A new report from Canada’s parliamentary budget officer indicates the cost of government support for electric vehicle battery plants is higher than reported, by billions, and an industry spokesperson isn’t happy about it.
The PBO published an updated report Friday, suggesting the combined cost of government production subsidies for the Stellantis-LG battery plant in Windsor, the Volkswagen battery plant in St. Thomas, and the Northvolt plant in Quebec is $43.6 billion over 10 years, “Which is $5.8 billion higher than the $37.7 billion in announced costs,” said Yves Giroux, Canada’s parliamentary budget officer.
In his report, Giroux said the added $5.8 billion in non-announced costs represents foregone corporate income tax revenues for the federal, Ontario, and Quebec governments combined.
Giroux also estimated the amount of time it will take for the governments to “break-even” on the multi-billion dollar investments.
“We estimate a break-even timeline of 15 years for the $13.2 billion production subsidy announced for Volkswagen, and 23 years for the $15 billion in production subsidies announced for Stellantis-LGES,” added Mr. Giroux.
Giroux said when the announcements were made, the government indicated the break-even period for the Volkswagen subsidies would be five years.
“We found that was very suspicious for such a short period. To recover what was at the time, almost $15 billion. So we decided to look into it,” he told CTV News.
Giroux said his methodology for determining a return-on-investment includes calculating direct economic benefits, indirect impact like the supply chain, and the induced economic activity it creates.
“That’s a totally legitimate reason to spend billions of dollars, they just have to be transparent and honest about it. Rather than say, we will get our money back in less than five years, which is absolutely not possible,” Giroux said.
But Auto Parts Manufacturer’s Association president Flavio Volpe isn’t buying it, calling the report “inaccurate.”
“He is so wrong on this, that it questions his judgment overall,” said Volpe, who represents the interests of 100,000 workers in the auto parts manufacturing sector.
“If you’re going to put your name on a report that’s publicly funded, and you’re not going to do a good job at it, either by omission or commission, I’m going to call you out,” Volpe said.
Volpe believes Giroux is not properly calculating the all-in benefits of selling a car — all the parts contained within — including batteries.
Volpe argues the battery plants will be the anchor in an EV ecosystem where supply chain spin-offs will speed up that break-even period, noting those weren’t taken into account by the PBO.
“Your methodology sucks,” Volpe said. “By definition, you have no idea what you’re doing, or what you’re talking about.”
Volpe told CTV News when reports like this come out, there are negative repercussions on public sentiment for what many in the industry herald as a good investment.
“What we’re doing is we’re creating a public debate based on the wrong set of facts that could lead people to conclusions, like this isn’t worth it,” said Volpe.
Giroux agrees there are many factors the government considers aside from return on investment, in this case, keeping Canada’s automotive industry afloat was a primary consideration.
But he counters having the battery plants in Canada does not guarantee supply chain spin-offs in Canada, noting his methodology is robust and he’s just stating the facts.
“It’s important for taxpayers to have a sense as to whether this is worth the investment from a money perspective, and also for government, to for them to be reminded that they have to be transparent and honest when they report on numbers,” Giroux said.
Volpe calls the report inaccurate and disingenuous.
“I call this, at the very least, a lazy report, because I don’t want to say what I really think, which is, you did it on purpose,” Volpe said.
Volpe was very firm in his rebuttal because he thinks the next time the PBO authors a report on the auto industry, he should consult with people in the industry to determine the methodology.
“Call me next time, and we’ll give you the math for it. We’ll show you,” he said. “Cars are not art. It’s just math and science: who makes what, where, when and why. The end.”
