Canada and Ontario earlier this year pledged up to C$28.2 billion (US$20.8 billion) to lure automakers Stellantis and Volkswagen to establish electric vehicle (EV) battery plants. The investments were made as part of Prime Minister Justin Trudeau’s strategy to position Canada as a key player in the North American EV supply chain.
However, a new report from the parliamentary budget officer has cast a shadow over the projected timeline for recouping this substantial investment.
Initially, the Trudeau government had anticipated that the economic benefits from these investments would match the government’s expenditure within just five years. In contrast, the budget officer’s report suggests a significantly longer payback period of approximately 20 years, extending well into 2043, assuming production commences in 2024 as planned. (via Bloomberg)
The difference between the two estimates lies in the assumptions. The government’s estimate for a quicker return on investment was based on the assumption that having two major battery-cell facilities would stimulate additional investments and production in the supply chain, generating substantial government revenues.
However, the budget office’s analysis primarily focused on revenue generated directly from cell and module manufacturing, excluding the broader economic impacts and public debt charges.
While the budget officer’s break-even estimate may seem daunting, it still aligns with Canada’s commitment to achieving net-zero emissions by 2050. In fact, it implies that the EV sector will have covered its costs seven years before this environmental pledge.