As if $50 billion wasn’t enough for Volkswagen and Stellantis, Canada could be on the verge of handing out even more lavish handouts to electric vehicle manufacturers such as Honda and Toyota as a result of Tuesday’s federal budget.That’s because the Liberal government unveiled a new 10% tax credit on the capital cost of buildings used in EV manufacturing, contingent on locating portions of their supply chains — battery manufacturing — in Canada.The credit is in addition to a 30% tax credit on the equipment costs of EV manufacturers — for equipment located in those subsidized buildings — announced in last year’s budget..And it also doesn’t include any possible future incentives on offer by the Trudeau government along the lines of one-off deals for Volkswagen, Stellantis and Northvolt that could cost taxpayers as much as $50 billion according to estimates from the Parliamentary Budget Office.The budget document said the tax credit is meant to encourage automakers to “choose Canada for more than one stage in the manufacturing process,” and “help cement Canada’s position as a leader in this sector.”Already, Honda and Toyota are reportedly considering taking Ottawa up on the offer, according to Bloomberg although it is hoping the tax credits will be enough to sway them without necessarily offering additional production subsidies.Honda has been in talks with the feds since at least February over landing a deal, although Industry Minister Phillipe Francois Champagne said the government would prefer to ‘transition’ to a tax credit model.“What we did in 2023 was to seize the moment,” in response to the US’ Inflation Reduction Act to lure battery makers to Canada, Champagne said at the time.“There’s only going to be one Volkswagen gigafactory in North America. There’s only going to be one Northvolt factory in North America. Over time, because the ecosystem is getting stronger and stronger with each of these investments, you could transition the type of support you’ve provided more to something akin to a tax credit.”
As if $50 billion wasn’t enough for Volkswagen and Stellantis, Canada could be on the verge of handing out even more lavish handouts to electric vehicle manufacturers such as Honda and Toyota as a result of Tuesday’s federal budget.That’s because the Liberal government unveiled a new 10% tax credit on the capital cost of buildings used in EV manufacturing, contingent on locating portions of their supply chains — battery manufacturing — in Canada.The credit is in addition to a 30% tax credit on the equipment costs of EV manufacturers — for equipment located in those subsidized buildings — announced in last year’s budget..And it also doesn’t include any possible future incentives on offer by the Trudeau government along the lines of one-off deals for Volkswagen, Stellantis and Northvolt that could cost taxpayers as much as $50 billion according to estimates from the Parliamentary Budget Office.The budget document said the tax credit is meant to encourage automakers to “choose Canada for more than one stage in the manufacturing process,” and “help cement Canada’s position as a leader in this sector.”Already, Honda and Toyota are reportedly considering taking Ottawa up on the offer, according to Bloomberg although it is hoping the tax credits will be enough to sway them without necessarily offering additional production subsidies.Honda has been in talks with the feds since at least February over landing a deal, although Industry Minister Phillipe Francois Champagne said the government would prefer to ‘transition’ to a tax credit model.“What we did in 2023 was to seize the moment,” in response to the US’ Inflation Reduction Act to lure battery makers to Canada, Champagne said at the time.“There’s only going to be one Volkswagen gigafactory in North America. There’s only going to be one Northvolt factory in North America. Over time, because the ecosystem is getting stronger and stronger with each of these investments, you could transition the type of support you’ve provided more to something akin to a tax credit.”
