Stellantis and LG Energy Solution have resumed construction of a $3.7 billion electric vehicle battery plant in Windsor, Ontario after receiving significant incentive increases from the Canada's federal government and Ontario's provincial government.

The two companies, which formed a joint venture called NextStar Energy for the plant, said on July 5 they signed a binding agreement with the federal government ensuring the production of battery cells and modules at the site.

As part of the new agreement, the Canadian government pledged to "level the playing field with the US Inflation Reduction Act (IRA)," Stellantis said in a statement.

“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. 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."

Mark Stewart, Stellantis Chief Operating Officer North America

Stellantis March 2022 announcement of battery cell plant in Windsor, Ontario

Stellantis March 2022 announcement of battery cell plant in Windsor, Ontario

Back in May, Stellantis and LG Energy Solution stopped construction of their planned EV battery factory in Canada, accusing the government of not keeping its side of the bargain regarding incentives. The battery joint venture wanted terms similar to the U.S. IRA, i.e. more subsidies to help pay for production of the cells and modules.

Stellantis started threatening with "contingency plans" for the Windsor site shortly after Volkswagen Group received up to $9.7 billion in incentives to build its own EV battery plant in St. Thomas, Ontario.

Fortunately, that is all in the past now as the $3.7 billion project is back on track. Canada's federal government offered a financial aid package on June 2, and NextStar lawyers spent the entire month reviewing it.

While the terms of the offer have not been released, it is known that Ontario has pledged to pay for up to one third of the entire package. According to sources cited by Automotive News Canada, that could be as much as $3.7 billion.

Effective immediately, all construction at the NextStar Energy battery plant in Windsor will resume, with production planned to launch in 2024. The plant has a targeted annual output capacity of more than 45 gigawatt-hours (GWh), enough to make batteries for more than 400,000 vehicles a year.

The site will create an estimated 2,500 new jobs in Windsor and the surrounding areas.

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