Volkswagen EV Plant Deal to Cost Canada Billions More than Expected

According to the parliamentary budget officer, Canada’s exclusive contract with Volkswagen, for the establishment of an electric-vehicle battery plant in southwestern Ontario, will cost the federal government an estimated $16.3 billion over the next decade.

This figure surpasses the government’s initial projections, which accounted for a $700 million capital investment and up to $13.2 billion in production subsidies, reports Automotive News Canada.

The revised budget outlined by the PBO includes the initial $700-million commitment towards the plant’s construction and $12.8 billion for production support. However, it also factors in an estimated $2.8 billion in additional tax adjustments to align with the benefits granted by the U.S. Inflation Reduction Act.

This recent report released on Wednesday provides an economic and fiscal analysis solely of the plant’s construction phase, excluding the operational phase. Yves Giroux, the parliamentary budget officer, stated that his office could not analyze the costs and benefits arising from the plant’s operation until the federal government and Volkswagen provide clearance.

Giroux highlighted the deal’s inclusion of confidential information concerning minimum production levels, which can’t be disclosed directly or indirectly. This makes it challenging to assess without further analysis and without lifting the confidentiality provisions enveloping the production schedule, he said during a media briefing.

The report estimates that the deal would generate a peak of 3,100 jobs at the start of 2026, which would eventually decrease to 1,400 by the end of 2027. Contrarily, the federal government, when announcing the deal in April, had promised it would lead to the creation of up to 3,000 direct jobs and 30,000 indirect jobs. The proposed factory would be Volkswagen’s first gigafactory outside of Europe.