Ontario to pay 1/3 of incentives for both Stellantis, VW battery plants

Photo: Stellantis.

TORONTO – Ontario has agreed to an auto pact with the federal government, to pay not just one-third of the production incentives in a deal with Stellantis and LG Energy Solution but also for a Volkswagen battery plant.

Stellantis and LG stopped construction in May on a $5-billion electric vehicle battery facility in Windsor, Ont., as they pressed the federal government to match what the United States would offer under its new Inflation Reduction Act.

The automaker announced Wednesday that they had reached a deal with Canada and Ontario, and those two governments say the agreement will see Stellantis receive performance incentives of up to $15 billion over about 10 years.

Deputy Prime Minister Chrystia Freeland said Thursday that large production incentives were necessary for both Volkswagen and Stellantis to help establish Canada’s green economy and ensure the companies were not lured away to the United States by the benefits under the IRA.

“There is a window of opportunity,” she said in Vancouver.

“It’s open now, but it’s going to close. The world’s big companies are making their investment decisions right now and that is why our government has acted…For these two specific investments, we have stepped up to ensure that they happen in Canada. It’s going to have a huge stimulative impact.”

Freeland said she and Premier Doug Ford had many conversations about the Stellantis deal and she is “grateful” for his help to finish it.

Ontario agreed in June, during talks to ensure Stellantis didn’t pull up stakes, to cover one-third of the production incentives, in addition to a $500-million capital commitment.

That could total $5 billion for the province, and Ontario Economic Development Minister Vic Fedeli said it’s more in the form of tax breaks, rather than writing a cheque.

“This third is based on the target of the company’s output, it’s not an up-front cash incentive like the $500 million,” Fedeli said in an interview.

“This is like a performance incentive that wouldn’t happen if they weren’t here. So you only get this tax break if you’re here, putting out batteries.”

The governments said Wednesday that the cost-sharing agreement now also extends to production incentives for a Volkswagen electric vehicle battery facility in St. Thomas, Ont., announced in March.

Volkswagen could receive up to $13 billion in incentives under its deal, which uses the same per-unit formula as the Stellantis and LG agreement.

That same formula and pact would be applied to any future battery plants, which Fedeli said he wasn’t ruling out.

“I think Ontario has everything that a battery manufacturer would want, everything that a component maker would want,” Fedeli said.

“We have everything from the critical minerals right through all the supply chain, right down to the recycling, so we have mega sites in Ontario that are ready for other companies should they want to come…So yes, we want more, we want battery companies, we want components manufacturers, we want every piece of the supply chain to grow.”

The Stellantis agreement also includes a commitment to uphold a production mandate at its plant in Brampton, Ont., and a promise for the company to invest more in Canada and Ontario, including establishing a research and development facility in Windsor.

The performance incentives in both deals are contingent on the production and sale of batteries, and if the IRA in the U.S. is cancelled or the incentives are reduced, the Canadian agreements would do the same.