Ontario’s minister of economic development says the province’s offer of up to $5 billion in tax credits to automaker Stellantis is “the price of being in a global business.”
“I think Premier (Doug) Ford looked at the situation and said, ‘you know, we'll step up in order to help the federal government close their deal with Stellantis,” Vic Fedeli told CTV news Toronto from Tokyo, Japan.
“That's what it takes to protect the jobs of the people across Ontario. That's the price of being in a global business.”
Stellantis and LG Energy Solution confirmed Wednesday that a deal had been reached with the governments of Canada and Ontario for the construction of an electric vehicle battery plant in Windsor.
The plant itself, set to cost about $5 billion, was first announced last year, but construction halted in May after the company decided to reopen negotiations for funding due to the U.S. Inflation Reduction Act (IRA).
The original deal saw the provincial and federal governments contribute $500 million each towards the plant. But after the United States passed the IRA, which offers companies production tax credits of up to $35 per kilowatt hour for each battery produced, Stellantis returned to Canadian both governments and asked them to match it.
At the time, the governments had reached a separate deal with Volkswagen by offering up to $13 billion in production subsidies.
The new deal offers Stellantis about $15 billion in tax breaks, which officials say is what they would likely get if the plant was in the United States. The federal government would cover two-thirds of the subsidies, while Ontario would be responsible for the last third—up to $5 billion.
The tax credits, Fedeli stressed, are contingent on batteries being made.
“So if they don't make batteries, they don't get the tax credits,” he said.
Fedeli noted the credits are similar to those the film sector receives for choosing to produce in Ontario. No new money is being spent by the government, however it does mean Ontario may lose out on collecting some tax revenue from Stellantis.
“It's not that you're taking money out of the government's bank account,” Fedeli said. “It’s revenue that you're not charging the company for in their taxes. That's really the better way to look at it.”
The tax credits will be spread out over the next decade, or as long as the IRA is active.
The agreement also ensures Stellantis upholds commitments at its plant in Brampton, Ont. and to invest more in Canada and Ontario.
Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, told CTV News Toronto there is some concern that the governments are investing so heavily in electric vehicles, especially considering a new survey found that two thirds of Canadian drivers were likely to buy in.
“The industry itself has been working with the federal government, the Ministry of Environment ,on sprinkling some reality into their EV targets,” Volpe said. “They suggest we should get to 100 per cent by 2035. We know in the industry that number will probably be around half or less than that.”
“We'll be making and servicing internal combustion engine vehicles for decades from now.”
With files from CTV News Toronto's Queen's Park Bureau Chief Siobhan Morris
