Politicians should be focusing on creating the right environment for any company, large or small, to grow without a government handout. Pictured: Prime Minister Justin Trudeau. Photo Credit: Justin Trudeau/X.
Politicians are rolling the dice on the electric vehicle industry with your money.
If they bet wrong, and there’s a good chance they have, hardworking Canadians will be left holding the bag.
Prime Minister Justin Trudeau and Premier Doug Ford announced a $5-billion agreement with Honda, giving another Fortune 500 automaker a huge wad of taxpayer cash.
Then Trudeau released a video on social media bragging about “betting big” on the electric vehicle industry in Canada. The “betting” part of Trudeau’s statement tells you everything you need to know about why this is a big mistake.
Governments should never “bet” with taxpayer money. That’s the reality of corporate welfare: when governments give taxpayer money to corporations with few strings attached, everyday Canadians are left hoping and praying that politicians put the chips on the right numbers.
And these are huge bets.
When Trudeau and Ford announced this latest giveaway to Honda, the amount of taxpayer cash promised to the electric vehicle sector reached $57 billion. That’s more than the federal government plans to spend on health care this year.
Governments should never gamble with taxpayer money and there are at least three key reasons why this Honda deal is a mistake.
First, governments haven’t even proven themselves capable of tracking how many jobs are created through their corporate welfare schemes.
Trudeau and Ford bragged about how a $5 billion giveaway to Honda is going to generate 1,000 jobs. In case you’re thinking of doing the math, that’s $5 million per job.
Five million dollars per job is already outrageous. But some recent reporting from the Globe and Mail shows why corporate welfare in general is a terrible idea.
The feds don’t even have a proper mechanism for verifying if jobs are actually created after handing corporations buckets of taxpayer cash. So, while 1,000 jobs are promised through the Honda deal, the government isn’t capable of confirming whether those measly 1,000 jobs will materialize.
Second, betting on the electric vehicle industry comes with risk.
Trudeau and Ford gave the Ford Motor Company nearly $600 million to retool a plant in Oakville to build electric cars instead of gasoline powered ones back in 2020. But just weeks ago, Ford announced plans to delay the conversion for another three years, citing slumping electric vehicle sales.
Look into Ford’s quarterly reports and the danger of betting on electric vehicles becomes clear as day: Ford’s EV branch lost $1.3 billion in the first quarter of 2024. Reports also show Ford lost $130,000 on every electric vehicle sold.
The decline of electric vehicle demand isn’t limited to Ford. In the United States, electric vehicle sales fell by 7.3 per cent between the last quarter of 2023 and the first quarter of 2024.
Even Tesla’s sales were down 13 per cent in the first quarter of this year compared to the first quarter of 2023.
A Bloomberg headline from early April read “Tesla’s sales miss by the most ever in brutal blow for EVs.”
There’s certainly a risk in betting on electric vehicles right now.
Third, there’s the question of opportunity cost. Imagine what else our governments could be doing with $57 billion?
For about the same amount of money, the federal government could suspend the federal sales tax for an entire year. The feds could also use $57 billion to double health-care spending or build 57 new hospitals.
The solution for creating jobs isn’t to hand a select few companies buckets of cash just to lure them to Canada. Politicians should be focusing on creating the right environment for any company, large or small, to grow without a government handout.
To do that, Canada must be more competitive with lower business taxes, less red tape and more affordable energy. That’s a real recipe for success that doesn’t involve gambling with taxpayer cash.
It’s time for our politicians to kick their corporate welfare addiction. Until they do, Canadians will be left paying the price.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.
