Public could have paid up to $10B for VW battery plant in St. Thomas, Ont., former auto exec says

A former Canadian Toyota executive who now studies automotive manufacturing policy at McMaster University says Volkswagen likely received between $1 and $10 billion dollars in federal and provincial support in order to build its EV battery plant in St Thomas, Ont.

Greig Mordue is an associate professor of engineering, the chair of advanced manufacturing policy at McMaster University's school of engineering, and the former General Manager of Toyota's Canadian manufacturing operations in Woodstock and Cambridge, Ont.

"The price of entry is at least a billion dollars," he said, noting it was the sum offered by the Ontario and federal governments to Stellantis to build its $5 billion EV battery plant in Windsor, Ont., last year. 

Since then, he said, with the introduction of the Inflation Reduction Act (IRA) in the United States under the Biden administration, which makes billions in U.S. federal dollars available for domestic energy production and manufacturing, the cost of attracting international companies has become a lot more expensive. 

"Some locations in the US, the cost could be eight or $10 billion," he said. "So presumably it can be argued that Canada and Ontario have had to do something between one and eight or $10 billion. We don't know yet." 

Both federal and provincial governments have said they won't release the sum paid to Volkswagen in terms of public money to support the construction of the new St Thomas EV battery plant until a later, unspecified date.

The company recently told CBC News in an email it wasn't ready to disclose anything, in terms of how much public support it received, let alone the size or production volume of the factory. 

Mordue said much has been made about the factory in terms of its size, significance and the economic activity it would generate in terms of direct and spinoff jobs, but all of it is pure speculation. 

"That's fine, but the real important question is 'how much did we pay for this?' Frankly, all I can tell you is somewhere between one and 10 billion dollars." 

Part of the deal likely hinged on access to the critical minerals that companies such as Volkswagen requires to build EV batteries, many of which are contained in Ontario's Ring of Fire region, Mordue said.

The company and the federal government signed an agreement last August about those minerals, but at this point, Mordue said what that agreement entails, whether it's enforceable, or whether it even meets Canada's obligations under the World Trade Organization's rules has yet to be made public. 

If history is any lesson, he said, the Ontario and federal governments usually split their support 50-50 for about 20 per cent of the total capital cost of a new factory, as they did with their $1 billion subsidy of the $5 billion Windsor Stellantis battery plant. 

Unlike Canada or the US, Mexico provides no financial incentives for automakers to set up shop other than cheap labour. Mordue said Mexican autoworkers are paid, on average, one-tenth the wage a Canadian autoworker would make for the same job. 

Before the passing of the IRA, state governments in the US would take a "one and done" approach, according to Mordue, giving automakers a subsidy to help with startup costs on the front end, after which the automaker was on their own.