The federal government plans to clean and green the Canadian automotive industry through a number of measures and millions in spending introduced in its budget, tabled Monday.
It also plans to tax some luxury vehicles.
Finance Minister Chrystia Freeland announced plans to spend billions in green manufacturing over the next seven years.
The Strategic Innovation Fund, first launched in 2017, will receive an incremental $7.2 billion over seven years on a cash basis, starting in 2021-22, and $511.4 million ongoing. The money will support projects across the economy, including those in the life sciences, automotive, aerospace, and agriculture sectors.
But the bigger, targeted investment is the $8-billion Net Zero Accelerator, which was officially added to the Strategic Innovation Fund. It’s designed to support projects that will help reduce Canada’s greenhouse gas emissions by expediting decarbonization projects, scaling-up clean technology, and accelerating Canada’s industrial transformation.
Flavio Volpe, the head of the Automotive Parts Manufacturers’ Association, called it a “material, explicit commitment to net-zero investments in automotive.”
“I think the magnitude they did it at is a game changer,” he said. “At a time when we’re wondering where the processing investments are going to come from and how we are going to sweeten the pot in an extremely competitive global market for ZEV mandates, the government of Canada answered emphatically.”
The government initially announced a $3-billion investment in December during an economic statement. The budget adds an additional $5 billion, bringing the total to $8 billion over seven years.
Freeland also pledged millions on electric battery development and charging infrastructure. Manufacturers will receive corporate tax breaks if they make green automobile and parts.
Budget 2021 proposes to provide $9.6 million over three years, starting in 2021-22, to create a Critical Battery Minerals Centre of Excellence at Natural Resources Canada.
The centre would coordinate federal policy and programs on critical minerals, and work with provincial, territorial, and other partners. The centre would also help implement the Canada-U.S. Joint Action Plan.
Budget 2021 proposes to provide $36.8 million over three years, starting in 2021-22, with $10.9 million in remaining amortization, to Natural Resources Canada, for federal research and development to advance critical battery mineral processing and refining expertise.
The budget also proposes to reduce—by 50 per cent—the general corporate and small business income tax rates for businesses that manufacture zero-emission technologies. That includes the manufacturing of electric-vehicle charging systems and the manufacturing of batteries and fuel cells for EVs.
The federal government also plans to help manufacturers cut costs by expanding the capital cost allowance for clean energy equipment, which will now include hydrogen refuelling equipment, electric-vehicle charging stations capable of supplying more than 10 kilowatts of continuous power, and stations that are capable of supplying at least 90 kilowatts of continuous power, are also included.
Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, which represents the interests of the Detroit Three in Canada, said he and his members welcome “the government’s commitment to the industry and transition to electric vehicles.”
“The auto industry is leading the way investing in zero-emission technologies in Canada,” he said in a statement. “The measures announced [Monday] create the conditions for an auto-driven economic recovery.”
Ottawa also wants to better align itself and Washington when it comes to zero-emissions codes and standards for charging and fuelling stations. Budget 2021 proposes to provide $56.1 million over five years, starting in 2021-22, with $16.3 million in remaining amortization and $13 million per year ongoing
Budget 2021 proposes to provide $56.1 million over five years, starting in 2021-22, with $16.3 million in remaining amortization and $13 million per year ongoing, to Measurement Canada to develop and implement the standards, in coordination with international partners such as the United States.
“This would include accreditation and inspection frameworks needed to ensure the standards are adhered to at Canada’s vast network of charging and refueling stations,” the budget reads, in part. “This measure would provide regulatory certainty to providers of charging services and facilitate the development of the charging network. It would also give more Canadians confidence to purchase and drive ZEVs.”
The federal government says it will also implement a luxury tax on new cars and private aircraft worth more than $100,000 and pleasure boats worth more than $250,000.
“If you’ve been lucky enough, or smart enough, or hard-working enough, to afford to spend $100,000 on a car, or $250,000 on a boat – congratulations!” The budget reads. “And thank you for contributing a little bit of that good fortune to help heal the wounds of COVID and invest in our future collective prosperity.”
Tim Reuss, head of the Canadian Automobile Dealers’ Association, said he was disappointed in the federal budget, particularly with the luxury tax.
“CADA is disappointed that cars have been singled out as a luxury item in the latest federal budget. The people that will be hurt the most by this are repair technicians and small businesses,” Reuss said.
The government says the tax will be a 10-per-cent fee on the total cost of the vehicle or a 20-per-cent fee on the amount exceeding $100,000, whichever amount is smaller. Ottawa estimates the measure will increase federal revenues by $604 million over five years, starting in 2021-22.
Reuss was also disappointed by the absence of any incentives to purchase new vehicles. There is no scrappage program and no EV incentives in the budget.