Canada Comes Through
NextStar Energy, a joint venture between LG Energy Solution and American-European automaker Stellantis, has finally agreed with the Canadian Government on a battery subsidy of 15 trillion won. The two companies have been at odds over the battery subsidy issue, going as far as threatening to suspend factory construction in May.
On July 6, NextStar Energy announced, “The Canadian government has promised to provide a subsidy equivalent to the U.S. Inflation Reduction Act. We have finally signed a contract guaranteeing a stable future for battery cell and module production in Ontario.”
Neither the two companies nor NextStar Energy revealed the exact amount of support. However, the Canadian Broadcasting Corporation (CBC) and local media Windsor Star have reported that “they will receive a total of 15 billion Canadian dollars (approximately 15 trillion won) in subsidies in the form of tax deductions.” The Federal Government is expected to bear around 10 trillion won, and the Ontario Provincial Government will cover approximately 5 trillion won.
In March of last year, LG Energy Solution and Stellantis decided to invest 5 billion Canadian dollars (US$3.7 billion) in Windsor, Ontario, Canada to build a battery module factory with an annual production capacity of 45 gigawatt-hours (GWh). This factory would be the first large-scale battery plant in Canada.
However, the Canadian Federal Government experienced internal conflicts and criticism from the public over the sharing of large subsidies, leading to a disagreement with LG Energy Solution and Stellantis. Stellantis publicly stated that the “Canadian government has failed to fulfill its agreement,” and the two companies even threatened to stop construction on May 15.
A breakthrough came during the visit to Korea of Justin Trudeau, the prime minister of Canada. Trudeau, visiting Korea on the invitation of President Yoon Suk-yeol, met with Korean businessmen the day after the construction halt, and also made contact with representatives from LG Energy Solution. This was followed by a series of discussions, including meetings with François-Philippe Champagne, the Canadian minister of industry, which eventually led to a final agreement.
LG Energy Solution anticipates the factory will start operations as planned in the first half of next year, creating around 2,500 new jobs. Deputy Prime Minister Chrystia Freeland stated, “This negotiation will create thousands of jobs in the automotive and related industries across Canada,” and “Canada can further solidify its position as a leader in the global electric vehicle supply chain,” in a press release.
Previously in April, the Canadian government agreed to give tax deduction benefits worth 13 billion Canadian dollars and an additional grant of 700 million Canadian dollars to the battery factory Volkswagen is set to establish in St. Thomas, Ontario by 2032. As a result, there were strong voices within Canada saying, “Considering the fairness with Volkswagen, NextStar Energy should also be supported at the same standard.” The investment amount by Volkswagen is 1.5 times that of LG Energy Solution’s JV, and the production capacity is twice as large.