Canadian Manufacturing

Ongoing battle over Biden’s EV tax credits

The tax incentives of up to US$12,500 on cars and trucks assembled stateside with union labour could mean the end of the road for Canada's automotive industry.

December 17, 2021  The Canadian Press

The tax-credit scheme that President Joe Biden is proposing to encourage U.S. consumers to buy more electric vehicles might never be implemented in its current form, say veteran observers of both North America’s auto sector and Canada-U.S. relations.

If they are, though, the tax incentives of up to US$12,500 on cars and trucks assembled stateside with union labour could mean the end of the road for Canada’s automotive industry.

“We’re at a really tentative moment,” said Dimitry Anastakis, a professor of Canadian business history at the University of Toronto’s Rotman School of Management.

Consider what would happen if the $83-billion U.S. auto market, which is rapidly abandoning the internal combustion engine, were suddenly confronted with the chance to save up to nearly 25 per cent on a $55,000 EV, so long as it was assembled on American soil by unionized workers.

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It would amount to what the federal government in Ottawa calls a 34 per cent tariff on vehicles built in Canada. The imbalance would brand foreign-made cars with a scarlet letter and send auto manufacturers and their roughly 125,000 jobs scrambling over the border.

It’s a worst-case scenario triggered by what Anastakis calls a “deintegration” of more than half a century of trilateral automaking, with companies abruptly pulling up stakes and cancelling plans they’re already making to spend billions on their Canadian and Mexican operations.

“You’d see a removal and rescinding of all those announcements that have already been made for investments, and probably no future investment on passenger vehicles at all,” he said, “which would obviously be the end of the industry as we know it.”

But Anastakis and others are confident it won’t come to that.

It doesn’t make economic sense for anyone — not consumers, not manufacturers, whether foreign or domestic, and not even the government that’s proposing it in the first place.

Canada offers a highly skilled, world-class manufacturing workforce with half a century’s worth of institutional knowledge when it comes to building cars and trucks, not to mention the cost benefits of a country with an 80-cent dollar and public health care. Union leaders like Bob White, the founding president of the Canadian Auto Workers after it split from its American counterpart, exploited those advantages at every opportunity.