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Ottawa Needs 20 Years To Break Even On Volkswagen Deal: Report

The parliamentary budget officer (PBO) says it will take the federal and Ontario governments 20 years to break even on the subsidies they provided to Volkswagen (VLKAF) and Stellantis (STLA) to win new electric-vehicle battery plants.

The governments announced production subsidies that total $28.2 billion to convince the automotive companies to build electric vehicle battery plants in Canada.

A new report released by the PBO, which oversees government spending in Ottawa, says it will take until 2043 for government revenues generated from the production of the two planned battery plants to equal the subsidies that have been paid with taxpayer money.

In March, Canada reached a deal that will see Volkswagen get up to $13.2 billion in production subsidies for batteries it produces at a manufacturing plant in St. Thomas, Ontario.

Stellantis later asked for a similar deal for a battery plant it's building in Windsor, Ontario, and ultimately secured $15 billion in government subsidies.

The cost of the production subsidies is being shared between the federal and Ontario governments, with Ottawa covering two-thirds of the cost.

Previously, the Liberal government of Prime Minister Justin Trudeau said that it would recover the subsidies paid to Volkswagen within five years.

The federal government has not provided a break-even estimate for the Stellantis deal.

However, the Trudeau government has argued that the production subsidies are necessary to convince foreign automotive companies to invest in Canada.

Volkswagen’s stock has declined 26% over the last 12 months, while shares of Stellantis have risen 31% in the same time period.