Election Upheaval Risks Billions in BEV Subsidies – in Canada

OTTAWA – A key question in Canada’s next election cycle is whether the billions of taxpayer dollars pledged for the country’s electric-vehicle supply chain by the Canadian, Ontario and Québec governments provide value for money and should be maintained.

That election could come sooner than the legally mandated October 2025 election if the teetering federal Liberal government in the Canadian Parliament is no longer buttressed by an agreement with the left-wing New Democratic Party. A no-confidence vote could trigger an earlier general election, with the Conservative Party leading in the polls.

Conservative leader Pierre Poilievre has criticized some of this EV spending, including the C$13 billion ($9.3 billion) promised by the federal government to Volkswagen for a battery plant in St. Thomas, ON, saying on the X social media platform: “This money belongs to Canadians…not to a foreign corporation.”

Party statements suggest that the deals will be reviewed should the Conservatives come to power, calling for the release of battery-electric-vehicle subsidy contracts signed with VW, Stellantis and Northvolt “so that taxpayers can know how much money they are on the hook for.” The party also wants assurances that Canadian workers are guaranteed jobs.

In Ontario, where there is more support for the subsidies, the Progressive Conservative Party government of Premier Doug Ford – who is also ahead in the opinion polls – could call an early election (which otherwise must be held by 2026). 

These political moves come after Canada’s Office of the Parliamentary Budget Officer concluded in June that federal and provincial government support for capital expenditures and operating expenditures to create a BEV supply chain in Canada (from mineral processing to battery manufacturing and auto assembly) will cost C$52.5 billion ($38 billion), eliciting C$46.1 billion ($33.3 billion) in direct private investment – 60% from the feds and 40% from provinces. The puts total government support at C$6.3 billion ($4.55 billion) more, 14% higher, than announced private investments.

Is that money well spent? 

Canada’s auto workers union UNIFOR has been supportive. It criticized the budget officer’s report for underestimating resulting BEV-related private investments, such as new commercial material contracts, local parts supplier investments and other indirect economic benefits, including staff spending.  

UNIFOR adds that government spending investments are upper estimates with many subsidies tied to unit production values – less production equaling fewer handouts. https://autotalks.uniforautohub.ca/letter_to_the_parliamentary_budget_officer_re_tallying_government_support_for_ev_investment 

Brendan Sweeney, managing director of the nonprofit Trillium Network for Advanced Manufacturing, stresses most of the pledged public money has not been spent: “It’s an upper boundary representing a very optimistic situation for the production of EVs and batteries,” he tells WardsAuto.  

The Ottawa-based Smart Prosperity Institute has argued that more government support is needed, mixed with private capital to install “well-maintained charging ports in all regions across Canada,” to boost BEV demand. 

That demand has been falling, notably in the U.S., the destination of 85% of all Canada-made autos. With Gallup noting in April that fewer Americans – 35%, down from 43% in 2023 – might consider buying a BEV in the future, the conservative-libertarian Fraser Institute says: “Canada’s governments are hitting the gas pedal on EVs, putting the hard-earned capital of Canadian taxpayers at significant risk. A smart government would have its finger in the wind and would slow down when faced with road bumps.”   

https://www.fraserinstitute.org/article/governments-in-canada-accelerate-ev-investments-as-automakers-reverse-course

However, Canadian Vehicle Manufacturers Assn. CEO and President Brian Kingston says public investment “has been done to keep Canada competitive with the USA” and its Inflation Reduction Act federal grants: “We had to match the Americans,” he says, highlighting how subsidized Canadian projects are now coming online, such as the NextStar Energy joint venture between LG Energy Solution and Stellantis in Windsor, ON, which started battery-module production last month. “There will be thousands of jobs. This is going to be a huge win for Windsor, for Ontario and for Canada,” says Kingston. 

And while the window for attracting downstream BEV battery and automotive manufacture may be closing, he thinks more government-supported projects could support upstream critical mineral production in Canada. These would tap lithium, nickel and graphite, plus rare earths used in BEV-associated non-battery technologies, in Ontario, Québec and Saskatchewan, says Kingston.  

He also wants more efficient and integrated permitting for potential mines and processing plants. At present, multiple levels of government make decisions, creating investor uncertainty and hence reluctance to spend. A one-project, one-approval system could maintain environmental regulation and consultation with local indigenous Canadian communities, for mining projects of national importance, which could also benefit from public road, rail, aviation and electrical investment, Kingston suggests. 

David Adams, CEO, Global Automakers of Canada, agrees that the public investment makes sense. Delays in building the planned Swedish EV battery manufacturer Northvolt plant in Québec, for example, have “given some people cause to be pessimistic about what about whether we’ve invested too deeply.”

But Adams says: “It’s not the case at all. There is a clear direction in the industry towards electrification.” He does not expect a new federal government, should the Conservative Party win the next election, to pull back from investing in the BEV sector. 

The challenge is that by waiting too long in Canada or Ontario, “you might miss the investment opportunity” and potentially see the Canadian auto industry “fade away,” Adams says. 

Vic Fedeli, Ontario’s minister of economic development, job creation and trade, warns the alternative to public BEV investment is “letting the entire auto sector collapse and stop making cars,” risking 100,000 Ontario jobs. While the opportunity for attracting major BEV assembly and battery plant projects is winding down, he says: “There’s another C$10 billion ($7.2 billion) we can attract,” highlighting investment into battery plant suppliers already establishing themselves around Windsor and St. Thomas. Will such spending be upset by a federal Conservative victory at the polls, which is keen to rein in public spending? Maybe. Federal and provincial parties in Canada are independent and often follow different policies, even those sharing the same name. Also, Conservative leader Poilievre has floated another policy that could boost demand for Canada-made BEVs: imposing a 100% tariff on China-made electric vehicles.