A transitioning Canadian economy has provided new opportunities for automotive manufacturers across the country. Declining oil and energy market prices have increased the importance of automotive success, and all levels of government within Canada are searching for ways to strengthen the automotive sector. Canadian government funding for innovative research and development projects is now more available than in previous years, and automotive manufacturers are beginning to leverage these funds to expand the scope of their projects through increased cash flow.
The Automotive Innovation Fund (AIF) is one of these automotive funding programs designed to support large-scale R&D projects. AIF incentivizes innovative, long-term investments made in the Canadian automotive industry. Large R&D projects (such as new product development, prototyping, or testing, and productivity enhancements) that provide private sector investment of $75 million or more over 5 years are prime candidates for this program. Projects may receive grants or repayable Canadian government funding valued up to 10-15% of project expenses. Automotive manufacturers can secure $16 million to $80 million in funding to extend cash flow and enable project completion.
Automotive Innovation Fund (AIF) Canadian Government Grants
How much Canadian government funding could my automotive business receive towards R&D?
Canadian automotive manufacturers can access up to $80 million in government grants. Typically, AIF automotive funding will provide 10-15% of eligible project expenses. Manufacturers that increase employment opportunities (jobs) and are able to satisfy the program objectives (below) will be able to access a higher amount of funds than manufacturers those who only show a few long-term project outcomes.
What are AIF’s program objectives?
The Automotive Innovation Fund seeks to promote large-scale research and development projects that encourage innovation, environmentalism, and fuel efficiency among Canadian-made vehicles. AIF will achieve this by:
- Promoting knowledge-based jobs that build Canada’s research and development capacity;
- Supporting the research and development of innovative, fuel-efficient products and processes;
- Supporting the Canadian economy by creating/retaining high-quality manufacturing jobs; and
- Leveraging private sector investments.
What is the source of AIF funding?
AIF government funding for automotive manufacturers has been released by the Government of Canada. This support was announced in 2008 and renewed in the Government of Canada’s 2014, then 2016 budget. Industry Canada administers the program and is responsible for collecting and reviewing applications, as well as distributing funding in a fair and impactful manner.
When will I receive funding? When do I have to pay it back?
As of January 2017, Automotive Investment Fund contributions may be provided as government grants or repayable funding (Canadian government loans). The amount and distribution of these funds will be assessed by Industry Canada after applications are received. Successful applicants are then required to enter a contribution agreement, provided by Industry Canada, that will stipulate when and how payment will be provided/collected.
What are examples of AIF supported projects?
Some recent Automotive Innovation Fund success stories include:
- Toyota Motor Manufacturing Canada received up to $59 million.
- Linamar Corporation received up to $50.7 million.
- Ford Motor Company of Canada received up to $71.6 million.
Can I commence my project before being accepted for funding?
Such as other government grants and loans, AIF will only provide funding assistance for expenses made after acceptance into the program. Applicants are advised to plan their project spends accordingly and ensure they are applying for AIF prior to incurring any of these costs.
Applicants who have already begun projects may still apply for AIF, however only expenses made after acceptance will be eligible for this automotive funding program.
Free Planning Resource: When to Apply for Canadian Government Funding – These informative slides will help Canadian businesses to plan their projects more efficiently and secure more value from government grants and loans.
Eligibility Factors for Automotive Innovation Fund Business Expansion Funding
Who is eligible to apply for the AIF program?
Canadian automotive sector corporations with projects valued at $75 million over 5 years are eligible to apply for AIF. With few exceptions, AIF will be reserved for Tier 1 manufacturers.
What projects are eligible for AIF funding?
A range of innovative vehicle and powertrain R&D projects are eligible for the Automotive Innovation Fund. This includes (but is not limited to):
- Development of cleaner, energy efficient technologies;
- Leading-edge engineering, design, and prototype development;
- Development of new production methods; and
- Introduction of new transformative production technologies to substantially increase productivity and efficiency (robotics and advanced IT systems).
What expenses will receive funding support from the Government of Ontario?
Expenses directly attributable to the project’s completion will be considered for up to 15% in grants or repayable funding. This includes:
- Building construction;
- Purchase of land
- Specialized equipment; and
Overhead labour costs, such as salaries and wages for employees working directly on the project, will receive up to 65% in Canadian government funding. This amount can be calculated based on the CRA Overhead Proxy Rate or on Public Works and Government Services Canada (PWGSC) rates.
Can I apply to AIF if I’m receiving other government funding for this project?
This will depend on the other type of government funding assistance being received. There are two general rules that govern whether or not applicants can apply for funding (stack funds) from two or more sources:
- Applicants must remain under the maximum government assistance threshold for projects. Applicants have the ability to apply for another government funding program that supplements AIF funding to provide up to 50% of eligible expenses. Since AIF project funding is capped at a maximum of 15%, businesses have the ability to recover up to 35% of additional expenses not provided through this funding program.
- Applicants must access different sources of funding. When stacking funds, it’s extremely important to note that two or more levels of government must be used. Since AIF is a Canadian government (federal) funding program, it must be combined with a provincial or municipal incentive.
Learn How to Stack Funds: The Canadian Small Business Funding Guide – This free resource will help identify the source of small business funding programs, including federal, provincial, and municipal agencies that administer funding programs. Find similar programs (provided by different levels of government) to stack funds and receive the greatest value of project funding.
Applying to AIF and Receiving Funds from Industry Canada
What is the application process?
Businesses interested in applying for AIF will need to complete a two-phase application process before being accepted. This requires two Statements of Work (SOW), articles of incorporation, financial documentation, and a clear justification for why the funds are necessary. Applicants should expect to work with government representatives as they are evaluating applications.
How will applications be evaluated?
Applications will be evaluated based on:
- The project’s relevance to AIF program objectives (see “What are AIF’s program objectives?”)
- Anticipated risk in providing funding to the applicant; and
- Other due diligence measures.
When can I begin the project?
Although projects can start at any time, it’s advised that applicants are accepted into AIF prior to beginning the project spends. Since AIF is a multi-phased application process, it’s advised that companies apply for the program no later than 6 months prior to the anticipated project start date. This will ensure that, if accepted, businesses are able to recover the maximum value possible.
How will I receive AIF Canadian government funding?
Automotive Investment funding will be awarded to companies based on payment and repayment schedules developed by Industry Canada. This is often highly customized based on the company and type of project being completed.
What are my responsibilities after being approved into the program?
After being approved into AIF, successful applicants will need to remain in communication with Industry Canada. This often includes the reporting of key performance indicators (KPIs) and reflecting on how close the project is to completion.
Continue Learning about AIF Canadian Automotive Industry Funding
- How Connected and Autonomous Vehicles are Driving Innovation
- How Electric Vehicles are Gaining Worldwide Popularity
- Automotive Innovation Fund (AIF) Shift from Repayable Funding to Government Grants
- Automotive Technology Encourages Alert Driving Through Smarter Seats
- Automotive Industry on Pace to Secure Over $1.5 Billion in Investments