The federal government this year announced subsidies to Volkswagen and the Stellantis-LG Energy Solution joint venture to encourage them to build battery factories for electric vehicles in Canada. (Photo: The Canadian Press)
Ottawa — The Parliamentary Budget Officer estimates that it will take the federal and Ontario governments 20 years, until 2043, to break even on deals with two auto giants to manufacture electric vehicle batteries, in Ontario.
The federal government this year announced subsidies to Volkswagen and the Stellantis-LG Energy Solution joint venture to encourage them to build battery factories for electric vehicles in Canada.
In an analysis of the break-even point for these production subsidies granted by Ottawa, the Parliamentary Budget Officer (PBO) estimates that it will take 20 years for government revenues generated by the production of the two Ontario factories to reach the equivalent of production subsidies, which total $28.2 billion (B) by the end of 2032.
In March, Canada reached an agreement that will allow Volkswagen to obtain up to $13.2B in subsidies for the production of batteries in a factory that would be established in St. Thomas, Ontario.
Stellantis then requested a similar deal for a factory it was building in Windsor, Ontario, and ultimately obtained a $15B deal.
Production subsidies for the two plants are intended to reflect incentives offered by the United States under the Inflation Reduction Act, a law passed in the summer of 2022, which provides for significant investments in the economy green.
The cost of subsidies for Canadian production must be shared between the federal and Ontario governments, with Ottawa covering two-thirds of the amount.
However, the PBO report has an important caveat: the analysis does not include additional government revenues that could be generated by spillovers to the economy.
This contrasts with the federal government’s five-year break-even calculation for the Volkswagen deal, which includes expected revenue from increased production throughout the supply chain.
The Liberals argued that these major production subsidies would have greater effects on the economy by encouraging more companies involved in the auto industry to invest in Canada, which would help move the country forward in its transition plans. green.
The Minister of Innovation, Science and Industry, François-Philippe Champagne, said the PBO’s findings demonstrate that these agreements constitute “good business.”
“While the Parliamentary Budget Officer’s report does not consider many of the overall economic impacts on the supply chain, it highlights, once again, that these investments will generate far greater economic benefits than our government’s investments », Said Mr. Champagne in a press release published on X, formerly Twitter.
The federal government has not provided a break-even estimate for the Stellantis deal.
By Nojoud Al Mallees
