Federal financial watchdog says subsidy recovery to be longer than minister let on

Photo: Contributed

Central Okanagan-Similkameen-Nicola MP Dan Albas

In May, I wrote about the announcement from the federal government that Volkswagen would receive up to $13 billion in subsidies over the next decade to ensure the automaker builds its electric-vehicle battery plant in southern Ontario.

I also referred to the report by the business analyst firm Statista, that stated Volkswagen's operating profit in the 2022 fiscal year increased by approximately 14.78% from the previous year, reaching around 22.1 billion euros.

Shortly after news of the Volkswagen deal became public, Stellantis-LG Energy Solutions (LGES), another electric vehicle battery manufacturer, demanded similar treatment. Like Volkswagen, LGES obtained a subsidy deal of up to $15 billion (split) between the federal and Ontario provincial governments.

At the time, federal Industry Minister Francois-Philippe Champagne defended the $13-billion subsidy with Volkswagen by stating, "The payback is five years. That's a very good investment."

This week, the Parliamentary Budget Officer (PBO) released a report scrutinizing the minister's claim that the subsidy from taxpayers would be fully recovered within five years. The PBO’s report, titled "Break-even analysis of production subsidies for Stellantis-LGES and Volkswagen," examined the combined subsidies for the two deals, totalling $28.2 billion.

The PBO concluded the break-even timeline for the $28.2 billion production subsidies announced for Stellantis-LGES and Volkswagen is estimated to be 20 years. It is deeply concerning that the minister would suggest a five-year timeline for recovering this investment when the actual timeline is much longer.

This seems to be part of a larger pattern with the current Liberal government and its continued subsidies for electric vehicles.

The CBC and the Canadian Press recently reported that the federal government has budgeted $768 million between 2016 and 2027 to purchase and install almost 90,000 electric vehicle chargers.

Two different federal programs were involved in the scenario. One of the programs, which has been in operation since 2016, funded 43,000 electric vehicle battery charging stations. However, data from that program shows fewer than one in five of them are operational.

The second program, launched in 2019, aims to install an additional 33,500 electric vehicle chargers by 2025. Currently, only 6,697 of those charging stations are operational.

It is important to note these federal programs are not fully funded and require financial contributions from private sector partners or other levels of government.

This week's question is:

What are your thoughts on federal subsidies for Canada's electric vehicle battery industry?

I can be reached at [email protected] or call toll-free at 1-800-665-8711.

Dan Albas is the Conservative MP for Central Okanagan-Similkameen-Nicola.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.