Canada agrees up to C$15 billion in incentives for Stellantis-LGES battery plant

By Ismail Shakil

OTTAWA (Reuters) – Canada is willing to dole out up to C$15 billion ($11.3 billion) in production incentives for a Stellantis-LG Energy Solution (LGES) electric vehicle battery plant, trumping a record deal with Volkswagen (ETR:) as Ottawa competes with Washington to woo major clean-tech projects.

The subsidies deal has resulted in construction resuming at the Stellantis-LGES plant after the companies halted the project in May demanding Canada match support available in the United States under the Inflation Reduction Act (IRA).

“Today’s announcement will protect and create thousands of good-paying jobs for workers, including unionized jobs, as we establish an end-to-end electric vehicle supply chain to strengthen the clean economy,” the federal and provincial governments said in a joint statement.

Canada has said that projects like the Stellantis and Volkswagen battery plants would be “anchors” for a pivot to clean tech. The country – home to a large mining sector for minerals including lithium, nickel and cobalt – is trying to lure companies involved in all levels of the EV supply chain as the world seeks to cut carbon emissions.

When the Volkswagen deal was announced, the federal government hailed it as the biggest single investment ever in Canada’s EV supply chain, but the new terms for Stellantis mean it will likely end up being even bigger.

The funding for the battery plant will be provided by Canada’s federal government and the Ontario province in a pact structured similarly to the C$13 billion deal for Volkswagen’s plant.

For the two deals, the federal government will provide two-thirds of the funding while the Ontario government will provide one-third, “as a direct response to incentives offered by the U.S. government,” according to the statement.

Production at the plant in Ontario, across the river from Detroit, where Stellantis has U.S. operations, is set to begin in 2024, creating some 2,500 new jobs and targeting an annual production capacity of over 45 gigawatt hours.

The performance incentives are contingent on, and proportionate to, the production and sale of batteries from each project, and could be canceled or reduced if the incentives offered under the U.S. IRA are reduced or canceled, according to the statement.

($1 = 1.3320 Canadian dollars)