People work at Honda’s auto manufacturing plant in Alliston, Ont., on April 5, 2023.CARLOS OSORIO/Reuters
A new tax credit in Tuesday’s federal budget is fuelling industry speculation that Canada is close to landing a massive electric-vehicle investment by Honda.
The proposed measure would provide companies with a 10-per-cent rebate on the costs of constructing new buildings to be used in the electric-vehicle supply chain. It would be atop other such incentives to which Ottawa has previously committed, including a 30-per-cent manufacturing investment tax credit, as well as provincial supports.
But unlike those other credits, this one would only be available to companies making across-the-board investments in battery-making, the manufacturing of battery components known as cathode active materials, and vehicle assembly.
Honda Motor Co. Ltd. HMC-N is the only automaker known to be in advanced talks with the federal and provincial governments for a Canadian EV-sector commitment of that breadth. Earlier this year, the Japanese news group Nikkei reported that the company is considering an investment here of up to $18.5-billion – pointing toward more comprehensive Canadian supply chain plans than those of competitors such as Volkswagen Group and Stellantis NV STLA-N, whose high-profile investments squarely in battery manufacturing would not qualify.
Amid a flurry of trips to Japan by Canadian officials – most recently a visit this month by Ontario Economic Development Minister Vic Fedeli – the perception among industry insiders is that the new tax credit may be a final component of an incentive package offered by the federal and provincial governments, to get the negotiations over the finish line.
“There’s a very short list of very big companies who are looking at a very big investment and talking to Canada, Ontario and Quebec, to whom this would apply,” said Automotive Parts Manufacturers’ Association president Flavio Volpe, referring to the two provinces vying for major EV commitments. “The translation here is that there are big new EV investments coming.”
That assessment was echoed by Brendan Sweeney, the managing director of the Trillium Network for Advanced Manufacturing. “All the bread crumbs are leading to something,” he said.
More than just heralding the potential for the largest EV-related Canadian commitment by a global auto giant to date, the new measure is seemingly part of a shift in strategy for how Canada subsidizes supply chain growth – one in which Ottawa and the provinces stop competing for investment by simply matching multibillion-dollar subsidies offered in the United States, and instead offer more nuanced packages that could prove more efficient.
That subsidy-matching approach – in which Canada has guaranteed companies of annual subsidies equivalent to production tax credits offered in the U.S. – has to this point been considered a prerequisite to securing the battery factories meant to serve as EV supply chain anchors.
However, those have come with projected cumulative costs of up to $13-billion for the factory being constructed by Volkswagen in St. Thomas, Ont., and up to $15-billion for the one being constructed by Stellantis and LG Energy Solution in Windsor, Ont., during the early years of plant operations when the subsidies would be available. And Ottawa, which will cover about two-thirds of those costs while Ontario pays the rest, has previously signalled that it does not have the fiscal capacity to provide many more such deals.
But since the Honda negotiations came to light, government officials have expressed optimism about that company being open to a package of support that would revolve more around tax breaks on investment costs – as opposed to operational subsidies once factories have been commissioned – and likely carry a less staggering government cost relative to the total investment. (The Globe and Mail is not identifying the officials, because they were not authorized to speak publicly about the talks.)
One reason for that optimism may be the multifaceted nature of the investment that Honda is considering.
Mr. Volpe noted that for battery factories alone, Canada’s investment tax credits (ITCs) are not enough to compete with the U.S. production tax credits. But he said it’s a different story if the company is also looking at vehicle assembly, production of battery components and other parts of the supply chain, which the U.S. is not subsidizing the same way.
At the same time, those other aspects of the Honda package under consideration also seemingly make its potential investment more attractive to Ottawa than merely chasing another battery plant alone.
Other companies could also take advantage of the new incentive, along with the others being offered by the federal and provincial governments.
The governments have also been in less advanced talks with Toyota Motor Corp., which is the only one of the five global automakers with an established manufacturing presence in Canada not to have made major EV-related commitments here. (The others are General Motors Co. GM-N, Ford Motor Co. F-N, Stellantis and Honda.)
But for now, it’s the prospect of Honda as the first taker for a made-in-Canada approach to EV supports that is causing the most buzz around the sector.
“I think this could be a really useful departure,” Mr. Sweeney said. “We have to be competitive with the United States, but we’re a sovereign country. Can we do this in a way that works better for Canada?”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
