Subscribe
Share
Share
Embed
Journalist Markham Hislop interviews leading energy experts from around the world about the energy transition and climate change.
Welcome to episode 261 of the Energy Talks podcast. I'm energy and climate journalist, Marcum Hislop. My guest today is Flavio Volpe, president of the Automotive Parts Manufacturing Association, and he's a thoughtful voice on the future of the industry, especially the Canadian industry, as it grapples with the rapid electrification of transportation. I'm especially interested in his take on the emergence of China's EV industry as a major, perhaps existential threat to North America, North American OEMs like GM and Ford, whose factories are supplied by his association's members. So welcome to the interview, Flavio.
Flavio:Thanks for having me on.
Markham:Well, happy to have you here, and we have to start this interview with congratulations on receiving the order of Canada. Well done, Nate.
Flavio:I appreciate that. It is, you know, it's an honor of a lifetime, really, and a bit of a surprise. And, you know, it's funny. I I wear this pin out everywhere. And, you know, 1st place I go, I end up in a meeting with an industry meeting, and Ray Tenge is in there.
Flavio:Ray Tenge used to run Toyota Motor Manufacturing Canada. He's the highest ranked Canadian executive in automotive history, especially at, at, Toyota, save for Sergio Marchionne who ran, FCA. And everybody does the intro and race starts, and he says, Flavio, congratulations. And I said, well, you know what? It's an honor to be acknowledged by you.
Flavio:You know? I follow as closely as I can in your footsteps. You've done a hell of a lot for Canada, more than I could pretend to do have done. And, you know, after and I said, where's your pin? It was Flavia.
Flavio:You wear those formal things, not in the middle of the afternoon at a meeting at a college. Okay. I'm learning. I'm a rookie.
Markham:Well, if I had, an order of Canada pin, I would wear it at every opportunity. Trust me. So I'm with you. Look. I wanna start off.
Markham:I I mentioned the the threat to the North American industry from China's automotive industry, particularly around EVs. I wanna start off with, a quote from, Carlos Tavares, who's the CEO of Stellantis NV, because I think this frames it just about as well as it can be framed. So here we go. Quote, if the automotive industry doesn't move, this industry will disappear under the offensive of the Chinese industry. The magnitude of the Chinese offensive, the competitiveness that they can demonstrate, and the massive arrival of all of their best carmakers is a significant change, end quote.
Markham:Yep. May I'll get you to respond to that.
Flavio:Well, that's the end of the interview because what else can I add to that? He's he's hit the nail on the head so publicly and so materially from from Carlos Tavares, you know, the world's CEO of the world's 4th or 5th biggest automaker, and someone who understands a lot about what the dynamics of this really hard competition look like. A company that's been amalgamated from different pieces from either side of the Atlantic, that famously, you know, former CEOs of the different pieces said, look. We gotta consolidate or we're gonna die. Well, Sergio Marchionne, who used to run FCA, that was absorbed, into the new Stellantis, was talking about, what he saw in China and what he saw in electrification and what he saw in consumer trends.
Flavio:And all of those things are favoring Beijing and Shanghai. It is people are saying they'd like to see technology in their vehicles. It's actually a new market of consumer, not necessarily the old gray beards like you and me, although it does include the gray beards specifically on the screens.
Markham:Speak for yourself, Flavia.
Flavio:Yeah. Yeah. Yeah. You didn't grow your beard out, so now we don't know. I know.
Flavio:That's the problem. You know, here is the 3rd biggest expense that anybody has after shelter and transportation, and this is a great California company that sells me a $1500 Chinese phone. And the Chinese are so, vertically integrated and centrally planned and access to capital at rates, that, are, you know, in some cases, free money. A a coordinated Chinese effort on automotive is not, the same as you would think in the in the traditional western market sense. There's 5 major OEMs.
Flavio:You know, there's 30 there. But let's say that there's 5 big ones there. When when it's time for consolidation, China Inc. Says Nanjing Auto fallener Shanghai Auto. They'd spent the last 20 years, learning how to, make cars at the same quality as, global OEMs, including doing JVs with all the major OEs.
Flavio:They started in China, and and now their product is is ready. It's inundating Europe. It's inundating the Asian markets and secondary, American, markets. And, they're coming. They're
Markham:coming. My take here's my take on this. So 20 ish years ago, we'll say 25.
Flavio:Yeah.
Markham:The Chinese government decided that it was going to, get into the clean energy industry in a big way. And it had an automotive manufacturing sector, electric vehicles, and it would dominate that. And it would it would it would do the investments upfront, to get on to the s curve of that industry, and it would you know, so there'd be a long learning curve, but eventually, the the, China would be the best. And I have to say, as much as I, you know, keep track of these things at a global level, China's emergence in 2023 as a major force in electric vehicle manufacturing caught me a bit by surprise. And I'm sure it didn't catch you by surprise because I imagine this has been a topic of conversation in within the industry for years years.
Markham:But why are we suddenly now China is the Chinese EVs are a hot topic of conversation and popular, you know, popular conversations, but it seems to have snuck up on us.
Flavio:Yeah. I wouldn't disagree with that assessment. I'll tell you what we saw, in the mid 20 tens. We've been we were going back and forth to China, and we noted that at the time this is before the Volkswagen diesel scandal, that the Chinese had, I guess, decided as a as a sector, as a country, they were gonna skip diesel. They weren't gonna be able to catch up.
Flavio:And much like you talked about, they weren't gonna be able to catch up for on a pure play for internal combustion. They said, let's go new energy. Now, where they had a a a lot of the the core competencies already is we were all buying electronic goods from China. You know, a a a a motor that's in your SUV, your electric motor is is principally the same as the motor that's in your electric fan, that's in your the your toys or tools. And all of those were being sourced in China, so it's let's gross that up.
Flavio:And then at the same time, a lot of the a lot of the battery, technology developments depended on, new chemistries. And in China, you know, I used to be in the solar business, and the the Japanese and the Germans were the best, you know, but it would cost $6 a watt to install a a a unit. And then the Chinese got involved and they turned it into $1 a watt and blew those guys out of the water. Well, that's they do these vertically integrated investments, very strategic national plays, and that's where they are on the critical minerals that go into those battery chemistries. So they learn from JVs.
Flavio:They learn from, having the biggest home market, you know, 35,000,000 cars a year. They learned by doing, and then, they decided you know, they they said it's rather public and national strategy to be to have a dominant export capability by 2025. We're just kind of the general public, the enthusiasts are kinda seeing it creep up in these triple digit increases in imports from China. But anybody who watched Tesla, make a deal in China 2018, 2019 should have known and seen that they have world class capabilities that can be borrowed by, you know, leading automotive brands. So here we are.
Markham:One of the things that, points has been made about this, process is that and you pointed it out, in your previous comment, is that China has had integrated and very scaled up and low cost electronic supply chains for for decades.
Flavio:Yeah. I mean, this
Markham:is something they they really you know, you when when Flavio was was talking about the thing he held in his hand, he was he had an iPhone. And and as I have one myself, and it's this terrific technology made in China. And so the the fact that they have electronic supply chains, and this is the argument, then making electric vehicles is just a natural extension of that. They're very good at that. They have the supply chains.
Markham:They have the critical the critical minerals and and battery metals processing and all of those things. They just have to restructure it and scale it up on the on the automotive side, and that gives them a tremendous advantage over North America, which outsourced all of its electronics manufacturing and its its supply chains years years ago to to Asia and particularly China. Does that put us really on the on our back feet?
Flavio:Yeah. Yeah. I think what we did was, to put in a more dramatic sense, we said, oh, well, you know what? This is about 30 years ago. Our the West's biggest challenge is the old, was the the Soviet block.
Flavio:And, imagine we turn around and said, look. You know what? In this arms race, we've got to find the cheapest place to get the the stuff we need to defend ourselves, so we outsource it to China. And then while the Soviet block collapses and, China got our gross orders, and we got used to buying this stuff for really cheap. And, of course, they can bring to bear, labor and materials in ways in which, we wouldn't dare.
Flavio:You know? We wouldn't dare. We also invited them into the WTO, gave them a WTO citizenship, so to speak, gave them WTO rules. We thought China will westernize. And the reality is that, well, that was never in the Chinese interest.
Flavio:The Chinese interest was let's let let's get a peek in a into the China in the western markets, and let's see if we can dominate them without playing by their rules. And, yeah, they can challenge us at the WTO, and we'd lose something here and lose something there. But we have that sweet nectar of, well, you need all that stuff that you get at Walmart for really cheap, you know, to make life affordable? Use us. Well, now here we are, and our adversary is the one that we had, we give the missile design to and the the jet engine design to.
Markham:Okay. So that begs the question, and you're in a unique position to provide an answer. Can the west adjust and and meet the competition head on, or are we just going to be overwhelmed by the Chinese, you know, industrial tsunami?
Flavio:I don't wanna underestimate the Chinese. I think in as much as I spend a lot of time talking about them that we need to, we need to respond. They have a formidable head start, you know, if we're talking specifically about EVs and and and things that matter, like ability to to to gobble up a market and then use the retained earnings in that market to develop products faster than we can. You know? We have to decide who we is and that what we want.
Flavio:I always say we. I paint with a real wide brush the, you know, the the operators in the west, market driven companies, etcetera, but they're all heavily invested in China. They're either heavily invested in manufacturing in China. Like, General Motors sells more cars in China than it does in, the US. And and because that makes business sense for General Motors, that that their shareholders demanded that.
Flavio:You know? But what's the we when you talk about companies that are are coinvested there? Chinese are not invested here. So the we probably is probably is western governments starting with the US and maybe Brussels. Or if not Brussels, at least, Germany specifically with with some France in there, and the UK.
Flavio:You turn around and, of course, Japan and and South Korea, turn around and say, what are the tools that we have? Tariffs. How do we slow down the Japanese invasion in the early eighties here? We we had them drop off cars at port of Montreal Vancouver, and then we inspected every one of them. But we knew how the Japanese would respond because they were market driven.
Flavio:They're like, okay. We'll just do better than you, and we'll invest there. The Chinese don't have to. I will say that we cannot afford to say let's see what happens. If we wanna have a if it's important to have a domestic, automotive manufacturing, capacity.
Flavio:I think it is. You can't be a service industry. You gotta lend money in something. But the the the wees really have to get active yesterday.
Markham:I'm my views on that question are are pretty well known, and I argue that the this is you know, it could be the 4th industrial revolution. It could be the 6th industrial revolution, depends which academic, you you read, but it is an industrial revolution, and this is a an inflection point in Canadian history. We have been hewers of wood and drawers of water since 18/67. That is almost our to build a clean energy industry and supply chain, to build a clean energy industry and supply chains that will not come again, not for a 100 years. You and I will be long gone.
Markham:It'll be our great great grandchildren, you know, who get the who deal with the next one. But this is ours, and we need to move and we need to get up, you know Canadians are so complacent. My god. We just getting this issue onto the national conversation is a is a major challenge. Never mind acting, and never mind supporting whatever government policy has been put in place to to implement it, just even talking about it.
Markham:And I am a I'm I'm of the opinion that we ought to do we ought to take a a page out of the Chinese playbook and go as hard on clean energy industry as we can, and that includes your industry.
Flavio:Yeah.
Markham:There's you have over 700 members. Many of these companies like Magna International are inter you know, they're international companies. They supply auto parts all over the place. A lot of jobs and a lot of capital tied up in that, and we ought not to just concede that. We ought to fight for it.
Markham:And so that leads me to my next question, which is your organization's Aero project.
Flavio:Yeah. You you
Markham:had it. You had Aero Point 1, which I love, by the way. I think I said it to you on Twitter. Hey, man. I'll buy that thing.
Flavio:I know you did. 20,000,000. I'll sell it to you right now.
Markham:Oh, gee. I'm I'm a journalist, dude. Not a Yeah. Yeah. I'm not a trust fund, baby.
Markham:Come on. Yeah. We'll do some
Flavio:good terms for you. But Yeah. Yeah. Yeah.
Markham:Yeah. Cheap capital. Got it. But phase 2 is underway. Now so explain what phase was, phase 1 was for our our listeners, and then what phase how phase 2 is different?
Flavio:First of all, you've always been rather generous about Project Darrow, and I appreciate it. You know, Project Darrow was is, us turning around saying, look. How do we how do we take exactly what you said? You know, we may be go we we may be going down, but shouldn't we fight for the parachutes? You know, we don't have a Canadian automotive company.
Flavio:We don't have a haven't had an OE since Malcolm Bricklin decided to make little sports cars in Nova Scotia and then run out of money rather quick. But we make everything from bumper to bumper. And and more importantly, we're very well positioned to be the supplier for all the battery chemistries and all the all the the the the new technology that gets platformed, on a 400 volt or an 800 volt or 1200 volt, electric electric platform. We decided that the best way for us to tell the world that Canada is going to fight for it is to show what a Canadian car would and could be. We ran a design competition for postsecondary students, a group out of, Carleton University in Ottawa 1.
Flavio:If you go to project aero.ca or you Google it, you'll see it. We, hired away the chief engineer, from, Aston Martin, Fraser Dunn, who who who led us through the, you know, an incredible, a 3 year engineering exercise. We went out for bid for companies, 534 bid, 244 had technology that was scalable for 2025. 58 of them came together. Came together at Ontario Tech University where all these parts from all these skunkworks from around the country came together to say, this is what Canada can do.
Flavio:It's been around the world, you know, 200 plus feature articles in in 14 different languages, and it said, we can be your supplier. But more importantly, we can be the the the leaders in that entire ecosystem. So 2.0 is, the genie's out of the bottle on 1 point o. We couldn't put it back in. How many more suppliers and how many more technologies can we platform if we build a fleet of 5 to 25 vehicles?
Flavio:But more importantly, can we take moonshots in other spaces? Like, virtual power plants, vehicle to grid, new chemistries, new orientations in in, in energy storage and and deployment. You know, let's really kinda work out what's possible from an ESG point of view and then, what's possible from a lightweighting point of view, and let's try to bring the entire community together, the related community together. And we would platform them. What we're asking people to do is bid, you know, proposed partnerships on project aero.c.
Flavio:But we're saying we have a supplier stream, but I have a partner stream, a a capital p partner stream. And we've got partner opportunities around the country for anybody that wants to use some of the lightning that we caught here to highlight what we're able to do. And I'll say this. I I I went I got invited to speak at, the federal cabinet retreat in Montreal a couple weeks ago, and I talked to a lot of people about we're ranked number 1 now. You know, that day, we were still number 2 at Bloomberg NEF for battery supply chain.
Markham:Potential. But Not not potential. Yes. Potential. But it's very quick we make make that distinction.
Flavio:That's the keyword. I said not to OEMs who are not. Because OEs right now who are being pushed to get to a 100% by 2035, they need to find this stuff now. And right now that means ostensibly China. Or if you find it somewhere else, it gets processed in China.
Flavio:So what should we do as a national project here? Project Aero is a, in in some ways, a marketing exercise, some ways, a technology demonstration, or a policy platform discussion. But if you control policy in this country, we should say that we wanna bring those critical minerals to market in 8 to 10 years or earlier if we can. But no longer than that, and peg a date take a whole bunch of the consecutive approval processes and investment processes and make them concurrent so that you could tell Volkswagen or Hyundai or Shanghai Auto or whoever else if you need lithium or graphite or nickel or cobalt in this volume, this is where you get it, this is when you get it, and this is what we think the spot price would be. Because if we don't do that, all these car companies will choose their suppliers.
Flavio:Those suppliers are not stupid. The one thing about the Chinese is that they are they they they are as smart or smarter than we are in the planning area. Oh, I'll give you the stuff. I'll subsidize it. Just signing on for a 10, 15 year, purchase agreement with me.
Flavio:And so we need to get on that horse. We can't just say there it is.
Markham:This is time for an anecdote. So in October of 2022, the Alberta Federation of Labor published their blueprint for Alberta called skate to where the puck is going. And and I was I kinda led the the writing team on that, on contract. You know? We're journalists.
Markham:We freelance when where we can. Gotcha. So we did all sorts of things in that report. We we argued for a a pivot from using oil as feedstock for refineries to feedstock for advanced materials manufacture. Make carbon fiber at at half the price it is, sell it to the EV industry.
Markham:But the reason I'm telling you this is because in, November of that year, there was a one day conference in Ottawa, and I was asked to go and and talk about this report. And I sat on a on a a 4 member panel, with a fellow named, Michael Wernick. And you know who Michael Wernick is, but a lot of people don't. He used to be the chief of the Privy Council, which is in Canada, is sort of the head federal bureaucrat. He was in charge of the federal government civil servants, and he's also a professor of economics and a really bright guy.
Markham:And we got into it Hammers and Tongues because Warnecke was saying, nah. Nah. Don't worry about this energy transition stuff, dude. You know, like, we've we've been around a 150 some years now. We'll muddle through, which is like, should be our national motto.
Markham:Right? We'll just muddle through. We muddled through before. We'll muddle through this one. Don't get your panties in a, you know, your knickers in a knot.
Markham:I I was incensed because the whole point of the report was, as I just said, there is an opportunity in time, and we as a country have to organize it to take advantage now because it's not coming around again. And I fear that in policy circles across this country, including in Ottawa, there is way too much of the, yeah, we'll muddle through mentality, and we're not having the right conversation. So I ask you, Flavio, am I right? And, b, how do we have the right conversation?
Flavio:Wow. You're right. And on b, I don't know. I'll tell you what. I've been throwing those same hammers and tongs, to say we have a very finite window.
Flavio:It's not an impossible window to hit, but it will be if we just sit around and and and hope that it happens. There's so many other motivated jurisdictions that would be very happy to be the ones that supply everybody. Also, be very happy to partner with the Chinese who who who offer capital. So we stop Chinese capital, especially state owned enterprise of buying mining assets here. Not every country does that.
Flavio:Buy the assets, get it out of the ground, send it for processing in China, and then bring it back for sale. Other countries will do that. Australia does it, and they do it quite well. They'll beat us to it. And once they beat us to it, and the Chinese beat us to EVs, as we force the market really quickly into EVs, we'll lose our domestic capabilities here.
Flavio:And then what do we have? We have these very healthy balance sheets in the oil and gas industry in the west right now. That's today's balance sheet. We have an opportunity, like you said, on carbon fiber, but we're also you know, there's a great company that we wanted to pull into Arrow that was extracting, brine water, from the refining process and turning it into
Markham:E3 Metals E3 Metals based out of Calgary.
Flavio:Yeah.
Markham:And they they they suck lithium out of produced water for oil. You guys you're an easterner, Flavio. I I we we we forgive your
Flavio:God bless you. I'm a car guy regardless. I think I think they should be part of it. And and I think, the one thing, that's getting in the way is this, east west political dynamic in Ottawa that the the west is anchoring, one party and the central and the east is anchoring the other party, and and we're gonna lose this opportunity in between. We took the car to Dubai, and Abu Dhabi in, December, and, we went for COP.
Flavio:And there was a lot of discussion at COP. Oh, how are the oil and gas companies here? And and and and this is a little bit intermingled. But conversations we had with the most senior people at ADNOC, Abu Dhabi National Oil Company, say, okay. Could we use your balance sheet to help transition?
Flavio:You know you need to transition. We're not gonna print money. You know, maybe we use some of yours. I think we need to figure out how we do this, how we how ears in Edmonton and Calgary hear the same opportunity as ears in Toronto and Vancouver or Toronto and Montreal that it isn't I we too often paint this politically as a zero sum game. And, look, if I was sitting in in Edmonton, I would say, you can keep your you can keep your EV future.
Flavio:I'm I'm gonna be around the next 30, 40 years. I'll be fine here. And like you said, it's about our great grandchildren. I I I think that we just need to learn how to talk past the the the politics of it. And and, there's gonna be a lot of hurt.
Flavio:There's no question. I, you know, I can't we can't charm people into transitioning. But, I I was in Ottawa. I was walking I I went to this this National Summit on Auto Theft yesterday. Walking in front of the Supreme Court, somebody had bought an ad, and it said, well, as long as the world needs oil and gas, shouldn't it be Canadian?
Flavio:And and I think it's a sentiment that we can't dismiss, for those of us who are major proponents of the shift. It'd be like, yeah. We can't ignore the fact that that, that, and we shouldn't, that you have to pay the bills in this country and that the the the health of the country's balance sheet has that. But I think we in the in in the auto business need to go over to Edmonton a lot more and Calgary and say, okay. Let me show you ROIs.
Flavio:Let's see if I can get you interested at scale.
Markham:Regular listeners of this podcast will know this, but I'll I'll say it anyway. And that is that at Energy Media, we do 2 kinds of energy journalism. Energy we do energy transition stuff or these kinds of conversations. We do a lot. Probably half of the 4 or 500 interviews I do in a year are with people outside of Canada.
Markham:They're in US, Europe, Asia, wherever they happen to be. Very different perspective than Canadians, I might add. But the other half of our journalism is about oil and gas, and it's specifically because Alberta is the epicenter, the big the big 800 pound gorilla in that in the Canadian industry. And I might add, Canada is the 4th largest, oil producer in the world. I mean, we're a major we are an energy superpower.
Markham:We're not emerging. We're becoming. We are one. Anyway, my point is I have ideas about what you just said. That's a grist for another conversation, but I agree in essence with with everything you did say.
Markham:And how we advance that, again, we'll have another conversation about that in the near future. I wanna go on now to talk about some of the Canadian policy, because I know that you meet with policymakers and bureaucrats in Ottawa all the time. It's part of your job. And my take on the energy transition policies that are coming out of the federal government are that they come through the climate lens more often than not. And they should be coming through the energy transition lens.
Markham:The the issue here is that Canada is facing existential economic threats from a shifting industrial base, a shifting global economy, and a shifting global energy system. And I'm frustrated at times. I know, you know, like, people like, finance minister, Christian Freeland, who's from Edmonton, by the way, will talk about we need muscular industrial policy, and then that's the last time you hear about it. You hear about it once, you know, a year ago, and then it never shows up again. And the I want you to get your insights based on your experience on parliament Hill.
Markham:Does the federal government, both bureaucrats and elected officials, get that this is an energy transition and it needs its own lens. It just can't all come through climate.
Flavio:Some do, but not enough. And it certainly isn't the posture of the government. Although it is many times in in private and public conversation with the prime minister and the deputy prime minister a full understanding of that. It's a to understand and then to be seized of the, of the the threat with some tensions, 2 different things. You you are absolutely right that a lot of the policies being driven totally climate lens.
Flavio:I mean, I, you know, I have rather public battles with, Environment Canada. I have rather public battles with some of their stakeholders. You know? Environmental Defence called Project Aero Vanity Project Said it's greenwashing nonsense. And to me, I think you're missing they missed the point when they say things like that.
Flavio:Like, what we try to do with Aero is to talk about is to is to give a platform for what you talked about. It's like, okay. Look. That climate lens, as long as it results in activity in Canada, as long as it drives some activity in Canada or or complement some of that industrial policy that's happening, you know, with a with an industry minister who's chasing battery investments, and and all of the the component classes, you know, up and down that value stream. Okay.
Flavio:I find the federal government is working at odds, to itself. And and we we're pushing really hard on being the lead in this climate policy and forgetting that we should actually be the suppliers of that technology, of those raw materials. And that the the the the the one half would see a major success if if we had a 100%, EVs on the road in Canada in 2035 and it happened to be Chinese. Well, so what? We've we've achieved our our climate policy goal there.
Flavio:And and and, I think it mutes some of the good work that that is being done on the industry side. I don't know, honestly, Mark. I I mean, I spent a lot of time on that beat, as as as you know, you know, and I think you and I have the same religion. If we had a federal election where that was the central theme, that would be really interesting. I don't know that the next federal election would have that theme.
Flavio:I think the the the governing party right now that is behind, if they would if they were able to recast what they're doing in that sense, you're like, who are you gonna trust? Who are you gonna trust to be to to understand any of the trend? They might do better. I don't know.
Markham:Elections are often fought on pocketbook issues. Jobs, wages, taxes, those kinds of things. And this is probably the you know, you mentioned gray beard. Okay. I shaved, but when you know, I do have a gray beard.
Markham:I'm I'm been around long enough that, in fact, my first election, you know, was around when, Justin Trudeau's father was, was prime minister. I remember those days. And the my my point here is in all of those years watching Canadian politics, watching, you know, the economy and so on, there has never been a a higher threat to what we do, nor has there ever been a bigger opportunity to do something different and better and to build on Wellby. And we don't, as a country, recognize that. We have we are we we are a very insular, provincial looking country.
Markham:We we, you know, we we've grown fat on selling our our resources, and we don't we think we can just do that forever as Michael Warnek does. And and so that's a problem. I don't know where to go with this, Flavio, because it it's we you you laid out it would be nice if the federal government did this, and and there are some problems with that, and then there's some problems in the provincial governments. And and all of these things need their own conversations. We're we're not gonna be able to to resolve them here.
Markham:So maybe what I will do is ask you to just comment, and so as we wrap up the interview on one of the more controversial federal policies, which is the ED sales mandate, which was released not that long ago. So by the end of, by 2035 in Canada, you'll no longer be able to buy a new internal combustion engine car. You can drive 1 if you got 1. You can drive it as long as you want, as long as there's fuel, but you can't buy. You have to buy a a zero emission vehicle, hydrogen, electric, whatever it happens to be.
Markham:What's your take on that particular policy?
Flavio:You know, this is where that the the environmental, the the the climate policy runs into the the economic transition policy. You know, I don't have to sell my bona fides on where we are on electrification. And before this, I was building solar power plants. But none of these things are charities. You have to you have to make money when you do it.
Flavio:Otherwise, you don't have a lender. Otherwise, you don't have a market or your future. So what we've been cautioning the federal government is don't go so steep on that curve that the 5 automakers that are here can't achieve the 20% by 20 25 or the 60% by 2030 or a 100% by 2035. And make sure that you are making the other investments, the ecosystem investments to make sure that human beings can actually plug in vehicles. I think a 100 is crazy.
Flavio:I think that the the real number is 35 to 40, but that is an incredible amount. The problem with the policy is it what it says is if you don't hit the target, you have to pay a $20,000 penalty for every car that doesn't meet it. So as I talk to OEs that manufacture car here's cars here that employ 100 of 1,000 of Canadians, they say, well, if we're in danger of not getting to the target, I'm not gonna buy a credit that's given to my competitor that has exceeded the target. It has no like, VinFast makes nothing in Canada. K?
Flavio:What we'll do is we'll just, lower the, the the amount of cars we sell this year so that the the proportion goes up, or we'll import the EVs from somewhere else. So as I try to tell the the federal government from the prime minister on down, it's not good when your major manufacturers say we're gonna sell less here, or we're gonna bring them in from somewhere else. Give them the same credit. Like, if you make a car here, but you sell it to an American, we're not hermetically sealed at the border. Give them the credit so that we can get there.
Flavio:It is, for me, a microcosm of what you talked about, which is should we have an industrial policy that is focused on the transition, surviving it, and then thriving, or should we have a climate policy that kinda sounds like the the the challenge here, but who cares where they come from? I said, what we're gonna end up with is way too many Chinese cars or way too many local made cars with Chinese batteries, and then what are we doing?
Markham:Well, on that note, this has been a fascinating conversation, and we need to not let so much time go by before we have our next, our next chat Flavia because this is all you all I appreciate your your insights into policy and the industrial issues that are confronting the country. So thank you for this and and appreciate your insights.
Flavio:Thank you. I'll leave this one last thought. This country needs new leaders. This is not to discard the ones that we have, but we need people who are willing to nation build and step out of where they are, wherever we are in private sector and say, look. I understand it better.
Flavio:I'll take the political hit. I'm gonna join the conversation, and we need to drive it because you're right. It is just potentially number 1, in this space according to Bloomberg, NEF. My bet here is that, 10 years from now, 15 years from now, we will not be number 1. We will be number 3 or number 5 or worse have missed the whole thing.
Markham:On that note, thank you, sir. Thank you.