Companies building electric-vehicle components in Canada won’t necessarily receive the same large subsidy package that Volkswagen did, Prime Minister Justin Trudeau indicated in late April.
Canada agreed to subsidize the German automaker’s electric-vehicle battery production with up to $13 billion (US$9.6 billion) over ten years.
This deal will result in Volkswagen constructing a massive new factory in St. Thomas, Ontario, employing thousands of workers, about two hours from Detroit.
When asked if every company building a battery plant can expect the same deal, Trudeau responded no.
“We are prepared to step up and make sure that we’re competitive with U.S. manufacturing subsidies,” Trudeau stated on April 28 during an interview in New York.
“But we’re going to look at each one on a case-by-case basis. We will think strategically about this and not just say yes to any firm,” he added.
Besides Volkswagen, Stellantis and LG Energy Solution have expressed interest in jointly setting up a battery-manufacturing facility in Windsor, Ontario.
Earlier this month in Washington, Trudeau’s finance minister, Chrystia Freeland, cautioned that democracies cannot engage in a “race to the bottom” on corporate subsidies without eroding their tax bases and harming their ability to fund social programs.
Despite the substantial funds his government committed to Volkswagen—and the approximately $80 billion in long-term investment tax credits promised in the latest budget for various industries—Trudeau maintained he is still cautious about entering a subsidy war.
He suggested Volkswagen likely left money on the table when choosing Canada over certain U.S. states for its first EV battery plant in North America.
“I don’t know what other jurisdictions offered, but I’m fairly confident they were willing to go further than we were able to go with financial incentives,” he said.
Canada’s clean electricity grid, labor force, and public healthcare system were also factors that convinced Volkswagen to build the plant in St. Thomas, he noted.
The prime minister emphasized that Canada cannot afford to fully match the U.S. subsidies available under last year’s Inflation Reduction Act.
“If we were to try and match dollar-for-dollar the equivalent of the IRA, we’d lose our triple-A credit rating, quite rightly,” he said. “So we do have to be thoughtful and strategic about this.”
