Victory, but at what cost? Canada persuaded Volkswagen and Stellantis to build EV plants in the country, but that arm-twisting came in the form of some hefty financial incentives that it has emerged could take decades to recoup.
Canada’s budgetary watchdog said the country won’t break even on its deal with the automakers for 20 years, and that’s only if production at the two plants is up and running by 2024. That contradicts comments made at the VW plant’s announcement in April of this year by Prime Minister Justin Trudeau, who claimed the economic benefits of the project would match the cash Canada was injecting in less than five years.
Stellantis-LG was guaranteed up to CAD$15 billion (USD $11 bn) in incentives from the Canadian federal government and the province of Ontario, while VW’s golden hello was CAD$13 billion (USD $9.6 bn) in tax credits and a CAD$700 million (USD $516 m) grant. Stellantis actually stopped production at its Windsor battery plant in May of this year shortly after VW’s generous assistance terms were announced, only restarting the build when the Canadian government promised more financial help.
Related: VW’s Ontario Battery Factory Will Be The Largest Manufacturing Plant In Canada
Canada’s mineral deposits will be a key player in North America’s plan to wean itself off Chinese-made batteries and the country was keen to court car makers to keep the entire production process within Canada’s borders. Without a big financial carrot dangling in front of them its doubtful that either automaker would have picked Ontario for its battery centers.
The budgetary watchdog’s timeline has caused some to question the decision to offer such large incentives, but Canada’s Minister of Innovation, Science and Industry, François-Philippe Champagne, and senior auto industry figures say the 20-year figure is misleading. They say it only accounts for government revenues from battery cell and module manufacturing, and not the wider benefits of the plants being sited in the region that could have a positive effect on everything from car manufacturing to mining and even catering and hospitality businesses.