Canada and Ontario Governments to Jointly Support Stellantis, Volkswagen EV Battery Plants

Researched by Industrial Info Resources (Sugar Land, Texas)--The governments of Canada and Ontario last week announced an agreement to jointly support two electric vehicle (EV) battery plants, which includes C$15 billion (US$11.29 billion) in incentives for a Stellantis (NYSE:STLA) (Amsterdam, Netherlands) joint venture in addition to up to C$13 billion (US$9.78 billion) for Volkswagen AG (VW) (Wolfsburg, Germany).

Stellantis' joint venture is with LG Energy Solution Limited (LGES) (Seoul, South Korea).

According to a press release, the federal government will provide two-thirds of funding and Ontario will provide one-third of funding for the two projects.

The support comes as Canada aims to compete with the U.S. Inflation Reduction Act (IRA), which provides a tax credit for U.S. battery-cell production of up to US$35 per kilowatt-hour (kWh) and a US$10-per-kWh credit on battery modules.

However, that doesn't mean the IRA does not benefit Canada at all. It includes, among other provisions, a US$7,500 tax credit for new EVs; starting in 2024, to access the credit, the vehicles must be built in North America.

However, there is a caveat to the two projects' incentives: "These performance incentives are contingent on, and proportionate to, the production and sale of batteries from each project, and should the incentives offered under the U.S. IRA be reduced or cancelled, so would the performance incentives under the agreement."

The performance incentives are on a per-unit production basis of up to US$45 per kWh, including US$35 per kWh for battery cells and US$10 per kWh for battery modules.

The newly announced funding means the Stellantis-LGES joint venture, named NextStar Energy, will restart construction of one of the project recipients: its EV battery-manufacturing plant in Windsor, Ontario. Stellantis halted construction in May, after the automaker and its joint venture partner wrote a letter to Prime Minister Justin Trudeau the month prior, saying the government had failed to meet its prior commitments, including its efforts "to match the production incentives under the U.S. Inflation Reduction Act."

The Windsor project, which sits across the border from Detroit, Michigan, has a total investment value (TIV) of C$4.7 billion (US$3.6 billion) and would feature an EV-battery production capacity of 45 gigawatt-hours per year for Stellantis' plants. Even though there was a seven-week halt in construction, the plant is still expected to begin production in 2024. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here to read a detailed project report.

But the final agreement with Stellantis also includes conditions: Among others, the automaker must make additional investment in Canada and Ontario and uphold "its existing commitments in Canada and Ontario," including a production mandate at its assembly plant in Brampton, Ontario. The automaker is planning a multi-phase, proposed C$1.4 billion (US$1.1 billion) retooling at the plant, to enhance production of its Chrysler 300, Dodge Charger and Dodge Challenger models as well as assemble additional models. The project is expected to kick off in 2024. Subscribers can click here for a project report.

Also in Windsor, near its EV battery plant, Stellantis is upgrading its solely owned automotive assembly plant, to manufacture plug-in hybrid and electric vehicles. The plant is expected to begin production in 2024. Click here to read a project report.

The other project the Canada and Ontario governments agreed on incentives for is Volkswagen's first battery plant in North America: its C$5.3 billion (US$4 billion) battery cell-manufacturing plant in Saint Thomas, Ontario, which would be operated by the automaker's battery company, PowerCO SE. The 2 million-square-foot facility would feature an annual production capacity of 90 gigawatt-hours. Click here to read more information.

Among other EV-related projects in Ontario is Honda Motor Company Limited's (NYSE:HMC) (Tokyo, Japan) upgrade/retooling project at its auto assembly plant in Alliston, Ontario, which is expected to kick off in September. It entails installing supporting equipment and systems to produce future electric vehicles, and last year, the Ontario and Canadian governments each committed C$131.6 million (US$105.3 million) to the C$1.38 billion (US$1.1 billion) project. Subscribers can click here to read the project report.

Subscribers to Industrial Info's GMI Project Database can click here for a full list of detailed reports for projects mentioned in this article, and click here for a full list of related plant profiles.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).