Industry Minister Responds to PBO Report on EV Plant Subsidies

Innovation, Science, and Industry Minister Francois-Philippe Champagne responds to a question during Question Period in Ottawa on Nov. 16, 2022. Adrian Wyld/The Canadian Press

Industry Minister François-Philippe Champagne has responded to a report by the Parliamentary Budget Officer that estimated it would take 20 years for the government to break even on its electric vehicle (EV) battery plant subsidies, by saying the long-term economic spinoffs of the deal would pay off.

“What the Parliamentary Budget Officer expressed today is that the investments we make will generate revenues in the coffer. The analysis that was done is that over 30 years you have to jump from $200 to $400 billion in economic impact to Canada. That’s money we can reinvest,” Mr. Champagne told reporters Sept. 12, the same day the PBO’s report was released.

The report examined subsidies the federal and Ontario governments granted to VW and Stellantis-LGES EV battery plants—which amounted to $13.2 billion and $15 billion, respectively—and determined it would take 20 years to break even.

“I think Canadians want Volkswagen,“ said Mr. Champagne. ”When you’re talking about 3,000 to 4,000 jobs, perhaps 30,000 indirect jobs, you’re changing the nature of the economy of the country. I think that was confirmed by the PBO today.”

Initially, the federal government said it would recoup its investment in VW’s St. Thomas, Ont., plant in just five years.

The federal and Ontario governments have entered a cost-sharing agreement in which the former will cover two-thirds, or $18.8 billion, of both plants’ production subsidies, while the latter is on the hook for the remaining $9.4 billion.

PBO Report

In his report, PBO Yves Giroux said the federal and provincial tax revenues generated from the EV battery manufacturing plants over the period of 2024 to 2043 “will be equal to the total amount of production subsidies.”

“That is, the break-even timeline for the $28.2 billion in production subsidies announced for Stellantis-LGES and Volkswagen is estimated to be twenty years, significantly longer than the Government’s estimate of a payback within five years for Volkswagen,” said the report.

Mr. Champagne said the VW plant, which is slated to open in 2027, will redefine the surrounding area and serve as a catalyst in other economic sectors. He characterized inaction as a more wasted measure than the monies allocated to the two plants.

“We’ve always said you have to build the full ecosystem,” he said. “If you read the report, the Parliamentary Budget Officer says himself he’s only considering 8.6 percent of the impact. So, clearly, if you look at the rest of it, you come to a much shorter payback.”

He stressed that subsidies are contingent upon production.

The PBO released a separate report in June that said Ottawa is subsidizing VW to the tune of $16.3 billion when tax compensation is taken into account, rather than the $13.2 billion the government initially announced to the public.