Even before the loss of the majority of the United Kingdom's tank force in France in 1940 after Dunkirk, it was recognised that tank production in the UK at the start of the war was insufficient and capacity in the US was taken for British needs. So it was necessary that if Canada was to equip with tanks they would have to be manufactured locally. In June 1940 the Canadian Pacific Railway's Angus Shops in Montreal - as the only large firm with spare capacity - had received a contract to produce 300 partially fitted out Valentine tanks for the British; this was followed later with one for 488 complete tanks for Canada. However the Valentine was an infantry tank and Canada required a cruiser tank for its recently formed armoured division. In the end 1,940 Valentines were produced by CPR most of which were supplied to the USSR. Although the Valentine used a number of American produced parts, its reliance on British components, difficulties in adapting its manufacture to North American methods, and other problems such as limitations to the availability of the right type of armour plate affected Valentine production. The Canadian Joint Committee on Tank Development concluded, in September 1940, that its cruiser tank should be based on a US rather than a British design. This would be quicker and allow it to use components already in production for the US design.
The Canadians were interested in production of the M3 Medium. However the M3 was an interim design; its main armament was in a side sponson, it was tall, and under-armoured, and it was clear that it would be unsatisfactory for Canadian and British use. In early 1941 the Canadian Interdepartmental Tank Committee adopted a compromise - to develop a superior design locally but still using the M3 chassis. The British Tank Mission which was involved in the modifications of the M3 for British use contributed a tank expert - L.E.Carr - to design a new hull and turret for the Canadian tank, which could take a 6-pounder (57 mm) or 75mm gun while retaining the lower hull of the US M3 Medium.
The new hull was cast rather than welded or riveted and lower than that of the M3. The pilot model's turret and upper hull casting was produced in the US by General Steel Castings and later they aided the set up of Canadian production. Montreal Locomotive Works (MLW) was chosen to make the new Canadian M.3 Cruiser Tank (as it was then known)and was given the funding to set up the Canadian Tank Arsenal at Longue Pointe. MLW was a subsidiary of the American Locomotive Company, which had experience in producing large castings and another ALCO subsidiary was producing cast hulls for the M3 Medium.
Canadian engineers ran into many challenges when developing the tank as Canada had never produced a tank before. Along with the lack of knowledge, it took time for Canadian factories to gear up for the production of many of the Ram's components. Initially Canada relied heavily on United States and British materials to complete the construction of the Ram. Most critically the Ram's Continental engine and transmissions were available only in the USA and these were always in short supply. The Ram tank was developed with a turret which unlike the US M3 could traverse the main armament 360 degrees. Its fully cast armoured steel hull gave reinforced protection and - with the driver's seat repositioned to meet British requirements for right-hand drive - lower height while the US designed chassis and power train ensured its overall reliability.
Although it could mount a US 75 mm gun, the preferred armament for the Ram was the QF 6 pounder which had superior armour-piercing capability. As it was not immediately available nor the Canadian designed mountings for them, early production (50 tanks) were fitted with the 40 mm QF 2-pounder gun.
A prototype Ram was completed in June 1941 and general production of the Ram I began in November of the same year. The Ram I and early Ram IIs were fitted with side doors in the hull and an auxiliary machine gun turret in the front. The former weakened the hull and complicated production and the doors and the machine gun turret would be discarded in later modifications. By February 1942, production had switched to the Ram II model with a 6-pounder gun and continued until July 1943. In March 1942 a decision had been made to change production over to the automotively-similar M4A1 Sherman tank for all British and Canadian units. Ram production continued due to delay in starting the new M4 production lines and a reluctance to let the plant lie idle. By July 1943 1,948 vehicles, plus 84 artillery observation post (OP) vehicles, had been completed.
The official Canadian history of the war compares the Ram to the Ross rifle as examples of unsuccessful Canadian weapon designs. It states that given the Sherman's superiority, in retrospect it would probably have been better for the United States to produce more tanks, and for Canada to have focused on manufacturing more transport vehicles such as the successful Canadian Military Pattern truck designs. The Sexton self-propelled gun based on the Ram chassis, however, was very successful.