The Parliamentary Budget Officer (PBO) today released his analysis of the cost of government support for electric vehicle (EV) battery manufacturing announced to date that will be provided to Northvolt, Volkswagen and Stellantis-LGES. The report also provides estimates of the break-even timelines for the announced production subsidies.
To date, government announcements of financial support for EV battery manufacturing have largely been made in isolation and an estimate of the total cost of government support has not been publicly provided. “To increase transparency around these announcements, we are providing an estimate of the total cost of government support for EV battery manufacturing—including both announced and non-announced costs,” says PBO Yves Giroux.
“We estimate the total cost of government support for EV battery manufacturing by Northvolt, Volkswagen and Stellantis-LGES to be $43.6 billion over 2022-23 to 2032-33, which is $5.8 billion higher than the $37.7 billion in announced costs,” adds Mr. Giroux. The $5.8 billion in non-announced costs represents foregone corporate income tax revenues for the federal, Ontario and Quebec governments combined.
Of the $43.6 billion in total cost, PBO estimates that $26.9 billion (62 per cent) in costs will be incurred by the federal government and $16.7 billion (38 per cent) will fall on the provincial governments of Ontario and Quebec. PBO’s estimate of the total cost is conditional on the U.S. Advanced Manufacturing Production Credit. (AMPC) remaining in place (until the end of 2032) and on the EV battery production schedules provided by Northvolt, Volkswagen and Stellantis-LGES being realized.
In its break-even analysis, the report notes that the federal government used PBO’s methodology to estimate a break-even timeline of 9 years for Northvolt’s production subsidy, based on full production in every year. “Based on Northvolt’s projected annual production schedule, we estimate a break-even timeline of 11 years for the $4.6 billion production subsidy,” says Mr. Giroux.
“We estimate a break-even timeline of 15 years for the $13.2 billion production subsidy announced for Volkswagen, and 23 years for the $15.0 billion in production subsidies announced for Stellantis-LGES—consistent with our previous estimate of 20 years based on their combined production schedules,” adds Mr. Giroux.