By on January 16, 2017


(Update: The initial story detailing new Canadian auto incentives was published on January 12. It has been updated to reflect new information.)

Canada’s new government-funded incentive program for automakers isn’t as generous as initially reported.

Last week, the federal government made changes to the Automotive Innovation Fund to allow car manufacturers, parts suppliers and R&D companies access to conditional grants that do not require repayment. Unfortunately, a communications slip-up at the country’s Ministry of Innovation, Science and Economic Development made the pile of cash a whole lot taller than intended.

According to Automotive News Canada, the amount of money available for non-repayable grants is $500 million (CAD) through 2021, not $500 million per year. That’s one-fifth of what was originally reported.

The previous AIF guidelines made the capital available in the form of interest-free, but repayable, loans. After the changes were announced, former Toyota Canada chairman Ray Tanguay said the updated program is at least as good as what is available in the southern United States and Mexico. It’s unknown whether he was speaking to the right sum of money.

“This is a government that is finally listening to many, many years of requests. In order to be competitive, we have to have an AIF that is not an interest-free loan, it has to be a grant,” Tanguay told Automotive News Canada last week.

“I think our incentives for the green fields are OK compared to Mexico,” he explained. “Yes, some of the United States still have very generous incentives. But I think our incentives are better.”

As the official “Car Czar” to the Great White North, Tanguay serves as the automotive advisor to Ontario, and is partially responsible for locating investments into Canada’s automotive industry.

The free meal does come with a few stipulations, however. Non-repayable grants can only be used for developing advanced technologies like autonomous vehicles or composite materials, securing existing facilities for future use, investing in clean technologies (meaning zero emissions), expanding existing facilities, or establishing a greenfield.

Any companies that don’t qualify for the conditional free money can still apply for repayable loans under the old AIF guiltiness.

Honda was the first automaker to take advantage of the automotive fund. On Monday, it announced it would be investing $492 million (CAD) to upgrade the Alliston, Ontario plants that build the CR-V and Civic. Because Honda says that a large portion of that money is going toward a new paint shop that cuts greenhouse gas emissions by 44 percent (while also ensuring jobs), Canada’s federal government is kicking in $41.8 million in grants.

While parts of the United States will happily offer massive incentives to automakers willing to build new factories in their part of the country, it’s rare to find a jurisdiction that pays car companies to update their facilities.

[Image: Fiat Chrysler Automobiles]

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27 Comments on “Whoa, Hold on There: The New Pile of Canadian Cash Available to Automakers Just Shrank...”

  • avatar

    “Non-repayable” is part of the definition of “grant”.

  • avatar

    As an Ontario, and Canadian tax payer, we have no choice in this matter. Now if the president -elect slaps a 35 percent import tax on Canadian produced vehicles ? We may need to re think this.

    • 0 avatar

      Or sell them to other countries. What a concept if we actually developed more diverse trading relationships…

      • 0 avatar

        That has happened in Canada with soft wood lumber exports to the USA. Countervailing duties were placed on our lumber. Companies found business elsewhere. It worked out well for BC because the USA 2008 economic slowdown/housing market collapse had minimal impact.

    • 0 avatar

      Opening moves, Mikey. What will happen is most likely a NAFTA rewrite, mostly likely to help bring US jobs back from Mexico. The President will most likely finally have to deal with the failed state of Mexico which will be very tricky.

      • 0 avatar
        Arthur Dailey

        “The Capitalists will sell us the rope with which we will hang them” Lenin.

        From day one I opposed free trade deals with 2nd and 3rd world nations and dictatorships. Not a level playing field. But Big Business naturally lobbied for it as business relentlessly searches for the cheapest sources of labour.

        And money (global corporations) have no loyalty or reason to exist except to maximize their profits.

        Imposing tariffs on Mexico is entirely feasible. However not only do Canadians purchase a great number of American exports such as high level pick-ups, Canada has far too many natural resources that the USA needs access to.

        As a pragmatist rather than an ideologue President Trump will find a way to continue the majority of free trade products between Canada and the USA.

        • 0 avatar

          @Arthur….I hope your right. The odds of winning a trade war with the USA are about the same as getting into a shooting war.

        • 0 avatar

          Hats off for the Lenin quote, Sir. I doubt Trump administration’s policy will target Canada. Canadian car production is not an existential threat to American manufacturing base. Mexico is. Mexico proven capable of manufacturing good product at very, very good prices. Judging from personal experience.

          • 0 avatar

            Personally I see some prejudice towards Mexico because they can compete on some levels.

            I understand people want America to “win” and have great jobs, but there is a lot of BS being flung around IMO. We have not shown the resolve, willingness and courage to deal with the greed and corruption in our government. The working (and well of ones) poor of America are battling the working poor (and rich) of Mexico.

            This is much more to do with ego, stupidity and dis-ease than anything IMO. We are in a very sad state as a society on many levels.

    • 0 avatar

      It would mean reverting to pre-Auto Pact days, when cars made in Canada were sold in Canada. The Auto Pact was very much driven by the interests of the D3, just as the Canada-US FTA was strongly supported by the business sector.

      In the real world, I very much doubt that efforts to repeal NAFTA will succeed. The business sector will lobby very heavily against it, and Republicans have been the core of support for free trade.

  • avatar
    Gardiner Westbound

    Nothing greases the wheels of commerce better than free money.

  • avatar

    A 35 percent tariff, would effectively shut down the Ontario auto industry. GM, Ford FCA, Honda, and Toyota, and all the feeder industries would be gone in 6 months.

    I’m all for “diverse trading relationships” The problem, as i see it, is what do we trade, and who do we trade it to?

    • 0 avatar

      Worrying that any US president will keep their campaign promises is silly. Worrying that the next one will requires ignoring that he’s contradicted almost every one of them somewhere in the last 4 years.

  • avatar

    All this for nothing; once Herr Trump is done destroying Mexico’s car manufacturing facilities, he’ll turn his attention to Canada.

    • 0 avatar

      I wouldn’t sweat it. My guess is that it’s just for show, or as one commenter called it, “rubefood”. Do you really think a Republican administration is going to go against what big business wants?

      • 0 avatar

        Good point.

        • 0 avatar

          One pundit expressed 2 possible scenarios for the Repubs in relation to the Comb-over-in Chief.
          1. Trump listens and follows party recommendations but his persona keeps the public and media distracted from all of their changes.
          2. Trump does not listen to party recommendations and fights them and gets in the way of any change.

          Scenario 2 means the road to impeachment. Mike Pence is a party stalwart so if Trump does not play ball he’ll move into the “big chair” and we go back to scenario 1 but without the dog and pony show.

    • 0 avatar

      The Orange One will have OD’d on Russian hooker pee long before that ever happens.

    • 0 avatar

      Why to your call Mister Trump “Herr”? This is an offense with nasty ethnic and racist undertones. This got to stop.

      • 0 avatar

        //Why to your call Mister Trump “Herr”?

        That’s PRESIDENT Thump to you, bub.

        • 0 avatar

          @Sceptic – Trump’s family name is Drumpf. His ancestry is German therefore “Herr” (German for Mister) is ethnic but not racist.

          • 0 avatar

            I’ve resolved to refer to our incoming president either as Trump or President Trump. Having seen all the horrible insults hurled at our current president, I don’t want to be a part of that scene. My reasons are as follows:

            1. I truly do respect the office of the presidency, and while I will always speak out on matters of policy, I don’t think insults are helpful.

            2. I suspect that anyone reading my comments will just tune me out after seeing me insult their president.

            3. The president elect has a history of lashing out whenever he feels insulted. While I don’t presume that he would stoop to swat at me in particular, I don’t want to be part of a hostile climate that causes the president to again lose focus and ignore the improvements his supporters expect.

  • avatar

    Free Trade is one thing (wild west. not many checks and balances)
    Fair Trade is something else.

    In 2004, the American Foundry Society brought a suit to the FTC I believe. The AFS said, ‘ hey man, China is Cheating.” They are supplying 10 pound aluminum castings to Detroit for $12 dollars. Delivered.
    Aluminum was $1/lb then. That china casting had 10$ in Aluminum in it. Plus the labor, burden, freight, fettling etc. So even offshore, the casting should have costed $20 or so. COST not price.
    This is an example of Free Trade. This is what has closed 50,000 manufacturing plants and ended 10,000,000 direct manufacturing jobs over the last 15 years.

    The new president says Fair trade may be a better way.
    You Choose.

    • 0 avatar

      @redapple – you do realize that multiple American multinationals set up shop in China to maximize profits? Same goes for Mexico.

      Most jobs were lost to robots not Chinese or Mexicans.

      There has been a considerable amount of research done trying to figure out the last election. Statistically things are better than they were decades ago. White middle class uneducated (grade 12 or less) males in their 40’s and primarily in smaller communities (50k or less) believe their place in life is worse. They tend blame foreigners, foreign countries, and ethnic minorities.

      ““You know, if you’ve always been privileged, equality begins to look like oppression. That’s part of what you’re seeing in terms of the [white] pessimism, particularly when the system gets defined as a zero-sum game – that you can only gain at somebody else’s loss.”
      Carol Anderson, historian at Emory University

      • 0 avatar

        Newsflash: China is losing manufacturing jobs way faster then the US. Why? automation. That’s the reason. But automation is also the reason that productivity improves, which (along with population growth) is what fuels growth.

        If you want more economic growth there are by definition only three ways to get it. You can:

        1. increase the population. But keep in mind that if the native population is declining (as ours is) then you can only grow population with immigration. I don’t think that’s what Trump supporters are expecting.

        2. Increase automation, which increases output, but also decreases the employment required to produce that output. Again, not something that Trump supporters were voting for.

        3. Increase workforce participation. This has been a key driver for American (and world) growth as women and minorities have increasingly entered the workforce. No the playing field is not yet level, but compared to 40 years ago…

        Here is where the rubber meets the road if Trump is going to have meaningful impact on the economy. How do you bring all these people who have given up searching for work back into jobs with dignity, respect for their disabilities and a decent wage? And maybe even health insurance? It will be interesting to see if the new administration will have success here.

      • 0 avatar

        People are the new buggy whips.

  • avatar

    RE The Picture.
    Interesting plant. Brampton I Guess.
    I ve tooled up Assy plants for – obviosuly – GM. Any body know why the car is complete- ready for paint, except, no front left quarter panel?

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