Industry Committee on Oct. 5th, 2023

[Yves Giroux]

To answer that last question, I think that not providing subsidies to respond to the IRA would probably lead to the continuous decline of the auto sector as consumers demand or are mandated to buy more and more electric vehicles, with the U.S. heavily subsidizing their own EV sector.

[Ryan Turnbull, Liberal, Whitby, ON]

That's the rub for me: We don't want to see the decline of our auto sector. We are putting in place the necessary measures to ensure that our auto industry remains competitive and that we anchor investments here in Canada.

That's where I think we differ. I don't think you're buying into the broader objectives. Maybe it's not for you to comment—I get that—but those policy objectives are much more important than whether it's five or 10 years before we break even, in my view.

[Yves Giroux]

I don't disagree with you that there are much bigger policy objectives than just having a return on investment.

My point is that the return on investment over five years is not realistic, but I fully recognize—in fact, I'm encouraged to see—that the government is taking other things into account than just the return on investment. If governments took only returns on investment into consideration when spending, there are many things that governments wouldn't do.

[The Chair, Liberal, Joël Lightbound]

On that note, we have Mr. Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Mr. Giroux, I again want to say how much I appreciate your great report, particularly for Quebec. Thank you.

For decades, the auto industry has been synonymous with Ontario. Any Canadian investments made in the sector go to Ontario, and it seemed as though the federal government wasn't there when the time came to back Quebec. We see that in other sectors as well. With the battery industry and the electrification of transportation, it feels as though Quebec is finally getting a fairer share of the pie. There was skepticism at first about the benefits of those investments, but more and more, we're seeing them materialize.

Do you feel as though this initial investment is making it possible to build the supply chain at the front end? Is it useful? Could this have happened without spending billions of dollars and trying to one-up the U.S.? Could we have arrived at the same result without the subsidies?

[Yves Giroux]

It's hard to say with any certainty. You would need a parallel universe where no subsidies had been granted in order to draw a comparison. As things stand, all we can do is speculate on what would have happened had the subsidies not been granted.

I believe one of Northvolt's executives was asked whether the new plant would have happened without the subsidies. The answer was yes, but he added that it wouldn't have happened as quickly. You can take him at his word, or you can believe that Northvolt would have built the plant somewhere else given how attractive the American subsidies are, plain and simple. As I said, it's tough to answer that question with any certainty.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Conversely, then, would we have been able to create the building blocks needed to get the ball rolling without government investment? I'm talking about lithium and the various steps in the chain of production. Right now, the investment isn't there. There's been no investment in production.

The timeline for a mining company wanting to set up here is still pretty lengthy, considerable—staggering even. If production starts in five or seven years, there's no guarantee that it will be possible to operate the mine, because it takes about a decade to go from mineral exploration to mining the raw material.

In short, could it have been developed without the buyer? When it comes to international production, shouldn't we prioritize foundational investments instead of investing at the end? A return on investment is never guaranteed, as you mentioned.

[Yves Giroux]

It's well known that North America's auto sector is highly integrated. During the discussion with Mr. Masse, we heard that a vehicle can cross the border, in some form or another, up to seven times before it's fully assembled.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

That's true.

[Yves Giroux]

It's not unlikely, then, that even without battery plants in Canada, we'd see some development of components. Lithium and other metals used in battery production are in high demand. Does Canada having one or more battery plants have a major impact on the development of the mining industry? Maybe, maybe not. Maybe those minerals would be highly sought-after even if the plants were in the U.S. or somewhere else.

As I see it, the crucial part is supply. It's less important whether the industry sources the lithium in Abitibi or China. It needs lithium, at a good price and quickly. The battery plants will probably generate additional demand, but whether they're in Bécancour, McMasterville or Saint‑Thomas doesn't make a big difference in some conventional sectors, like minerals and metals.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I think there's an important aspect here. Recycling has to be taken into account at the front end. With battery manufacturing, we know losses are very common in the beginning. Further to trial and error, a number of prototypes will end up having to be recycled, so recycling has to keep pace with battery production.

Do you think enough has been done so far to encourage related industries to develop recycling capacity? I'm referring to those that will latch on to battery manufacturing or support the megaprojects we are talking about.

[Yves Giroux]

That's not an area we examined, because it's something that tends to come afterwards, a certain time later, given that batteries are recycled at the end of the vehicle life cycle.

You mentioned trial and error. Indeed, defects or flaws always play a part in battery production, given what I know about the sector. However, it doesn't represent a significant part of the value chain; it's an area that can be developed down the line, since EV uptake and demand for battery disposal are still low.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I'm going to ask you one final question to wrap up my third turn.

You received a briefing note from Electric Mobility Canada criticizing your report and pointing out that a tax break is different from a subsidy, since there is no tax credit if there's no production.

That made me think. Did you take that into account in your report? If the company were ultimately to shut down production, wouldn't that be a direct hit to our wallet, even if the amount is less than $20 billion or $28 billion?

[Yves Giroux]

It's semantics. Whether you call it a tax credit, a production tax credit or a subsidy, it's direct support from the government.

That said, the point was made that the subsidies are tied to production the vast majority of the time. That provides some assurance that it won't spiral out of control, as Mr. Masse mentioned earlier. It is linked to production: if there's no production, there's almost no subsidy. That amounts to a bit of control or assurance that the money gets spent only if the plants produce something.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you.

We now go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I appreciate the opportunity to intervene again.

One thing that's very interesting about the report you have at this time.... Again, there can be criticism of the report. I think it's very good value-added for understanding investment in the auto industry. Our hand was forced by the United States, even before this. You're either in or out with massive subsidies. We've been losing jobs to Alabama and all kinds of different places. Republicans and Democrats all over the place have been doing that. Our workers' quality is what has kept us in the game until recently.

We have two projects here. I want to get your opinion on this. We have the pipeline, and we're spending around $31 billion on that right now. Then, we have this investment of $28 billion for two plants.

Looking at the models of the investment the government did, if we had to do it again, in terms of picking one of those two models, which model would be the better investment for Canadians? Should we do it like the pipeline one that you did the report on, or do it this way? What would be a better and safer return of money for Canadians in terms of investment and a return on investment?

[Yves Giroux]

You're putting me in a very delicate spot by having me choose between two.

It is not my place to say which one is the best, because they have different objectives. One is aimed at getting Canadian oil to market and reducing the discount at which it sells. The other is more of an industrial policy on jobs and avoiding the decline of the auto sector.

[Brian Masse, NDP, Windsor West, ON]

I'm not trying to do that either, but I think it is.... Maybe I can rephrase it, if that helps. You don't have to answer if you don't want to, because I want this to be constructive.

Isn't it fair to say, though, that our auto investment has more fixed numbers, particularly for jobs and hours, and that it has better controllable measures for that investment than the pipeline model? Would that be a fair...?

Don't answer if you feel it's.... I don't want to put you in that situation.

[Yves Giroux]

Thank you.

I'll plead the fifth. I know it's the wrong country but....

[Brian Masse, NDP, Windsor West, ON]

No, it's okay.

Again, I find the report helpful. I mean, there's some criticism, and I have it too. At the same time, I find this is a good starting point. We need to have people trust that the investment in the auto industry returns for Canadians, so I don't take this as negatively as the government members do.

In the other report, are there any measurables on research and development or partnerships going to universities and colleges? Do you know whether that was part of the report and what you took into...? There were massive amounts of investment, previously, in the colleges and universities—the University of Windsor, St. Clair College and many others, all the way through the supply chain—to do R and D, especially in electrification.

Do you know whether that was included in this?

[Yves Giroux]

I'm not sure, but I know there's a mention in the report saying that R and D and innovation aspects tend to take place more in the U.S., because that's where the HQs of the companies are. There are some in Canada, but it tends to.... I think it mentions that. I don't have the exact page number, but it mentions that.

[Brian Masse, NDP, Windsor West, ON]

You're right. We have a hard time competing there too.

My point is this: If we don't have that production here, wouldn't it be a measurable loss—

[Yves Giroux]

Yes.

[Brian Masse, NDP, Windsor West, ON]

—because we've been paying millions to universities, colleges and stuff like that? That would be part of the declining asset, I guess.

Okay. That's what I was looking at there.

I want to return to the workers to get a bit more clarity.

Are we going to get some type of update? Is it possible to do a more robust...or maybe there's a different model for employment hours, wages earned and the taxation they put back...? Is there another model that can be done to separate that in the future? I'm curious about that, because we don't often have the human factor in these larger analyses. I didn't see that. I wonder whether that can be something taken under advisement, or whether there's a model out there that's easy for you to.... You only have limited staff and resources, but I find that component is often missed.

It's like our health care dollars. Our dental care is going to save us money, because people won't go to the hospital for emergency services for dental anymore. That's why I'm looking at the workers. By far, they're going to be unionized, get benefits and so forth, so I'm wondering whether there's a measurement....and hours of employment.