Feds Confident Economic Benefits Will Outweigh $31B in Subsidies for EV Battery Plants: Report

A woman checks the status of the charge for her 2022 Volkswagen ID.4 EV at a charging station at a Scarborough, Ontario Canadian Tire on June 14, 2023. The Canadian Press/Doug Ives

After signing deals committing over $31 billion in funding for large automakers, Industry Minister François-Philippe Champagne’s department says Canada is confident that its large subsidies for electric-vehicle (EV) battery manufacturing plants will create an overall benefit for the country’s economy.

“Canada is in the driver seat with investments that have been secured across the electric vehicle supply chain that will benefit all Canadians,” said an internal briefing note, titled “Automotive Industry Zero Emission Vehicles,” and obtained by Blacklock’s Reporter.

“Canada’s continued strength in automotive production is a key pillar in building a resilient, prosperous and healthy future for Canadians.”

The note added that Canada’s auto sector “contributed $16 billion in 2022 to Canada’s gross domestic product.” It also said Ontario is the “second largest automotive manufacturing jurisdiction in North America.”

The federal government signed deals earlier this year with Volkswagen’s subsidiary company PowerCo and Stellantis and LG Energy Solution to build EV battery plants in Ontario.

Parliamentary Budget Officer Yves Giroux estimates that Ottawa’s deal with Volkswagen will cost over $16 billion in total subsidies including tax adjustments, while the federal government approved another $15 billion for Stellantis in July to continue building its plant in southern Ontario. The Ontario government will pay for a third of the subsidies to be released to Stellantis, while Ottawa will cover the rest.

Mr. Giroux predicted the Volkswagen plant will only bring the country “marginal” economic benefits once it is completed in several years, estimating that it will increase Canada’s real GDP by just 0.01 percent above its baseline projection by 2027 while adding around 1,400 jobs by that time.

However, Mr. Champagne has previously said that Ottawa will recoup all costs of the battery-plant subsidies through their positive economic impact.

Ottawa has estimated the Volkswagen plant will produce batteries for up to 1 million EVs per year once it is built by 2027, predicting it will create 3,000 direct and 30,000 indirect jobs.

Mr. Champagne told reporters on April 20 that the Volkswagen plant is going to have an economic impact for years to come, saying it will operate in southern Ontario “for 100 years.”

“Talk to any banker. He would say if you get your money in five years for a plant that’s going to be there for 100 years that’s a pretty good deal,” he said.

Marnie Cathcart contributed to this report.