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



Ontario has reached an auto pact with the federal government, agreeing to pay not only one-third of the production incentives for a deal with Stellantis and LG Energy Solution but also for a Volkswagen battery plant. Stellantis and LG had halted construction on a $5-billion electric vehicle battery facility in Windsor, Ontario, in order to negotiate matching incentives from the Canadian government, similar to what the United States was offering under its Inflation Reduction Act (IRA).


The agreement between Stellantis, Canada, and Ontario will provide Stellantis with performance incentives of up to $15 billion over a 10-year period. Deputy Prime Minister Chrystia Freeland emphasized that substantial production incentives were necessary to attract investments from Volkswagen and Stellantis, ensuring the development of Canada's green economy and preventing the companies from choosing the United States due to the benefits offered by the IRA.


Freeland acknowledged the limited timeframe for investment decisions and expressed gratitude to Premier Doug Ford for his assistance in finalizing the Stellantis deal. In June, during negotiations to secure Stellantis' presence in Ontario, the province agreed to cover one-third of the production incentives, along with a $500-million capital commitment. This could amount to $5 billion for Ontario, primarily in the form of tax breaks rather than direct financial contributions.


The cost-sharing agreement now extends to production incentives for Volkswagen's electric vehicle battery facility in St. Thomas, Ontario, with the potential for up to $13 billion in incentives. The same per-unit formula used in the Stellantis and LG agreement applies to Volkswagen's deal. Additionally, the formula and pact will be applicable to any future battery plants, as Ontario aims to attract more battery manufacturers and component makers.


The Stellantis agreement includes commitments to maintain a production mandate at its Brampton plant in Ontario and to make further investments in Canada and Ontario, including establishing a research and development facility in Windsor. The performance incentives in both deals are tied to battery production and sales. If the IRA in the United States is canceled or the incentives are reduced, the Canadian agreements will be adjusted accordingly.


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