Industry minister defends Canada's $13B Volkswagen battery plant subsidy plans

Industry Minister Francois-Philippe Champagne says the federal government's plans to provide approximately $13 billion in subsidies over the next decade, in order to see Volkswagen build its first overseas battery manufacturing plant in southwestern Ontario is "a very good investment."

Bloomberg News first reported the "unprecedented" contract, based on an interview with the minister.

Speaking to reporters on Parliament Hill on Thursday, Champagne confirmed that the plant—slated to be larger than 390 football fields— will and cost $7 billion to build. The minister said that once Volkswagen begins producing and selling batteries, then Canada's production support will come into play in the years ahead.

The contract Canada has inked will include both an initial capital investment of $700 million and then up to $13 billion in ongoing production subsidies, comparable to what Volkswagen would receive had it taken its business to the U.S.

"The payback is five years. That's a very good investment. Talk to any banker, he would say 'if you get your money in five years, for a plan that's going to be there for 100 years, that's a pretty good deal for Canadians,'" Champagne said, going on to call it a "generational opportunity" and a "game changer." 

In mid-March, the German automaker said its subsidiary PowerCo had plans to establish an electric vehicle (EV) battery manufacturing "gigafactory" facility in St. Thomas, Ont., south of London.

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With production planned to start in 2027, the EV battery plant is expected to employ thousands of workers once fully operational, though Champagne pointed Thursday to the trickle-down job creation expected in southern Ontario as a result of the European car manufacturer setting up shop.

"Canada and Ontario are perfect partners for scaling up our battery business and green economy jobs, as we share the same values of sustainability, responsibility and cooperation," said chairman of PowerCo's supervisory board, in the March statement detailing the deal.

At the time and until now, the federal and provincial governments have remained tight-lipped about how much governments agreed to spend to secure the plant. Ontario has yet to release how much it plans to contribute towards this plant, or what form provincial funding may take. Any provincial contributions would be on top of what Ottawa has put on the table.

Touting the deal as an indication of Canada's growing green economy and ability to attract international investment, the move comes amid pressure for this country to remain competitive against the United States' Inflation Reduction Act (IRA) which is offering billions in clean energy and net-zero industries south of the border.

Champagne said Thursday that the contract will see Canada's subsidies continue so long as the IRA is in place. This comes after what the minister has said took months of deal-making that started with a phone call and a series of meetings where he and his officials made Canada's case.

Asked what this move may mean for other clean technology companies Canada is also courting, the minister said the federal government expects to be "very selective" and "targeted" with further investments.

Speaking to CTV News Channel's Power Play host Vassy Kapelos the day plans for the plant were revealed, the minister said that Canada didn't win "on the money" and pushed other factors in the deal-making, but declined to offer details despite repeated questions, suggesting the information was “commercially sensitive.” 

Reacting to the reported developments on Thursday, NDP MP and auto critic Brian Masse said as more details emerge, the federal government needs to ensure workers and communities benefit in the long-run, not just Volkswagen's CEO and shareholders.

"To fight the climate crisis and secure Canada’s economic future, Canada needs to be a leader in producing electric vehicles with good-paying union jobs as a requirement for any contracts," said Masse in a statement.

When the initial pledge was made public, Conservative Leader Pierre Poilievre questioned "how much of Canadians' money" would be going to a "foreign corporation."

A further announcement about the plan is scheduled to take place in St. Thomas on Friday, with Prime Minister Justin Trudeau, Ontario Premier Doug Ford, and other top officials expected to be in attendance.

Flavio Volpe, president of the Automotive Parts Manufacturers' Association, told CTV News he's anxious to see the figures announced, but this plant is shaping up to be the largest electric battery manufacturing facility in North America.

Asked what he thought of the amount of money the federal government appears ready to spend, Volpe said this scale of investment in the auto industry has been seen before, pointing to the 2010 $13 billion bailout of General Motors and Chrysler.

"That was to shore up companies that would have disappeared and probably taken the rest of the industry with them," Volpe said, noting that now equivalent funding is going towards something that he estimates would result in between $100 billion and $200 billion worth of economic activity over the next 10 years.

He called it more than a return on investment. "This is like acquiring a big-league franchise," he said.

With files from CTV News' Kevin Gallagher, CTV News London, and CTV News Toronto