OTTAWA | The Volkswagen battery mega-factory to be built in Ontario will cost the federal government more.
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This is the conclusion reached by the Parliamentary Budget Officer, Yves Giroux, an independent federal agent responsible for evaluating government spending.
Mr. Giroux estimates that “the federal government’s financial commitment to Volkswagen will total approximately $16.3 billion”.
However, the Trudeau government had announced with great fanfare this spring that its massive investment to attract Volkswagen amounted to $14 billion.
However, according to Mr. Giroux, Ottawa underestimated by $2.8 billion the amount it will have to pay VW to match the financial support that the company would have received if it had established itself in the United States, which Canada promises to do.
The Biden administration has implemented extremely aggressive subsidy policies to attract investment in green energy.
The decision forces Ottawa to retaliate with its own generous grants.
The plant should be able to produce one million batteries per year after its scheduled opening in 2027.
Canada has a goal, by 2035, to see that all new cars sold in the country are emission-free.
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Arm wrestling with Stellantis
The PBO report comes as the federal government and the Ontario government are in a standoff with another auto giant, Stellantis. This auto giant, which is made up of the PSA and Fiat Chrysler groups, has put the construction of its Windsor battery plant on hold, after learning of the contract concluded between Ottawa and Volkswagen.
Stellantis is asking Canadian governments for a similar offer, which mirrors the benefits promised by the US Inflation Reduction Act.
Stellantis could receive much more than the billion promised by Ottawa and Queen’s Park last year.