Trudeau government underestimated cost of EV subsidies by $6.3 billion

By Noah Jarvis

The Liberals have already gone billions of dollars over budget for subsidies given to electric vehicle manufacturers in collaboration with provincial governments.

The federal government is now spending more money on capital expenses for projects across the EV supply chain than large automotive corporations are spending themselves on these projects.

Over the past four years, the Trudeau government in collaboration with the governments of Ontario and Quebec have struck 13 deals with multinational auto-making corporations to match investments with an equal amount of private sector funding.

As part of these deals, Canada is committed to dolling out an estimated $46.1 billion in subsidies to EV producers according to the Trudeau government’s initial estimates.

However, an analysis by the Parliamentary Budget Officer found that the government spends an estimated 14% more on the EV supply chain than the private industry. Originally meant to be $46.1 billion in government subsidies to EV manufacturers, the figure has ballooned to an estimated $6.3 billion more than the original target.

“PBO estimates total corresponding government support (for capital and operating expenses) to be up to $52.5 billion, which is $6.3 billion (14 per cent) higher than announced investments.” reads the analysis.

The PBO estimates that of the $52.5 billion of taxpayer dollars being spent, $31.4 billion comes from the federal government while $21.1 billion will come from the provinces. 

To make Canada a world leader in electric vehicle manufacture and create jobs, the federal government is subsidizing select battery manufacturing plants, assembly plants, and raw materials plants to become a key contributor to the EV market.

The largest of the recent subsidies went to Honda, where the feds and Ontario had given the Japanese auto-maker a $15 billion subsidy to build vehicle assembly plants and a few manufacturing plants.

Other notable subsidies include the $7 billion given to Northvolt by the federal and Quebec governments, a $7 billion subsidy for a Volkswagen EV battery plant, and $5 billion for a Stellantis battery plant. 

The federal government had come under fire last year when it was revealed that Stellantis – receiving billions in taxpayer dollars – was hiring foreign temporary workers at the plant, challenging Trudeau’s claim that the subsidies would provide new jobs for Canadians.

Last year, the PBO published a report claiming that the subsidies for EV manufacturers will take around 20 years for the government to recuperate their funds from the subsidies. 

The Trudeau government has been committing to transitioning Canadians away from using combustion engine vehicles and towards a completely electrified vehicle market. 

Beyond subsidies, the Trudeau government introduced a ban on the sale of new combustion engine vehicles by 2035.

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