Evidence of meeting #88 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was analysis.
A recording is available from Parliament.
5:20 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We had an interesting discussion with Unifor yesterday. They made these exact points. That's looking at a micro aspect, whereas we look at the macro—
5:20 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's the economy-wide perspective.
In order to do a study like the one you're alluding to, we would need to know the working conditions of the employees in these plants, whether they're unionized or not, and all the benefits. I'm not sure we would be able to get that information in a timely manner.
5:25 p.m.
NDP
Brian Masse NDP Windsor West, ON
That's fair enough. I just hope that's done in the future because even their contributions to the United Way are savings and social savings on a magnitude for children, persons with disabilities, seniors and all those different things that wouldn't be there. Our United Ways would collapse—in my region, anyway—without that type of investment.
Where I'll conclude, Mr. Chair, is that I hope that we get, in the future—and maybe it's not necessarily through you, but maybe through the government or if there's a learning process—a little more of a robust analysis of how workers benefit through these things. That's what I would hope to see.
Again, I know that you've taken on some criticism for the report and so forth, but I guess that means that it's making its way through being evaluated and there's value in that. I appreciate it because I think the more content that Canadians have and the more we analyze the auto investment, the more we'll see much better policy in the future.
Thank you very much for your time.
5:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you, Mr. Chair.
Thank you to everyone from the PBO for being here today.
What information did ISED provide to your office to assist in the preparation of these reports?
I'll ask a couple of subsequent questions.
Did ISED provide the PBO with an estimate of the break-even point for subsidies granted to Stellantis-LGES? Did ISED refuse to share any information with the PBO? If so, what impact did this have on the report? Among the data provided by ISED, do you disagree with any, and if so, why?
5:25 p.m.
Chris Matier Director General, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Thank you for the question.
Upon request, ISED provided us with the methodology and the data they used to determine the break-even rate for Volkswagen for the initial announcement. Based on their numbers, they came up with a break-even rate of 3.3 years. That was consistent with the government's less-than-five-years payback that the minister announced. They walked us through that methodology. They walked us through their data sources.
5:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
On that point—and I want you to continue in a second—on April 26, the minister was here and he said, “if you look at the multipliers that are normally used, an investment like [the one they've given to Volkswagen would] generate between $200 billion and $400 billion over 30 years.”
Was his assessment here before committee of $200 billion to $400 billion reflective of the assessment you received from the department when you requested the information?
5:25 p.m.
Director General, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Yes, that was part of the request that they provided the information for, but that wasn't directly part of our analysis in the report that was published.
5:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Okay. Thank you.
What's very interesting to me is.... We've heard a lot today about making these major investments in one sector of the economy. I see the argument, though I might not necessarily agree with it. I would be remiss if I didn't raise the point that much of the production in Canada will not be for domestic consumption.
Is it fair for me to assume in my reading of your report and the money granted—the full production subsidy up until 2033, I believe—that we would be effectively subsidizing Volkswagen to sell cars in America?
5:25 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Given the highly integrated nature of the auto sector, that's quite likely because, personally, I don't know of any plans by Volkswagen to build an EV assembly plant. Very likely the batteries built in the Volkswagen battery plant will be shipped to the U.S., where they do assemble EVs or have plants.
That could end up subsidizing batteries that will be assembled in the U.S.
5:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
In your analysis, did you consider the overall cost of an automobile and what proportion of the cost of an automobile is directly related to the battery?
Maybe I'll rephrase that. What proportion of the cost of an electric car is solely attributed to the battery?
5:25 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The estimates vary depending on exactly the type of car, whether it's a high-end car or mid-range. Between 25% and 40% of the cost of the car is related to the batteries.
5:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Is it wrong for me to assume that the Government of Canada, for whatever reasons, has made an investment or given Volkswagen up to $13 billion, and as part of that agreement, we will be subsidizing the sale of Volkswagen cars to American or Mexican citizens up to 40%?
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I wouldn't say that the subsidy itself would represent up to 40% of the car.
To have a sense of proportion, we'd need to know what the production cost for Volkswagen would be, and we don't have that information. It's what the subsidies will cover in terms of the percentage of the cost of the batteries.
5:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
We do know that the full cost of production is being subsidized by the Government of Canada as a part of the contract signed between Volkswagen and the Government of Canada. Is that a fact?
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That is a fact. That is in the contract. It's a subsidy per unit produced.
5:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
It's up to 100% at certain times in the first 10 years of production.
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's up to 100%, I think, and—
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, it scales down to reach zero by the end of 2032.
5:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Is the sale of those batteries subject to any type of federal tax? Is that part of Canada's ability to get to a break-even point? Are we going to be taxing Volkswagen on the sale of those batteries, or is the sale of those batteries tax-free?
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The sale of these batteries, to the extent that the batteries are an input into a car, would be taxable but the tax would be recovered. We have a value-added tax regime in Canada, which are the GST and HST, so it's not taxable. It's taxable only at the end point of sale.
5:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Finally, in your break-even analysis, are you accounting for batteries being sold in Canada, or is that not part of your analysis?
5:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's not relevant to the analysis. It's the production and the inputs into the production that are relevant.
