The federal government has agreed to give Volkswagen up to $13 billion in subsidies over the next decade as part of a deal to ensure the automaker builds its electric-vehicle battery plant in southern Ontario.

Bloomberg News first reported the subsidy amount, quoting Innovation Minister François-Philippe Champagne. Sources have confirmed the details of the contract with CBC News. 

The federal government will provide annual production subsidies to the German automaker and kick in funds to build the massive factory.

According to Bloomberg and sources, Ottawa is offering about $700 million in capital expense grants to Volkswagen through its Strategic Innovation Fund. Federal production support for the plant is expected to range from $8 billion to $13 billion over 10 years.

Sources also say that, according to the terms of the contract between Ottawa and Volkswagen, Canada’s production subsidies will stay in place only as long as the U.S. Inflation Reduction Act remains in force. That U.S. law offers billions of dollars in clean energy and net-zero subsidies south of the border. 

If the U.S. reduces its incentives, Canada’s subsidies will also go down.

The Ontario government is also expected to subsidize the project but details are not yet clear.

A man at a podium
Industry Minister François-Philippe Champagne says the federal government’s decision to subsidize the battery plant is about ‘seizing generational opportunities.’ (Justin Tang/The Canadian Press)

Champagne defended the cost, arguing the job creation and supply chain spinoffs from bringing one of the world’s largest automakers to Canada will be worth more than the cost of the subsidies to the government. 

“This is about us seizing generational opportunities,” he told Bloomberg. “This is about raising our level of ambition.”

More details of the deal are expected to be made public Friday.

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