Quebec makes a billion-dollar bet on its electric dreams. Will taxpayers again be left holding the bag?
The recent announcement that the Canadian and Quebec governments are contributing a total of $2.7 billion to attract Northvolt, a Swedish battery manufacturing giant, to Quebec is the latest – and by far the biggest – in a long list of projects partly funded by governments to support international companies building parts for electric vehicles (EVs).
The Northvolt factory will be about 30 km east of Montreal, in the Saint-Basile-le-Grand and McMasterville area, situated in southwestern Quebec, and span 170 hectares. The facility will be able to produce batteries for one million EVs annually. It’s expected to mean 3,000 jobs.
Quebec is a hot spot for the emerging EV industry – thanks in part to the provincial and federal governments.
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Last month, it was announced that a South Korean firm, Volta Energy Solutions, will produce copper foil for batteries in EVs in a retrofitted facility in Granby, about 80 km east of Montreal. The Quebec government will lend the company $150 million as part of the $750 million project, which is expected to create 260 jobs.
In August, Ford announced a $1.2-billion manufacturing plant to produce materials for batteries in EVs. The Quebec and federal governments are each putting $322 million into the project. The new plant will be built in Bécancour, about 150 km northeast of Montreal and is expected to mean 345 jobs.
Earlier this year, General Motors and South Korea’s POSCO Chemical announced plans to build a $600 million factory in Bécancour to manufacture components for electric car batteries. The federal and provincial governments will each contribute about $150 million.
The Quebec government says these financial incentives are essential to attract business, while critics say this is not a good use of taxpayers’ dollars.
However, financial incentives for the auto industry are nothing new in Quebec and go back to the 1960s.
In late 1965, an auto manufacturing facility opened in Saint-Bruno-de-Montarville, about 20 km east of Montreal, thanks to some funding from the Quebec government. The $4-million plant was run by the newly-created Société de Montage Automobile, or SOMA, a Quebec government organization designed to attract industrial investment. Under the agreement, French automakers Renault and Peugeot would sell major components to SOMA, which then would paint and assemble the cars.
Some of the parts, including glass, batteries and spark plugs, were made in Canada. SOMA sold the finished cars to Renault and Peugeot sales organizations in Canada. Advertisements proudly announced the cars “Made in Canada.” The dealer brochure bragged about the economy and comfort of the “Canadian-built Renault 8.”
Now for the rest of the story.
SOMA lost $600,000 on 3,000 cars in the first eight months of operations. Peugeot quickly pulled out. While Renault’s production increased in the second year and peaked in 1971 at 11,980 units, the car manufacturer still lost about $250 on each car compared to simply importing them from France. In 1972, Renault announced it was ending its contract to build cars in Quebec.
Also in 1965, General Motors built a new auto assembly plant in Saint-Thérèse, just north of Montreal. Although GM received no government incentive to initially open the plant in Quebec, it later took government money to convince it to stay. This plant turned out Buicks, Chevrolets, Oldsmobiles and Pontiacs. Auto supply firms were drawn to the Montreal area, and some Quebec companies became new suppliers to GM.
As the plant got older and GM ran into economic problems, the automaker warned in 1986 that the plant would close after 1989 without financial aid to modernize the facility. In 1987, the federal and Quebec governments approved a $220 million interest-free loan to GM, each contributing $110 million. That kept the plant in operation for several more years. But in 2001, GM announced the Ste. Thérèse plant would be shut for good in September 2002.
Then, in 1985, Hyundai announced it would build an assembly plant in Bromont, about 75 km east of Montreal. Quebec provided a 400-acre site worth $1.5 million. Hyundai also got lower electricity rates as a large consumer, free water for the plant, and grants for training. The total cost of the plant was $450 million. There were also promises of $110 million in loan guarantees and interest payments from the federal and Quebec governments on the condition that Hyundai would have 1,200 employees by 1990 and produce 100,000 vehicles by 1991. That amount was later reduced when targets were not met.
The first Canadian-made Hyundai rolled off the new assembly line in 1989. The best year was 1991, when 28,000 cars were made, and there were 850 employees. Production dropped in half in each of the next two years. Hyundai shut the plant down In 1993 after losing about $400 million. Hyundai paid back $50 million to the federal and Quebec governments for failing to meet its targets. In 2002, Hyundai announced it would build an assembly plant in Montgomery, Alabama, with the state providing a $118-million package of incentives. The plant opened in 2005.
The first large-scale auto assembly plant in the province of Quebec opened in 1914 when Ford built a facility in Montreal. It served as an assembly plant and a regional parts and service centre for almost three decades. This building is still standing, and now it’s known as Plaza Laurier and is home to various businesses.
Ford did not receive any government funding in 1914; it was strictly a business decision by Ford to build the new $333,000 facility.
But today, if there are no financial incentives for firms in the auto industry, there’s often another government willing to make a deal to attract an auto supply plant.
Dale Johnson is an award-winning author, broadcaster and journalist who has worked in TV, radio, print and online. While the manufacturer provided Dale with a vehicle to test drive, the content of this review was not reviewed or accepted by the manufacturer.
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