The federal government could add $2,8 billion to the initial cost of the project in order to match American incentives.
The Minister of Finances says this prevision is inaccurate.
The economic repercussions of this project for Canada are estimated at only $700 million.
Volkswagen’s upcoming Canadian battery plant could end up costing the federal government more than was initially expected.
While the automaker and the government have signed a deal that calls for subventions to the tune of $13 billion, the Parliamentary Budget Officier (PBO) believes Ottawa is about to increase the total up to $16,3 billion.
Most of this expected increase comes from a sum of $2,8 billion that would be used to match the incentives offered by the U.S. on the batteries that will be produced there starting in 2027.
This is because the planned St-Thomas battery plant will be the first of the sort for Volkswagen in North America, which means it will be eligible to receive tax credits and incentives from the American government, which has pledged to give the automaker US $35 per Kilowatt-hour produced.
The Canadian government will also provide funding to VW in order to support production over a 10-year deal that also includes $700 million to be paid in the coming months in order to finance the actual construction of the factory, which will occupy an area equivalent to 210 soccer fields.
The federal government hasn’t confirmed it will add this $2,8 billion package to the project, but the Parliamentary Budget Officer thinks it is the only way for the administration to match U.S. incentives, which it has repeatedly promised to do.
The Minister of Finances, Chrystia Freeland, says the PBO’s estimates are wrong since they have been based on an erroneous hypothesis, saying that the government can use many other ways to equal U.S incentives without having to add so much extra cash.
While the impact of this project on Volkswagen is easy to see, especially since the Ontario government has pledged an additional $500 million, its repercussions for Canada are less impressive, with the estimated financial gain being placed at around $700 million, the growth in GDP expected to stop at 0,01% and the number of jobs created limited to only 1,400.
This leads many to ask why the government continues to support this project, and the answer might be that Ottawa is ready to make a loss on its collaboration with Volkswagen in order to attract similar projects from other automakers and become a leader in the EV industry over the coming decades.
Source: Radio Canada
