring targets for 2,500 workers have been extended.
• E-One Moli (British Columbia): The Taiwanese-backed plant in Maple Ridge faces delays and reduced scope.
• Lion Electric (Quebec): The Quebec-based electric bus and truck maker entered creditor protection in 2025 and its battery plant project was liquidated.

Scale and location questions

Grieg Mordue, a former Toyota executive and retired McMaster University professor, says the St. Thomas project illustrates two structural problems with Canada's EV investment strategy: scale and location.

Volkswagen's major assembly operations are in the southern U.S. and Mexico, meaning batteries produced in southwestern Ontario must travel long distances to reach vehicle plants. Europe isn't the obvious destination either — VW already has battery capacity there. Even combined, VW's North American plants don't produce enough vehicles to absorb a million battery packs annually.

"They got a million batteries," Mordue said. "What are they going to do with them?"

The subsidy upside

There's a potential taxpayer upside: with production now starting in 2029 and production subsidies scheduled to decline from 2030 and end in 2032, governments will likely pay "a whole lot less" than the original maximum, Mordue notes. The Parliamentary Budget Officer's 2024 analysis flagged this dynamic — incentives are output-linked, so delays reduce the fiscal exposure.

Long-term bet or misplaced wager?

Joanna Kyriazis, director of policy and strategy at Clean Energy Canada, argues these investments operate on 50-to-70-year horizons. The current slowdown reflects growing pains in an industry still transitioning, not evidence Canada built too much capacity.

There are early recovery signals: Statistics Canada shows battery-only EV registrations rose 37.4% year-over-year in Q2 2026, with 58,811 new zero-emission vehicles registered (up 26.7% including hybrids). Transport Canada data puts EVs at 11.7% of new light-duty sales in Q1 2026, down from a 15.4% peak in 2024.

Kyriazis also notes the battery market extends beyond vehicles — grid-scale storage for expanding electricity grids could absorb significant capacity. The St. Thomas and Windsor sites were partly positioned for this dual-market play.

Skeptics see forced demand

University of Guelph economics professor Ross McKitrick is less convinced. In a 2024 Canadian Journal of Economics paper, he warned that if EV sales requirements rise faster than buyer willingness, it could hurt automakers and the broader economy. Ottawa scrapped federal EV sales requirements in 2026 and is consulting on replacement emissions standards through October 29.

"What the government's been trying to do is force that market into existence," McKitrick said. "The numbers just don't add up."

China's dominance remains the strategic driver

The wider justification hasn't disappeared: the IEA reports China produced over 80% of global battery cells in 2025. North American and European governments are building domestic supply chains to reduce that concentration risk — a strategic imperative that transcends near-term demand cycles.

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