The federal government has decided to provide Volkswagen with up to $13 billion in subsidies over the next ten years as part of a deal to make sure the automaker establishes its electric vehicle battery plant in southern Ontario.
This agreement comes after commitments from Ottawa to stay competitive with the U. S. and encourage electric vehicle battery manufacturers to set up operations in Canada. However, the cost is raising some concerns.
“This is a game-changer for our nation,” said Innovation Minister François-Philippe Champagne while addressing reporters on Thursday.
The federal government will offer yearly production subsidies to the German carmaker and contribute funds toward the massive factory in St. Thomas, which is estimated to cover an area equivalent to 391 football fields, making it Canada’s largest factory.
Bloomberg News first reported on the subsidy figure. Sources familiar with the agreement have confirmed details of the contract with CBC News.
Under the terms of this deal, federal production support for the plant is projected to range from $8 billion to $13 billion over a decade.
Ottawa is also providing approximately $700 million in capital expense grants through its Strategic Innovation Fund for Volkswagen.
Champagne mentioned that these subsidies will kick in once the company finishes constructing the $7 billion plant and starts production.
According to sources, under the agreement between Ottawa and Volkswagen, Canada’s production subsidies will only remain effective as long as the U. S. Inflation Reduction Act stays active. That U. S. law offers substantial clean energy and net-zero incentives south of our border.
If U. S. incentives are reduced, Canada’s subsidies will decrease as well.
The government has expressed its intention to be a significant player in electric vehicles, which are widely regarded as key for future automotive industry growth.
Champagne defended this expenditure by arguing that job creation and supply chain benefits from attracting one of the world’s major automakers will outweigh costs associated with these government subsidies.
“When you see a transformation in history like that, you have to seize the moment. You lose that, what’s going to happen to the auto sector? What’s the cost of inaction?” he stated.
WATCH | Up to $13B for an EV battery plant – and that’s just from the feds p >
Up to $13B for an EV battery plant – and that’s just from the feds p >Flavio Volpe, president of Automotive Parts Manufacturers’ Association discusses what such a substantial investment into an upcoming EV battery facility in Ontario could mean for the province’s automotive sector.
Speaking with reporters Thursday, Champagne argued that Canada would start seeing economic benefits from this plant within its initial five years.
“Talk to any banker. He would say if you get your money back within five years for a facility that’s going to last 100 years, that’s a pretty good deal for Canadians,” he remarked.
Volkswagen announced last month that it had selected St. Thomas, Ont., about two hours northwest of Detroit as the location for its first North American “gigafactory.” p >
At that time it was unclear how much financial support both federal and provincial governments were contributing towards securing this facility.
The Ontario government is also expected to provide subsidies but those specifics haven’t been revealed yet.
< pIndustry Minister François-Philippe Champagne says that backing by the federal government regarding this battery facility revolves around ‘seizing generational opportunities.’ (Justin Tang/The Canadian Press) p >< pThe Official Opposition plans on criticizing Liberals concerning this arrangement.
When news broke about building this factory last month Conservative Leader Pierre Poilievre tweeted “this money belongs to Canadians. Not to a foreign corporation. Not t o Justin Trudeau. How much of Canadians’ money is he giving t o this foreign corporation?” P>
President Flavio Volpe commented he understands not everyone may feel comfortable about such significant expenses. P>
“We believe it’s incredibly worthwhile , but it does come at quite a price,” he explained. P>
“These jobs are solid ones-paying mortgages , supporting families , nurturing communities. They’re not short-term gigs where people just come and go. You can build careers here.” P>
More information regarding this deal should be available Friday. P>
This facility will operate under Volkswagen’s subsidiary called Power Co. P>
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