Ottawa’s deal to provide the joint Stellantis and LG Energy Solution battery cell plant in Windsor, Ont. with up to $15 billion in production tax credits is one part of a “new auto pact” between the Canadian and Ontario governments.
The “historic” intergovernmental deal is geared toward countering the lucrative tax breaks included in the U.S. Inflation Reduction Act, and pulling further battery supply chain investments into Ontario, according to Vic Fedeli, the province’s minister of economic development, job creation and trade.
“If we weren’t all-in before, we’re certainly all-in now,” he told Automotive News Canada.
Fedeli referred to the deal as a “new auto pact,” a reference to the 1960s agreement between Canada and the United States that prompted the integration of the North American auto market.
The all-Canadian deal will “mirror” the IRA, with Ottawa picking up two-thirds of battery plant tax breaks, while the province will account for the other one-third, Fedeli added.
The IRA offers production tax credits of US $35 per kWh for battery cells, plus $10 per kWh for battery modules. The incentive program runs through 2032, though the value of the credits drops 25 percentage points annually beginning in 2030.
The same will now apply to all battery plants in Ontario, including the $7 billion cell plant planned for St. Thomas, Ont. by Volkswagen Group affiliate PowerCo.
The pact will leave Ontario on the hook for up to $5 billion in incentives in Windsor and up to $4.4 billion in St. Thomas.
“This auto pact will include both companies, and any future battery companies,” Fedeli said. “It’s the new deal in Ontario.”