Prime Minister Justin Trudeau’s government agreed to subsidies that might top $13 billion over a decade to land a Volkswagen electric-vehicle battery plant, the company’s first outside Europe.
Champagne and other government officials believe the financial aid for Volkswagen is necessary to protect Canada’s position in the North American auto sector as it moves away from internal-combustion engines, and to ensure the country isn’t seen as merely a provider of critical minerals but also a source of advanced manufacturing and clean technology. The government is also in talks on financial help for a plant that LG Energy Solution and Stellantis are building in Ontario, the minister said.
Still, the size of the incentives is striking. The production support alone is expected to range from $8 billion to $13 billion over 10 years, depending on how much the plant produces and what happens with U.S. policy. The contract is written so that Canada’s production subsidies will stay in place only as long as the Inflation Reduction Act is in force. If the U.S reduces its incentives for clean manufacturing, Canada’s will go down proportionally.
The Volkswagen deal in Canada also raises the question of how much financial help other automakers and battery producers might be able to get. Last year, LG and Stellantis announced a $5-billion joint venture in nearby Windsor, Ontario, across the border from Detroit. Trudeau’s Liberal government is likely to face some backlash over the deal. It has already taken some criticism for not giving more detail on the cost. “How much of Canadians’ money is he giving to this foreign corporation?” Conservative Leader Pierre Poilievre tweeted shortly after the factory was announced last month. “How much is the cost per job?”