Who pays for all this? Either today’s hard-working Canadians, through their taxes, or future taxpayers paying interest on debt. With these companies standing to reap profits from battery production anyway, subsidies are just the icing on the cake.
Industrial policy might well save the auto industry, but Ontario, with per capita income little different than Alabama, may be left with little else as other industries wither under the tax load. And there are no guarantees. The EV industry will grow but it’s far from clear which company will succeed. Goldman Sachs identifies Tesla, which already has over half of the U.S. market, as best positioned to dominate the market, not Volkswagen or Stellantis.
Such thinking is also typical of economics textbooks, which spell out the many ways “market failure” can lead to resource misallocation. Economies of scale lead to a monopoly or oligopoly dominating an industry so governments need to regulate prices. Credit markets are too risk-averse to fund “infant industries” so governments must. Pollution is not priced in markets so governments need to “make polluters pay.