Demands by Stellantis and LG Energy Solution for battery plant incentives from the Canadian government that match those offered in the United States are a “risky ploy,” given the amount the companies have already invested in Windsor, Ont. and the automaker’s electric vehicle production plans, according to one U.S.-based auto analyst.
“They’re going to need those cells in just a few months when [EV] production starts in Windsor. They’re down that road far enough that it would be difficult for them to account for the loss of this [battery] plant,” said Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions.
Stellantis and LGES halted work on part of the 220-acre (88-hectare) NextStar Energy construction site Monday, saying that the Canadian government has “not delivered” on promises to match production credits offered in the U.S. Inflation Reduction Act (IRA).
The U.S. legislation, which was passed in Washington last summer, several months after the companies announced the $5 billion Windsor plant, offers tax credits of US $35 for each kWh of battery cells produced, plus $10 for each kWh of modules.
Ottawa recently pledged to match the $35 cell credit as part of its successful bid to attract Volkswagen Group to St. Thomas, Ont., but that deal did not extend to modules, according to Innovation, Science and Economic Development Canada (ISED).
Talks with Stellantis about incentive funding have been ongoing since the introduction of the IRA, according to ISED, and the Volkswagen accord has only increased their urgency.
Stellantis said the partial halt to construction in Windsor this week was the first step in its “contingency plans.” It has previously warned Ottawa of other “difficult decisions” if the funding is not put in place.
But Fiorani said the escalation also carries risks for the company.
“They have invested a lot already, so it seems a risky ploy on their side to put this in front of the government and say, ‘Pay us to stay here.’”
Stellantis announced in May 2022 that its nearby Windsor Assembly Plant will be retooled starting later this year. Battery-electric vehicle production is scheduled to begin in 2024, Fiorani said, but will rely on cells and modules from the new battery plant.
“They’re going to have to wrap [the dispute] up soon to make sure they have a supply of batteries when the new vehicles go into production next year.”
Running afoul of Unifor, which represents hourly workers at Stellantis assembly plants in Canada, is another challenge, Fiorani said.
“If you were to pick up stakes and lose all these jobs, that’s not going to bode well when you come to the bargaining table in September. You don't want to make an enemy of the union, especially the year that you’re negotiating a new contract."
Unifor has been urging both parties to come to a quick resolution, while warning a risk to the new battery plant could threaten Stellantis’ wider footprint in Canada.
Fiorani said it’s unlikely the dispute will have a long-term negative impact on the relationship between the company and Ottawa if the two sides come to a resolution.
“When you're that large a company dealing with that large a government, you have to let it pass once this issue is solved and move onto the next one,” he said. “You’re constantly working with these people, these governments, these businesses, and if you hold a grudge, it’s just going to ruin everything going forward for you and for them.”
— With files from Grace Macaluso and Greg Layson
