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Volkswagen, Stellantis subsidies will take 20 years to break even: watchdog

Click to play video: 'Premier Ford calls on feds to ‘step up’ after Stellantis stops construction on Windsor, Ont. EV battery plant'
Premier Ford calls on feds to ‘step up’ after Stellantis stops construction on Windsor, Ont. EV battery plant
Ontario Premier Doug Ford expressed concern after Stellantis, one of the world’s largest automakers, said it has stopped construction on a $5-billion electric vehicle battery plant in Windsor, Ont., because the federal government has not delivered on what was promised. "We need the federal government to step up as they did for Volkswagen," Ford said at a press conference in Mississauga. – May 15, 2023

The parliamentary budget officer says it will take the federal and Ontario governments until 2043 to break even on their electric vehicle battery deals with two industrial giants.

The governments announced subsidies for Volkswagen and Stellantis-LG Energy Solution this year to entice them to build electric vehicle battery plants in Canada.

A report released by the PBO on Tuesday says it will take 20 years for government revenues generated from the production of both plants to equal the production subsidies, which will total $28.2 billion by the end of 2032.

In a statement posted on X, formally known as Twitter, Innovation Minister Francois-Phillippe Champagne called this a good deal for Canadians and the auto sector.

“These transformational investments will create thousands of jobs across the entire EV supply chain,” he wrote.

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“While the [PBO] report does not capture many of the broader economic impacts on the supply chain, it does highlight, once again, that these investment will generate economic benefits far greater than our government’s contribution.”

In March, Canada reached a deal that will see Volkswagen get up to $13.2 billion in production subsidies for batteries they produce at a plant planned for St. Thomas, Ont.

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Stellantis later asked for a similar deal for a plant it’s constructing in Windsor, Ont., and ultimately secured a $15-billion agreement.

The production subsidies for both plants are supposed to mirror incentives offered by the U.S. through the Inflation Reduction Act, a law passed in the summer of 2022 that makes significant investments in the green economy.

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Click to play video: '‘The future is electric’: Guilbeault points to Volkswagen EV plant as clean energy investment example'
‘The future is electric’: Guilbeault points to Volkswagen EV plant as clean energy investment example

The cost of the Canadian production subsidies are to be shared between the federal and Ontario governments, with Ottawa shouldering two-thirds of the cost.

The budget watchdog’s calculation does not include any potential revenue that may be generated across the supply chain.

That’s in contrast to the federal government’s five-year break-even calculation for the Volkswagen deal, which includes expected revenue from production increases across the supply chain.

The federal government has not provided a break-even estimate for the Stellantis deal.

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