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Perfect. To

0:32

further accelerate our electrification

0:34

efforts in Canada, Honda

0:37

will take another major step forward.

0:41

I'm pleased to announce that

0:43

Honda intends to establish a

0:45

vertically integrated and

0:47

comprehensive EV value chain

0:50

in Canada. That's

0:53

Toshihiro Mibe, the global CEO of

0:55

Honda. He's

0:57

announcing last week's $15 billion

0:59

investment in electric vehicle production

1:02

in Ontario. This

1:04

is the fourth major deal Canada has

1:06

landed in the past year. Today we

1:08

can announce that Northvolt will build

1:11

a new giant electric vehicle battery

1:13

manufacturing facility here in the province

1:15

of Quebec. Today

1:17

is the day that we have

1:19

announced our conclusion

1:22

of a deal supported by

1:24

Canada in Ontario with

1:26

Stellantis. The Volkswagen EV battery

1:28

plant is a generational investment

1:30

in St. Thomas and

1:33

in all of Ontario and Canada. And

1:36

it's the biggest one yet. The

1:39

federal government wants 60% of

1:42

all new car sales to be zero emission by 2030 and

1:44

100% by 2035. But

1:50

sales of these vehicles haven't been growing

1:52

like they used to. So what should

1:54

we make of the billions of dollars

1:57

governments are investing in this sector? Adam

2:01

Radwonski is the globe's climate policy

2:03

columnist. He's here to explain

2:05

these big Canadian deals and the challenges

2:07

ahead for the EV industry. I'm

2:11

Mayna Karaman-Wells and this is the Decibel from

2:13

the Globe and Mail. Adam,

2:16

great to have you back

2:19

in studio. Thanks for having me again. So let's

2:21

dig into this big Honda deal. What

2:24

exactly is Honda proposing to build

2:26

in Ontario? So Honda has

2:29

announced a $15 billion

2:31

total investment plan with

2:33

four different components. Two of

2:35

them are at the company's existing

2:37

manufacturing site in Ontario in Alistairn.

2:40

One of those is building

2:43

electric vehicles there starting in 2028

2:45

and the other there is

2:47

making electric vehicle batteries. And

2:50

then there's two other components which are

2:53

both partnerships with other companies in

2:55

which they'll be making battery components. That'll be

2:57

elsewhere in Ontario and we

3:00

haven't gotten all the details on those yet. Okay, but essentially

3:02

it sounds like a kind of a comprehensive

3:04

electric vehicle supply chain, right? We've got battery

3:06

components, the batteries and then the vehicles. Yeah,

3:08

it's not the full supply chain because you can

3:10

go further back and talk about minerals and so

3:12

on, but it is far more

3:15

comprehensive than any other investment we've seen to

3:17

date and unusually so for this industry. And

3:20

this is one of a few different EV-related investments

3:22

we've seen in the last year or so, right?

3:25

So can you just remind us how many have we seen in total? Well,

3:28

there's been a few big ones and

3:30

the biggest investments we've seen have typically

3:32

been in new battery plants. And

3:35

the largest of those would be

3:37

the Volkswagen plant that is planned

3:39

for St. Thomas, Ontario, which

3:41

is about a $7 billion project and

3:44

a partnership between Stellantis,

3:46

which is a global auto company,

3:48

and LG, which is a Korean and

3:51

electronic company. That's in

3:53

Windsor. That's about a $5 billion project. There's

3:56

also a third battery factory being built by NorthVolt,

3:58

which is a Swedish company in Quebec. And

4:00

then we've seen others, I mean, in terms of

4:03

retooling existing auto plants

4:05

in Ontario to make EVs,

4:07

but the biggest ones and by far

4:10

the most talked about ones have

4:12

been the battery plants. So as you

4:14

said, Adam, this deal is a $15 billion investment. How

4:18

does it work in terms of then like Honda putting up

4:20

the money and then the federal and the provincial government also

4:22

have something to do here too? So how does that part

4:24

break down? The combined federal

4:26

and provincial government support for this,

4:29

for the announcement, is about

4:31

$5 billion, about $2.5 billion each. The

4:35

federal component is through investment

4:38

tax credits. The provincial one

4:40

is more kind of direct subsidies and some

4:42

investment infrastructure around it, but it's basically all

4:44

supporting the capital cost of building it. Okay.

4:47

So essentially, it sounds like Honda is putting up the

4:49

$15 billion to build these things, but then they're getting

4:51

kind of tax credits and money back from both those

4:54

levels of government to the tune of about

4:56

$5 billion. Yes, effectively, Honda's investment here seems

4:58

to be about $10 billion. Okay.

5:01

And how does this amount compare to the

5:03

other EV deals that we've heard about in the last year? You

5:06

just mentioned a bunch there, Adam. How do those compare? This

5:08

is a dramatically different deal from the

5:10

other agreements that we've seen around battery

5:12

factories in particular. Those

5:15

were much more

5:17

heavily subsidized. This is

5:19

comparatively a relatively small subsidy. And the

5:21

usual thing where this is actually a

5:24

much bigger investment total,

5:27

as in $15 billion versus, say, $7

5:29

billion, so more than double, but

5:32

with actually a smaller subsidy. I mean,

5:34

the subsidy in this case combined between

5:36

Ottawa and the provincial government, as

5:39

I said, is about $5 billion. In

5:41

the other cases, the subsidy may be more than double that.

5:44

So it seems like a pretty good deal

5:46

compared to the other ones we've seen. But

5:48

these are serious investments that we're talking about, right? There's

5:51

financial help from Ottawa and provincial governments to

5:53

get these deals done. Let's

5:55

talk about, I guess, the motivation behind this, Adam.

5:58

Why is the federal government specifically... committed

6:00

to building out this sector of the Canadian

6:02

economy? I think it's sometimes helpful

6:04

to look back a few years.

6:07

It was probably only about five years ago when

6:09

I think there was a real question as to

6:11

whether the auto sector in Canada would survive at

6:14

all. It had been

6:16

in decline for decades before that, and

6:18

there was no particular reason to believe that EVs

6:21

would be made here. We've seen

6:23

obviously a real change in that narrative in the last

6:25

few years, and that's been very much

6:27

a strategic approach by the federal and

6:29

Ontario and to some extent Quebec government.

6:32

I think that just rests on the premise that this

6:35

is an industry of the future, and it can

6:38

be a significant pillar of Canada's

6:40

economy during a long

6:42

period of decarbonization. Without

6:46

it, a traditional industry would be basically completely gone

6:48

and nothing would replace it. I

6:50

think that was the premise initially. I would

6:52

say that it's now gotten to a point

6:54

where I think there's some degree

6:56

of optimism, probably justified based on

6:58

what we're seeing, that this will actually put our

7:01

auto sector in Canada far ahead of

7:03

where it's been for a long time, if ever. There

7:05

does seem to be a genuine hub

7:07

developing, particularly in Ontario. I

7:11

think what we're seeing here is a pillar of

7:13

Canada's clean economy taking shape. Yeah. Because

7:16

there's of course the auto sector component that you touched on,

7:18

but of course EVs are kind

7:20

of critical to the Liberal government's climate plans

7:22

as well, so this seems to help bolster

7:25

that. It does help bolster

7:27

the country's climate plans, although of course most

7:29

of the vehicles that are produced here actually

7:31

might have been exported to the United States.

7:34

Some will be consumed by that. But

7:36

certainly they tie together. We've

7:39

heard from pretty much almost

7:41

the day that the current federal government took office,

7:43

but more so even in recent years, this

7:46

line that the environment and the

7:48

economy go hand in hand, that

7:50

they're not at odds with each other. The

7:54

growth of the sector certainly helps

7:56

bolster that case for people who

7:58

might say, way different going to

8:00

be bad for us or is this going

8:02

to challenge our existing economy. If you can say, actually,

8:05

we're going to have a more robust manufacturing sector

8:07

than we've ever had before or at

8:09

least had in a very long time, that

8:11

does help make the case for how addressing

8:13

climate change can be an economic

8:15

benefit rather than economic harm to the country. We

8:18

should also talk about jobs, right? Because this is another

8:21

aspect of a sizable corporate investment like this.

8:23

And during the Honda announcement last week,

8:25

Prime Minister Justin Trudeau promised there would

8:27

be 1,000 new jobs from this Honda investment.

8:31

What kind of timeline are we talking about here,

8:33

Adam? When would we actually see these jobs? So

8:36

the 1,000 jobs, I think,

8:38

refers to jobs on

8:41

an ongoing basis in the battery

8:43

manufacturing plant specifically because that's new.

8:47

I should say it's hard to be exactly certain

8:49

of this because there weren't all the specifics providing

8:51

the time of the announcement. But

8:53

that seems to be the case and I think

8:56

we're talking about later this decade for those job

8:58

stakeholders. Now, of course, there will be some

9:00

construction jobs and so on, although there

9:02

is the question that's popped up elsewhere as

9:05

well as to how many of those are going to be

9:07

Canadian jobs versus how many people coming from elsewhere to help

9:09

build the factory and so on. And

9:11

then the idea is it preserves other

9:13

vehicle assembly jobs that might have been

9:15

lost as they stop making vehicles and

9:17

internal combustion engines there. And then

9:19

there should be some further jobs, I think, in

9:22

the other two facilities that are going to be built, which

9:24

we haven't gotten as many details for, but the ones making

9:27

battery components. Okay. So

9:29

if we kind of take a broad view here, Adam,

9:31

we total up the amount of government support that we've

9:33

seen here, be it in the form of tax credits, loans,

9:36

other subsidies for these deals, it's

9:38

over $30 billion. It's a lot

9:40

of money, right? From

9:42

what you're hearing, is that kind of

9:44

investment worth it? There's certainly

9:46

mixed opinions on the total

9:49

investment that we've seen made, not just for this

9:51

deal specifically. And whether

9:53

it is justified. I think

9:56

certainly you can't look at it just through

9:58

the lens of how many jobs. jobs does

10:00

this create? Which sometimes gets brought

10:02

up and in fact during

10:04

the announcement last week, you saw

10:06

both Prime Minister Trudeau and Premier Ford practically

10:08

charged the microphone when they were challenged a

10:10

bit on this by a reporter. The

10:13

argument is, look, this is not just about immediate

10:15

jobs being created. This is a multi-decade

10:19

investment. It's going to have

10:21

tons of spin-off jobs. It's going to bring stability.

10:23

It's an anchor to build around and all that.

10:25

I think all that is true. The

10:27

question there I guess is how broad do

10:30

those go? If we wind up

10:32

only with a few battery plants, we've heavily

10:34

subsidized, and a few assembly plants, but

10:37

not a ton of other economic activity around it, then

10:39

you would say, well, that was not a great investment.

10:42

If you wind up with full supply chains

10:44

being built here from mining

10:46

of battery materials and refining of

10:49

those minerals and production

10:51

of battery components

10:53

and battery assembly and

10:55

other parts assembly and vehicle

10:58

assembly and battery recycling and

11:00

all of that, then

11:02

I think you can say, well, okay, then

11:04

these were extremely worthwhile anchors and

11:06

20 years from now, the

11:09

cost for them is not going to look that exorbitant. We'll

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for the love of home. Adam,

11:52

let's stick with the money here. Let's actually dig into

11:54

some of the specifics now. The

11:56

announcement by Honda to invest $15 billion is

11:58

called the biggest

12:00

investment that Canada has seen so far for this.

12:03

But we're also hearing that Solantis and

12:05

Volkswagen are getting up to $15 billion

12:07

each in subsidies. So I guess just

12:10

help me understand this. Why is the

12:12

Honda deal seen as the bigger investment?

12:15

I couldn't blame anybody for being confused about

12:17

this because the numbers are kind of counterintuitive.

12:20

This is a very large investment,

12:24

much larger than any of the other ones that we've seen announced

12:26

by our companies. At $15 billion, it

12:28

is more than double the size of the others

12:30

that we've seen in the last couple of years.

12:33

But the other ones got a much higher

12:35

subsidy total. So if you look at

12:37

something like the Volkswagen

12:40

deal, it's about a $7

12:42

billion investment by the company. It's

12:45

getting subsidies of up to $13 billion

12:47

or $13.2 billion, I believe, over the next

12:51

decade or so. So the

12:53

subsidies could actually outweigh the capital cost of

12:56

building the thing. But if we look at

12:58

like the $7 billion versus the $15 billion for Honda,

13:00

the company is putting up more with Honda. Yes.

13:02

In the Honda case, the

13:04

governments are only subsidizing roughly

13:06

a third of the capital

13:09

cost. So basically, Honda

13:11

is a much bigger investment,

13:13

much smaller subsidies. Okay.

13:15

And let's dig into this a little further then. So how

13:18

exactly do the government supports for the

13:20

Honda deal then differ from the Stellantis

13:22

and the Volkswagen deals? For

13:24

Stellantis and for Volkswagen, as well

13:26

as for Northvolt in Quebec,

13:29

what the government did is essentially

13:31

match subsidies that are available in the

13:33

United States. Those subsidies in

13:35

the U.S., which are via the Inflation Reduction

13:38

Act, are production

13:40

tax credits in the U.S. What that

13:42

means essentially is that in the early

13:44

years of the company's operations, you

13:46

are providing a subsidy per

13:49

unit produced there on

13:51

an ongoing basis. So when you see numbers like

13:53

$13 billion for Volkswagen

13:56

or $15 billion for Stellantis,

13:59

what you're talking about... about is essentially the

14:01

maximum subsidy they could earn up

14:03

until about the early 2030s from

14:06

the time that the plant opens if they produce the

14:08

maximum number of cars possible. Okay, so it all

14:10

depends on how much they produce. Yes, they

14:13

probably will not in fact wind up getting $13

14:15

billion or $15 billion, but it will

14:17

be quite large. In Honda's

14:19

case, the governments are not matching what they would

14:21

get in the US. What they're

14:24

doing instead in the federal case is

14:26

just giving them access to

14:28

investment tax credits that basically

14:31

cover a share of their capital

14:33

cost. I have a few

14:35

more, I guess, why questions about how this all shakes out here,

14:37

Adam. Why do our

14:39

governments agree to give more subsidies and

14:41

capital costs than to Stellantis and Volkswagen?

14:43

What is the reason for that? There

14:46

are many why questions about this. In

14:48

the case of the first

14:50

two or three battery plants that Canada

14:52

landed, I think

14:54

the view from governments was

14:56

that they needed anchors for

14:58

this EV ecosystem they want to build.

15:02

If they did not match the US, they simply would not

15:05

be able to get any. If

15:07

they did so, then ultimately it would be

15:09

a little bit easier to get subsequent investments

15:11

without spending that much money. In

15:13

fairness, that is what appears to have happened. Because

15:16

of the Inflation Reduction Act in the states and the

15:18

subsidies that companies were getting south of the border, we

15:20

basically had to match that if we wanted to play

15:23

the game. In

15:25

the case of Volkswagen, the US

15:27

subsidies were already in place and it was basically just a

15:29

matter of if you want this year, you

15:31

have to match them. You don't have to exceed them, but it

15:33

basically needs to be a level playing field from the company's perspective.

15:36

In the case of Stellantis, the

15:38

agreement with Stellantis had actually been

15:40

negotiated before the Inflation Reduction Act came

15:42

in. They were initially only getting maybe a billion

15:45

dollars or so in subsidies. You

15:47

may recall that there was then a ... I believe I may

15:50

have been on here talking about it. We

15:52

talked to you about the phone app and yes, okay. There

15:54

was then a big blow up where Stellantis basically said, okay,

15:56

well now that we would get this in the US, we

15:59

need it here, especially after ... Volkswagen got their deal and

16:01

there was a big standoff where it appeared

16:03

briefly that investment was in jeopardy

16:05

until the government's proof willing to basically just match the

16:07

way. Okay, so my

16:09

other why question then is the motivation with

16:12

Honda because if these other companies are getting

16:14

so many subsidies from the government, why would

16:16

Honda settle for less money from the government?

16:19

This to me is the biggest why question. Broadly,

16:22

based on the conversations that I've

16:24

had since January, I think

16:27

there are three different

16:29

factors here. One of those

16:31

is changing economic and investment

16:33

climate. There's a lot

16:35

of uncertainty in the United States where

16:38

of course these production subsidies are from or we're trying to

16:40

match them. There's an election later

16:42

this year. Nobody knows

16:44

for certain whether these incentives will still be in place

16:46

by then and therefore whether Canada would even have to

16:48

match them. A second factor

16:50

is the structure of the deal and the nature

16:52

of the investment. The

16:55

other plans were just for battery

16:57

plants and that's

16:59

where the US subsidies come in most

17:01

strongly. On the other

17:03

aspects like vehicle assembly

17:05

or the components of batteries, Canada

17:08

is a little more competitive just with the existing things

17:10

it has. As a whole,

17:13

because the deal is broader,

17:15

the battery subsidy was a little less important than

17:17

it might have been. The

17:20

third factor here seems to be

17:22

corporate culture. Honda seems to operate

17:25

a little differently from a company

17:27

like, say, Stellantis. What

17:29

I've heard from people who've engaged with it is it

17:32

just has a somewhat, I suppose, more

17:34

conservative corporate culture. Notably, they've been a little slower

17:36

to go into the EV space than some of

17:38

the other companies, but also

17:40

tending to take more of a long view and being

17:43

a little less concerned with immediate

17:45

subsidies and a little more concerned with how the investment makes

17:47

sense in a 20, 30, 40 year frame. They

17:51

do a lot of history of holding

17:54

government's hostage for money during tough times and so

17:56

on. I think it was

17:58

just a company with a different calendar. Let's

18:02

talk about the EV market more broadly too,

18:04

Adam. It's kind of in a weird place

18:06

right now, right? Like after a few years

18:08

of increasing growth, demand for EVs is dipping

18:10

a little bit these days. So

18:13

both Tesla and Chinese EV maker BYD show

18:15

that their earnings and sales have been

18:17

down in recent quarters. So I

18:19

guess with that in the background, why

18:21

are we seeing such a ramping up

18:23

of investment around producing more electric vehicles

18:25

right now? My question

18:28

of why now is something that

18:30

I put to Honda's preference

18:33

to a hero maybe after the announcement

18:35

last week. The answer

18:37

that I was given was partly

18:40

that they are confident that by

18:42

2028, which is when

18:44

they will start rolling these

18:46

EVs off the factory floor, that

18:50

demand by then should be more robust again, that

18:52

they're expecting the market to be growing again in

18:54

a really strong way. But

18:56

the other factor is, and I think what you really have to

18:58

take from this decision, is that they're

19:01

aware, and you said as much, that there are

19:03

going to be bumps along the way. There

19:05

are in any kind of transition. But if you take the long view

19:08

of 10, 15, 20 years from now,

19:11

this is where we're going. Exact

19:13

how quickly we get there and exactly how

19:15

difficult it is this decade is hard to

19:17

predict. But if you're

19:19

making investments where you're planning to do

19:21

it for three, four, five decades, then

19:24

you're really taking more of a view of what does this

19:26

industry look like come And

19:29

there seems to be strong confidence, including even from

19:31

this rather cautious

19:34

company, that this is just the way

19:36

the world is going. So

19:38

we've talked a lot about what governments are doing to

19:40

kind of spur the supply of EVs to actually make

19:42

these cars. But what are we

19:44

doing to make sure that EVs don't just sit

19:47

in the lot after they're made? Adam, what's happening

19:49

to make buying an EV actually worth it for

19:51

more people? To

19:53

date, governments have leaned fairly

19:56

heavily on purchase subsidies,

19:58

basically just giving you a few thousand dollars. dollars

20:00

to help break down the cost. And that certainly

20:02

has some importance. That's

20:04

becoming less important now because the cost

20:06

of EVs is falling. The

20:09

bigger challenge and the one that governments have

20:11

not done as well as so far, nor

20:13

I should say the private sector, is charging

20:15

infrastructure. And if you speak to

20:17

people in the automotive

20:19

sector about some recent challenges

20:22

for EVs and why they're having

20:24

trouble past the first adopters, people

20:27

who are really keen to buy these, why they're having

20:29

trouble with the next wave right now of potential consumers

20:31

for them. What they'll

20:33

typically say is it's concern about

20:35

the range anxiety thing we've all heard, but basically just

20:37

how do I charge this thing and is there reliable infrastructure?

20:40

Speaking anecdotally here personally, you

20:43

would assume as somebody who writes about climate policy that

20:45

I might have an EV by now. But

20:48

I live in downtown Toronto more or less and I

20:50

don't have a driveway and it's

20:52

just not an option right now. And I'd be

20:54

a relatively early adopter. So clearly

20:57

there is a need to address that and I think there's going

20:59

to be a lot of pressure on governments to build our charging

21:01

infrastructure. Just very lastly

21:03

here, Adam, I just wonder what you're

21:05

hearing. Like after this Honda deal, should

21:07

we expect more deals similar to this one

21:09

in the future? I think

21:11

now that this has been established, I

21:14

think there is a fair amount of confidence

21:16

out there about landing some more. The

21:19

most obvious next one potentially

21:21

would be Toyota, which is the one

21:24

company that has a presence making vehicles

21:26

in Ontario that has not yet

21:28

made a major EV commitment here. They've

21:31

had some preliminary talks with governments. They don't seem

21:33

to have gotten that great initially, but

21:35

I think there's still some ongoing discussion there. So

21:38

I think there is a decent chance of

21:40

that. There are other European companies as well

21:42

like BMW and so on that come up.

21:46

So I think there is a

21:48

good chance of one or two more of these. I

21:50

would say that if that happens, it'll be fairly

21:52

soon. Where you have to look

21:55

is which companies have not yet fully

21:57

laid out their North American, particularly battery

21:59

making plans. and what's

22:01

their history in Canada and so on. And are they willing to take this

22:03

kind of deal? But I think what Honda has,

22:05

it may be a lot easier to get other companies to

22:07

also come here without spending,

22:10

more than their capital costs in such cities. Adam,

22:12

always great to talk to you. Thank you so much for being here. Thank you.

22:19

That's it for today. I'm Mayna

22:21

Karaman-Wilk. Our intern is

22:23

Raisa Alibi. Our

22:25

producers are Madeline White, Cheryl

22:27

Sutherland, and Rachel Levy-McGlaughlin. David

22:30

Crosby edits the show. Adrian

22:32

Chung is our senior producer. And Angela

22:34

Pajenza is our executive editor. Thanks

22:37

so much for listening, and I'll talk to you tomorrow. The

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