Jeep maker Stellantis demands billions to keep battery plant in Canada

Stellantis, the manufacturer of Jeep and various other automobile brands, has issued a warning that it may relocate a planned battery plant from Canada to the United States unless it receives additional state subsidies comparable to those offered to a competitor. This move is the latest tactic employed by major manufacturers in the global competition for green incentives.

Meanwhile, as the world’s fourth largest carmaker, Stellantis is spearheading a campaign in Europe, advocating for the renegotiation of tariff regulations in the Brexit deal between the United Kingdom and the European Union. This effort aims to address the concerns of the company and promote favorable trade conditions between the two entities.

In March of last year, Stellantis and South Korean electronics manufacturer LG revealed their joint plans to construct an electric vehicle “gigafactory” in Windsor, Ontario, with a substantial investment of C$5 billion (£3 billion). This initiative received nearly C$1 billion in subsidies from the federal and provincial governments, making it an attractive proposition for the parties involved.

The anticipated opening of the factory is scheduled for 2024, and the agreement was heralded by the governing Liberal party as a significant achievement in attracting multinational automakers to Canada.

Following the passage of the Inflation Reduction Act in the United States, which pledged substantial subsidies for battery production, the Canadian government responded in April by offering matching incentives to secure a partnership with Volkswagen for a large-scale battery plant in St. Thomas, Ontario. These subsidies, expected to amount to as much as C$13 billion over the next ten years, were instrumental in finalizing the agreement.

Consequently, Stellantis has now requested comparable benefits from the Canadian government. In the absence of such support, the company has issued a warning that it may relocate its production to the United States.

In an effort to salvage the plans, Canada’s Prime Minister Justin Trudeau and Industry Minister François-Philippe Champagne were in the South Korean capital on Wednesday. Champagne has urged Ontario to contribute additional funds to fulfill its “fair share” and ensure the deal’s continuation.

Jeep maker Stellantis demands billions to keep battery plant in Canada

Speaking from Seoul, Champagne emphasized the challenges of attracting such investments and expressed the government’s strong desire for ongoing commitments from the involved parties. He stressed that it is now crucial for Ontario to step up and contribute their fair portion of support.

On the other hand, Ontario, which had previously provided C$500m in subsidies to Stellantis and Volkswagen, contends that the federal government should take the responsibility of contributing additional funds to salvage the project. Ontario’s Premier, Doug Ford, expressed disappointment with the current situation but emphasized the province’s commitment to collaborate with the federal government, highlighting the significance of retaining Stellantis.

Brian Kingston, the leader of the Canadian Vehicle Manufacturers’ Association, acknowledged the gravity of the situation, characterizing it as a “very serious” matter. However, senior government officials are cognizant of the importance of securing the Stellantis investment and have recognized the need for resolution.

“With the intensifying race towards electrification in the industry, competing against the generous subsidies offered by the United States, it becomes increasingly challenging to attract such facilities to Canada,” expressed the industry representative. Recognizing the significant impact on the Canadian economy, there is optimism that an agreement will be reached.

The nation’s largest auto workers union expressed concern over the impasse, describing it as “outrageous.” There are fears that the failure to reach an agreement could result in the loss of thousands of jobs. The urgency to find a resolution remains high due to the potential consequences for the workforce.

“The national president of Unifor, Lana Payne, emphasized the criticality of preserving the jobs, stating, ‘Once those decisions reach an advanced stage, they become extremely challenging to reverse, and we cannot afford to let these jobs slip away.’

Stellantis’ call for a revision of the Brexit deal between the UK and EU comes in response to concerns that the changes in sourcing rules for vehicle components could jeopardize the viability of its plants in Britain.

The company proposed a delay in the expected increase of the proportion of parts sourced from the UK, which is set to rise from 40% to 45% next year. Stellantis suggests pushing back this increase to 2027 to allow for additional time to secure battery supplies from within Europe.”