The agreement includes the Canadian government’s commitment ‘to level the playing field’ with the U.S. Inflation Reduction Act, Stellantis says
Construction of a $3.7-billion electric-vehicle battery plant jointly owned by Stellantis and LG Energy Solution has resumed, the automaker said July 5
NextStar Energy, the name of the joint venture in Windsor, Ont., signed a binding agreement with the federal government ensuring the production of battery cells and modules at the facility.
The agreement includes the Canadian government’s commitment “to level the playing field with the U.S. Inflation Reduction Act (IRA),” Stellantis said in a statement.
NextStar lawyers spent the month of June reviewing a financial aid package the federal government gave the company on June 2.
Terms of the offer are unknown. But, Ontario has pledged to pay for up to one third of the entire package. Sources say that could be as much as $3.7 billion.
NextStar earlier this year said it wanted more subsidies to help pay for production of the cells and modules. It wanted terms similar to the U.S. IRA.
Stellantis, the federal government and province of Ontario then spent all of May and early June blaming each other for the standoff.
All levels of government said they wanted to offer something they deemed fair.
The automaker halted some construction May 15.
Stellantis said at the time that the federal government had not met its financial commitment to the project and that the company was implementing “contingency plans.”
Sources at that time told Automotive News Canada those plans were to move the module production to the United States, likely somewhere in Michigan.
MORE SUBSIDIES
NextStar wanted more government support after the United States announced in August 2022 new production tax credits for EV battery makers as part of the IRA. Under terms of that U.S. legislation, battery makers get a tax credit of U.S. $35 per kilowatt hour from now until 2030, when they begin to be phased out. By 2033, they will be eliminated. They also receive a credit worth U.S. $10 per kilowatt hour for the modules under the same timeline.
Stellantis turned up the heat earlier this year and began threatening those contingency plans for the Windsor plant once Volkswagen received up to $9.7 billion in incentives to build its own EV battery plant in St. Thomas, Ont.
“The IRA fundamentally changed the landscape for battery production in North America, making it challenging to produce competitively priced, state-of-the-art batteries in Canada without an equivalent level of support from government,” Stellantis Chief Operating Officer North America Mark Stewart said in a statement emailed to Automotive News Canada. “We are pleased that the Federal government, with the support of the provincial government, came back and met their commitment of leveling the playing field with the IRA. This collective effort enabled the deal to close and we are now resuming construction on the site in Windsor.
“We are very grateful to the governments for their leadership to resolve and bring this deal to fruition, as well as [Unifor President] Lana Payne and her team from Unifor for tirelessly advocating alongside us in our shared commitment to protecting thousands of new jobs as we achieve our electrified future propelled by our Dare Forward 2030 strategic plan.”
Dong-Myung Kim, president and head of the Advanced Automotive Battery Division of LG Energy Solution, called it “a good day not only for our joint venture but also for Canada.”
“We are happy to finally move forward with building the country’s first major battery plant and be a central part of the local battery ecosystem,” Kim said in the same statement. “We are grateful to the federal and provincial governments for working together, and to everyone who worked tirelessly to get this deal done.”
Danies Lee, CEO of NextStar Energy, said the company “can now focus on what we do best.”
“We will soon produce state-of-the-art batteries here in Windsor, and we’re excited to grow and thrive with the community,” he said.
Effective immediately, all construction at the NextStar Energy battery plant in Windsor will resume with production operations planned to launch in 2024. The plant aims to have an annual production capacity in excess of 45 gigawatt hours (GWh) and will create an estimated 2,500 new jobs in Windsor and the surrounding areas.
‘HIGH STAKES’
NextStar Energy is one of eight battery plants that LGES has secured in North America in response to its growing EV market.
Unifor, the union that represents thousands of unionized Stellantis workers across Ontario and plans to do the same at the battery plant called the standoff “high stakes.”
“We knew these commitments had to be kept because the alternative would have been unthinkable for so many workers,” Payne said in a separate statement. “I know what resonated with all parties was the persistent message from our union that thousands upon thousands of workers’ livelihoods were hanging in the balance throughout this dispute.”
The lithium-ion battery plant was first announced in March 2022.
The Stellantis plant is to have an annual production capacity of 45 gigawatt hours, which could make enough batteries for more than 400,000 vehicles a year, with the first production happening as early as 2024.
