Would assembling Chinese EVs in Canada be a 'devolution' of the auto industry

0:00Ottawa is laying out its conditions for building Chinese electric vehicles at an Ontario plant. Yesterday, Bloomberg reported that Stellantis is in talks to make Chinese EVs in Brampton. Thousands of workers remain laid off at that plant after the automaker moved Jeep production to the U.S. Ottawa has vowed to claw back hundreds of millions of dollars in incentives from Stellantis unless production returns. And today, the industry minister said that simply assembling pre-made Chinese EVs won't meet the bar. If they bring back production, it must be along with the union and the province supporting their plan. And there are three conditions. First, labor standards. Conditions for workers need to be good and actually the same they were and even better. First, second, it needs to support the local supply chain. We can't bring cars in a kit to Canada. And finally,

1:06the software needs to be secure. Joining me now, Flavia Volpe is the President of the Automotive Parts Manufacturers Association. Welcome to the show. If it could get some of the thousands of people who were laid off in Brampton working again, would assembly in Chinese EVs be there, be a positive for Canada's auto sector? Well, let's define assembly, Carina. That plant has been making cars since 1962. 75% of a vehicle come from parts suppliers, so you deal with that plant. And in hundreds of plants that feed that, that when that plant is going, there's nine to 12,000 other jobs there. You make cars, you source parts, you source raw materials from Canada and the US. And in part, Mexico, you build them to a USMCA standard and those cars compete with all the other car companies that are trying to do the same thing. What's contemplated here is, hey, by the way, let's forget about all that. Let's have those cars made in China like IKEA furniture kits. And then send them over, maybe disassemble them, partially

2:10think the wheels adores off and then have 300, 400 workers with crew drivers and wrenches and reassemble those cars. That is an import quota cheat. That's not automotive assembly. That's not manufacturing. The CEO of that company said to the prime minister, when you guys settle the USMCA review. And if you get access to the US market again, we will put a vehicle there and go back to what we were doing two years ago. Now, do we know for sure that in the talks between Stellantis and the Chinese company that it is about these sort of breakdown kits or do we know that for sure? Because that's what it's been alluded to, but I wanted to know whether you could shed some light on that. No, look first of all, I'm not part of the discussion, but I do

3:11know that that's one of the options presented by the company. That company, the first option they presented was if you guys all wait until July, August, September, we settled this USMCA, if it breaks back in everybody's favor, we're going to put a product in there. Maybe the equivalent of the Jeep Compass. There's a Chrysler SUV that hasn't been assigned yet. Maybe it's some brand production. I'm sure that the government's pressure on Stellantis, which is good. We've supported it. I said Stellantis come up with a bunch of options. Somebody told Bloomberg, who first reported it yesterday, that this was one of the options. I think a lot of us are saying, hey, that option is not an option. Don't even try it. That's a devolution of that whole automotive ecosystem in pure region. But it also is a signal that if you let one of the five automakers that's currently manufacturing vehicles here in a traditional competition and allow them to devolve to a

4:12model that gives them an incredible cost advantage, you put undue pressure on the other four automakers that are here. It is a very slippery slope. And we have a deal with the Chinese that the industry didn't want, but we understand the Prime Minister is a Prime Minister for the whole country, and we had to do something for the ag sectors. There is an import quota here. You can send them in 49,000 of them in your if Canadians will buy them, that's fine. But if you want to send them in partially assembled, well, they should count against that same hard cap. One of the things that we said to the Prime Minister and his team was, if you're going to allow the door to open, then you should have a point, a three-year point, a five-year point where they review, and we should require them to manufacture in this market like we do everybody else, or get rid of that import quota. We said they should JV like the Chinese force the West to JV taxes the Chinese market. China learned a lot about automaking from Western partners,

5:15forced Western partners, and in many celebrated cases, famous cases stole IP to jump the line. Well, if we're going to give them access to this market, we should make them work for it. There's no point in giving them away, and there's no point in giving away the Brent and Assembly plant when we could work just a little bit harder and get back to a place where we were manufacturing with thousands of jobs and hundreds of millions of dollars a payroll. And that plant, when it was making 150,000 cars a year, and they were $50,000 cars, was buying $3 billion worth of Canadian parts and raw materials a year. We shouldn't give that up because of a convenient first shot that would have a total impact of $30 million a year because we're under pressure from the Chinese or consumers who are saying, look, I want access to cheaper EVs. You know, your access to those EVs and your desire for those EVs is important to note, but they're not important than the jobs

6:19of the people who are there. Now, you mentioned that if this were actually to be allowed, it should be counted against the quota of the 49,000 EVs that Canada has said could come into from China and to Canada. But when the Prime Minister, when that was announced, the Prime Minister was explicit that they were trying to get China to invest in the Canadian auto industry. So, in what capacity should China be allowed to invest? Look, we have the Canada Investment Act that regulates how we deal with foreign direct investment mergers and acquisitions from parties that may or may not have the same industrial objectives that we do. We can use that act to turn around and say, look, if BYD wanted to build a plant here and meet the USMC standard and try to access those markets or try to access the European market from here, South American market from here, there are minimum content levels in all those trade agreements that are local content. You've got to buy parts and raw materials from here.

7:24BYD has said publicly last week that there's no intention of joint venturing in Canada and has expressed that they want to do that in the US. We get calls every single day, since this agreement in principle, from Chinese tier one manufacturers, raw material suppliers, and from Chinese car makers, you say, help us enter this market, help us find JV partners. And what we say to them is what we say to everybody else. If a parts supplier JVs with a car maker and tries to sell cars together on a brand-new cone, that parts supplier is going to lose the parts supply contracts they have with other OEMs. You can't compete with your customer. But good luck. We're going to make introductions for you. If you manage to set up a plant that is a $2 billion investment that buys $3 billion with parts by batteries and raw materials in this country, then you become part of this country's auto sector. I haven't heard from anybody who has said, hey, that's what I want to do,

8:26how we make some intros. They've all called or reached out through intermediaries and said, how can we circumvent this JV? How can we circumvent the hard cap? And I say, call somebody else. Well, thank you for breaking it all down for us. That's Flavio Volpe, President of the Automotive Parts Manufacturers Association.