VW deal and Canada's auto sector
Electrify with electrification.
The Liberal government has recently outbid the US to land Volkswagen’s expansion in North America with its first battery plant. They showered Volkswagen with such generosities that the US didn’t seem to want to compete.
VW will invest $7B in the plant and the federal government will provide $13.7B in contributions and tax subsidies. Ontario will also provide over $500m in direct investment and spend hundreds of millions more on infrastructure upgrades.
The overall said employment creation will be 3,000 jobs in the plant and another 30,000 jobs downstream. Even though the government didn’t provide any research to back up the claim let’s give them the benefit of the doubt for math’s sake. I highlighted the per-job contribution and what it looks like for taxpayers in this tweet:
There is no question that there is a technological shift coming to the automotive industry. The kick-off may have been in the name of the environment but the reality is the internal combustion engine is reaching its limits. The battery of today won’t be the battery of tomorrow. Electric vehicles will be much more efficient and this efficiency is what consumers will seek - I don’t mean environmentally.
Electric vehicles require fewer parts and are more straightforward to assemble. They require almost half of the labour force to build. Human labour. And because they require fewer parts it means there will be fewer jobs needed downstream as well. That’s where the efficiency is; there are simply fewer parts and maintenance on electric vehicles. Now you can question the net value claims of this VW deal.
For Canada, this new market dynamics is a fight for survival, and this deal with VW is exactly what it is. You see, Canada’s auto industry has been losing jobs for over two decades.
It isn’t about creating net new jobs anymore it’s about retaining jobs in the auto industry. This was a deal of desperation. The question Canada should be asking itself is how to retain the remaining jobs. Writing cheques this size isn’t sustainable and it is reactive. A completely wrong strategy is being executed.
Canada needs to be attracting businesses based on talent, innovation, R&D, business friendliness, and resources. The VW deal is giving the federal government the opportunity to show the world how quickly, and efficiently it can move. A tall order based on this government’s performance. There is not much margin for error for Canada’s reputation in the business community with a famed deal like this.
Canada is well positioned for the electrified world. From mining to manufacturing we can be a closed-loop supply chain for ourselves, and market participants. An industrialization opportunity that we can not miss. It will help pivot us, nicely, from the direction of the service economy we are on.
As a country, we need to think about what other jobs will be impacted by innovation. What is the world of tomorrow looks like and work towards it in our education system, industries, R&D, resources, and immigration.
Canada needs to be a catalyst, a shareholder in innovation.