Thank you, Madam Chair, vice-chairs and members of the committee, for the opportunity to speak with you today on this very important matter.

I'm here on behalf of Toyota Motor Manufacturing Canada, and I have a responsibility for corporate and external affairs for all of Toyota's operations across Canada, including our interactions and engagement with all levels of government.

TMMC has been building vehicles in Canada since 1988. This past summer we built the 10 millionth vehicle in our history. We've been the largest automotive manufacturer in Canada over the last five years, and last year we were responsible for nearly 40% of all vehicle manufacturing in Canada, employing more than 8,500 Canadians across our facilities in Cambridge and Woodstock, Ontario.

Since our inception in Canada, our mission has been to build high-quality vehicles for the North American marketplace. Since 1988, we've enjoyed duty-free access to the U.S. market, first through the Canada-U.S. FTA, then through NAFTA and now through CUSMA.

Our success is dependent on us remaining competitive and having access to both the Canadian and U.S. markets. More than 85% of our production is exported to the United States, and last year we worked alongside the Canadian government to fight the build back better bill in the U.S., which, if passed, would have significantly if not fatally damaged our ability to serve both markets as our industry transitions through increasing levels of electrification.

While the defeat of build back better should rightly be celebrated, the subsequent Inflation Reduction Act, or IRA, is a double-edged sword. On the one hand, consumer tax rebates now include Canadian-produced vehicles on a footing equal to those produced in the United States. This is great news. On the other hand, manufacturing tax credits available to U.S.-based manufacturers of certain clean technologies, including the batteries that go into electrified vehicles, are subject to a refundable tax credit of up to $45 per kilowatt hour of battery output. While the implementing legislation still needs to be finalized to understand the true impact of the bill, as currently written, it could amount to more than $1 billion U.S. annually for companies wishing to invest in gigafactory-scale battery operations in the United States, and would subsequently undercut our ability to attract these investments to Canada, despite already generous incentives on offer from our federal and provincial governments.

While the IRA is being presented in many quarters as key legislation to fight climate change, in reality it is an act of trade protectionism, forcing the onshoring of future powertrain production within the borders of the United States at the expense of all other countries, including Canada. As governments, including our federal government, race to implement legislation that increases or even mandates the sale of zero-emissions vehicles in their respective markets, limiting where those products can come from or defining where their powertrains can originate may support the industrial policy of those respective nations, but it will not make it easier for consumers to get their hands on an electric car, and it certainly won't make it less expensive. Furthermore, the uncertainty related to the IRA is causing companies to pause planning activities until the true impact of the IRA is understood. This delay is shortening our window between when investment decisions need to be made and the point in time when those investments need to be in place to support a positive policy outcome.

Much like build back better, Canada needs to take a similar course of action with respect to the IRA, working with like-minded partners in Europe and Asia with similar concerns, to ensure that companies are not penalized for choosing to build vehicles and batteries in Canada, either to support our domestic market or for export to the United States or elsewhere. Similarly, we need to look at the consumer incentives available on our zero-emissions vehicles to make sure they are in line with those available in the United States. This obviously impacts the uptake of those vehicles, making them affordable to more consumers. However, incentives distort the marketplace and can create unintended consequences like cross-border arbitrage, as well as impacting resale values.

Toyota remains interested in working with the Canadian government to ensure the best outcome for the Canadian automotive industry through this transition to vehicle electrification.

I thank you for your time and would be happy to take questions at the appropriate time.