The federal government has agreed to give Volkswagen up to $13 billion in subsidies over the next decade as part of a deal to ensure the automaker builds its electric-vehicle battery plant in southern Ontario.
The contract follows promises by Ottawa to remain competitive with the U.S. and convince electric vehicle battery producers to set up their plants in Canada. But the price tag is raising eyebrows.
“This is game-changer for our nation,” said Innovation Minister François-Philippe Champagne while fielding questions from reporters Thursday.
The federal government will provide annual production subsidies to the German automaker and kick in funds for the massive factory in St. Thomas, which is estimated to be the size of 391 football fields, making it the largest factory in Canada.
Bloomberg News first reported the subsidy amount. Sources with knowledge of the deal have confirmed the details of the contract with CBC News.
According to details of the deal, federal production support for the plant is expected to range from $8 billion to $13 billion over 10 years.
Ottawa is also offering about $700 million in capital expense grants to Volkswagen through its Strategic Innovation Fund.
Champagne said those subsidies will come into effect after the company builds the $7 billion plant and begins production.
Sources say that, according to the terms of the contract between Ottawa and Volkswagen, Canada’s production subsidies will stay in place only as long as the U.S. Inflation Reduction Act remains in force. That U.S. law offers billions of dollars in clean energy and net-zero subsidies south of the border.
If the U.S. reduces its incentives, Canada’s subsidies will also go down.
The government has been open about its desire to be a player in electric vehicles, widely seen as the future of the auto industry.
Champagne defended the cost, arguing the job creation and supply chain spinoffs from bringing one of the world’s largest automakers to Canada will be worth more than the cost of the subsidies to the government.
“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 said.
WATCH | Up to $13B for an EV battery plant — and that’s just from the feds
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, talks about what a massive financial infusion into a planned EV battery plant in Ontario might mean for the province’s auto industry.
Speaking to reporters Thursday, Champagne argued Canada will see the economic impact of the plant in its first five years.
“Talk to any banker. He would say if you get your money in five years for a plant that’s going to be there for 100 years, that’s a pretty good deal for Canadians,” he said.
Volkswagen announced last month that it had chosen St. Thomas, Ont., about two hours northwest of Detroit, as the site for its first North American “gigafactory.”
At the time, it was not known how much the federal and provincial governments had put on the table to secure the plant.
The Ontario government is also expected to subsidize the project but those details are not yet public.
The Official Opposition is expected to attack the Liberals over the deal.
When news of the factory was announced last month, Conservative Leader Pierre Poilievre tweeted “this money belongs to Canadians. Not to a foreign corporation. Not to Justin Trudeau. How much of Canadians’ money is he giving to this foreign corporation?”
Automotive Parts Manufacturers’ Association president Flavio Volpe said he knows not everyone will be comfortable with the price tag.
“We think it’s incredibly worth it, but it is a very material number,” he said.
“These are good jobs that pay for mortgages and feed kids and build communities. They’re not, you know, short-term jobs that people slip in and out of. You can build a career on them.”
More details of the deal are expected to be made public Friday.
The plant will be run by a Volkswagen subsidy called PowerCo.
