The federal government has reached a deal with German automotive giant Volkswagen to provide it with support of up to $13 billion to help it establish an electric vehicle battery factory in St. Thomas, southwestern Ontario.

The contract comes following Ottawa's promises to remain competitive with the United States and efforts to persuade electric vehicle battery manufacturers to set up their factories in Canada. But the cost is surprising.

For his part, the federal Minister of Innovation, Science and Industry, François-Philippe Champagne, said in response to reporters' questions: "This changes the game for our country."

Under the contract, the federal government provides annual production subsidies to the German automaker and sends funds to the large factory in St. Thomas, which will be the size of 391 football fields, making it the largest factory in Canada.

Also, according to the details of the deal, federal support for the factory is expected to range between $8 billion and $13 billion over 10 years.

Meanwhile, the federal government is providing about $700 million in grants for Volkswagen's capital expenses through the Strategic Innovation Fund.

Minister Champagne said all these subsidies will take effect after Volkswagen builds the $7 billion factory and begins production.

Also, sources familiar with the agreement details said that Canadian production support will remain valid as long as the American Inflation Reduction Act is in effect. This law provides billions of dollars in clean energy subsidies in the United States.

If the United States reduces its incentives, Canadian support will also decrease.

Minister Champagne defended the cost, arguing that creating new jobs and supply chain gains from bringing one of the world's largest car manufacturers to Canada would be more valuable to the government than the cost of support.

Justin Trudeau's Liberal government in Ottawa has long expressed a desire for Canada to be a key player in the electric vehicle sector, widely seen as the future of the automotive industry.