Giswold, Jill; Matier, Chris; Nahornick, Nora; Nicol, Caroline; Stanton, Jason

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Electric Vehicles & Battery Manufacturing

Fiscal Analysis of Canada’s Support for Volkswagen’s Electric Vehicle Battery Manufacturing Plant

Jill Giswold ; Chris Matier ; Nora Nahornick ; Caroline Nicol ; Jason Stanton

Published on June 14, 2023 PDF

In response to interest from several Members of Parliament, this report provides a static cost estimate of the entirety of the Government of Canada’s funding support for Volkswagen’s electric vehicle battery manufacturing plant, as well as the economic and budgetary impacts of the plant’s construction.

Highlights

The PBO estimates that the government will need to pay Volkswagen up to $16.3 billion over the period of the agreement.
This report only examines the economic impact of the new facility’s construction, which is marginal. We estimate that construction of the plant would increase real GDP by 0.01 per cent above its baseline projection by the end of 2027 and increase the level of employment by 1,400 jobs by that same time.
The net budgetary impact of the plant’s construction is expected to be approximately equal to the government’s $0.7 billion contribution.
PBO continues to examine the government’s support and will undertake an economic and fiscal analysis of the production support over the coming months.

PDF

Communications

Quotes

Based on our analysis, the federal government’s financial commitment to Volkswagen will total around $16.3 billion over the period of the agreement.
The economic benefits of building the new facility are marginal. We estimate the plant will increase real GDP in Canada by 0.01 per cent above its baseline projection by 2027 and will add around 1,400 jobs by the same time.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":50,"created_at":"2023-06-12T15:07:10-04:00","updated_at":"2023-06-14T08:27:02-04:00","slug":"pbo-pegs-total-cost-of-federal-governments-volkswagen-plant-deal-at-163-billion-le-dpb-estime-a-163-milliards-de-dollars-le-cout-total-de-laccord-conclu-par-le-gouvernement-federal-pour-lusine-de-volkswagen","title_en":"PBO pegs total cost of federal government\u2019s Volkswagen plant deal at $16.3 billion","title_fr":"Le DPB estime \u00e0 16,3 milliards de dollars le co\u00fbt total de l\u2019accord conclu par le gouvernement f\u00e9d\u00e9ral pour l\u2019usine de Volkswagen","body_en":"The Parliamentary Budget Officer (PBO) today released his analysis of the Government of Canada\u2019s electric vehicle battery manufacturing facility agreement with Volkswagen. \n\nThe PBO\u2019s latest report provides an estimate of total cost of the funding support to Volkswagen, which was recently announced by the government. \n\n\u201cBased on our analysis, the federal government\u2019s financial commitment to Volkswagen will total around $16.3 billion over the period of the agreement,\u201d says PBO Yves Giroux. \n\nThe PBO\u2019s total cost estimate includes $12.8 billion in production support, a $0.7 billion contribution through the Strategic Innovation Fund (SIF) for the construction of the plant, and an estimated $2.8 billion in tax adjustments, that are needed to achieve an after-tax equivalency to support offered under the U.S. Inflation Reduction Act (IRA), as per the Government\u2019s stated intention.\n\nThe additional $0.5 billion in direct support to Volkswagen announced by the Government of Ontario will be funded by the province and is not included in the PBO\u2019s federal cost estimate.\n\nThe PBO\u2019s report also examines the economic and budgetary impacts of the Volkswagen plant\u2019s construction.\n\n\u201cThe economic benefits of building the new facility are marginal,\u201d adds Mr. Giroux. \u201cWe estimate the plant will increase real GDP in Canada by 0.01 per cent above its baseline projection by 2027 and will add around 1,400 jobs by the same time.\u201d","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui son analyse de l\u2019accord conclu par le gouvernement du Canada avec Volkswagen pour la construction d\u2019une usine de fabrication de batteries pour v\u00e9hicules \u00e9lectriques. \n\nDans ce rapport, le DPB estime le co\u00fbt total du soutien financier \u00e0 Volkswagen r\u00e9cemment annonc\u00e9 par le gouvernement. \n\n\u00ab Selon notre analyse, l\u2019engagement financier du gouvernement f\u00e9d\u00e9ral \u00e0 l\u2019endroit de Volkswagen totalisera environ 16,3 milliards de dollars pendant la p\u00e9riode vis\u00e9e par l\u2019accord \u00bb, a dit le DPB, Yves Giroux. \n\nLe co\u00fbt total estim\u00e9 par le DPB se ventile comme suit : un soutien \u00e0 la production de 12,8 milliards de dollars, une contribution de 0,7 milliard de dollars \u00e0 la construction de l\u2019usine dans le cadre du Fonds strat\u00e9gique pour l\u2019innovation, et des ajustements fiscaux de 2,8 milliards de dollars, lesquels sont n\u00e9cessaires pour \u00e9galer le soutien apr\u00e8s imp\u00f4t offert dans le cadre de la Inflation Reduction Act am\u00e9ricaine, ce qui semble \u00eatre l\u2019objectif du gouvernement.\n\nL\u2019aide directe suppl\u00e9mentaire de 0,5 milliard de dollars \u00e0 Volkswagen annonc\u00e9e par le gouvernement de l\u2019Ontario sera financ\u00e9e par la province et ne fait donc pas partie du co\u00fbt f\u00e9d\u00e9ral estim\u00e9 par le DPB.\n\nDans son rapport, le DPB examine aussi les r\u00e9percussions \u00e9conomiques et budg\u00e9taires de la construction de l\u2019usine de Volkswagen.\n\n\u00ab Les retomb\u00e9es \u00e9conomiques de la construction de la nouvelle usine sont marginales, a ajout\u00e9 M. Giroux. Nous estimons que la construction de l\u2019usine augmentera le PIB r\u00e9el de 0,01 % par rapport \u00e0 la projection de base d\u2019ici 2027 et cr\u00e9era environ 1 400 emplois d\u2019ici la m\u00eame \u00e9ch\u00e9ance. \u00bb","release_date":"2023-06-14T08:30:00-04:00","is_published":"2023-06-14T08:27:02-04:00","internal_id":"COM-2324-050","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/pbo-pegs-total-cost-of-federal-governments-volkswagen-plant-deal-at-163-billion-le-dpb-estime-a-163-milliards-de-dollars-le-cout-total-de-laccord-conclu-par-le-gouvernement-federal-pour-lusine-de-volkswagen"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/pbo-pegs-total-cost-of-federal-governments-volkswagen-plant-deal-at-163-billion-le-dpb-estime-a-163-milliards-de-dollars-le-cout-total-de-laccord-conclu-par-le-gouvernement-federal-pour-lusine-de-volkswagen"}},"pivot":{"publication_id":747,"news_release_id":50}}