Stellantis EV battery plant deal being described as ‘new auto pact’

Stellantis EV battery plant deal being described as ‘new auto pact’

Stellantis EV battery plant deal being described as ‘new auto pact’

Ontario’s fiscal assistance in countering the IRA has been a sticking point for months.

Canadian Finance Minister Chrystia Freeland has been pushing for the province to pay its “fair share” of the tax credits since early this year. Ontario Premier Doug Ford initially dismissed the pleas, saying the IRA was a federal problem that required a federal solution.

The prospect of losing the NextStar Energy plant, however, prompted a change of tack.

In mid-May, Stellantis and LGES halted construction on a portion of the Windsor battery plant, saying the federal government had reneged on its pledge to stay competitive with the United States. Ottawa then began heaping pressure on Ontario to help fund production incentives that would match the IRA. On June 1, Ford trusted, agreeing to pay a one-third share of the tax credits.

Fedeli said Ontario stepping up was the “only way that the federal government could do this deal,” and Ford was not prepared to see the jobs expected in Windsor go elsewhere.

Unifor President Lana Payne said the nearly two months of talks were “very difficult,” despite Stellantis, LGES and the two levels of government all signaling their eagerness to work out a deal.

“We always feel that everyone wants to make it happen, but that doesn’t always mean it happens.”

Unifor, which represents hourly workers at Stellantis plants in Canada, has been pushing for a coordinated governmental approach on the automotive file for years.

The pact that’s emerged from the series of tough talks in Windsor is “very much in line” with what the union has been advocating for, Payne said, and will help draw further battery supply chain spending into the province.

“Everybody in the sector knows that there is more investment out there, and I think that this deal with Stellantis and the renewed commitment around Volkswagen are really signaling to the auto industry and to the world that Canada is more than in the game.”

The new federal-provincial investment formula will also “put to bed” any possible angst among global investors created by the weekslong Stellantis standoff, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.

“It says that anybody looking to invest at that level in Ontario, they know what they’ll be getting from both levels of government, and they’ll be doing it through one discussion.”

But while the new auto pact provides transparency about what investors can expect, unlike the catch-all IRA, which makes the tax breaks available to any battery producer that puts down roots in the United States, Ottawa’s approach to such investments will remain targeted.

“We need to be strategic when picking deals and it is still case-by-case for us,” said Laurie Bouchard, press secretary for Canada’s minister of innovation, science and industry.

With two battery cell plants now secured, Fedeli said the Ontario government continues to work on several other battery cell prospects to add to its EV ecosystem.

He did not directly address whether the province could afford the expense of landing further battery makers.

“It’s not what you can afford more [plants]. Without them, you don’t have that revenue.”

While the cost of the production subsidies is considerable, he said because they take the form of tax breaks, it is a matter of “giving up” tax revenue for the first few years the plants are in operation, as opposed to an expense to the government is paying on the front-end.

But while the provincial government is still working on landing more battery cell plants, and expects its new pact with Ottawa to draw further interest globally, its focus has shifted toward cell plant suppliers.

“Primarily, right now, it’s prospects on the [battery] components because we’ve got two major battery companies located in Ontario that are going to need those components,” Fedeli said.

The province has piqued the interest of producers of cathode and anode materials, as well as manufactures of battery separators, copper foil, electrolyte and lithium hydroxide, and now must close out the deals, he added.

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