Canada nears $7 billion deal to construct another EV battery plant: report

The Canadian and Québec governments are willing to fork billions in aid to Northvolt AB, following a similar agreement with Volkswagen AG (VW) and another tentative deal with Stellantis NV.

Canada nears $7 billion deal to construct another EV battery plant: report
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Swedish manufacturer Northvolt AB is nearing a deal to build Canada's third electric vehicle (EV) battery plant near Montreal for $7 billion.

The Northvolt project — to be built in Saint-Basile-le-Grand, about 25 kilometres east of Montreal — includes a cathode factory, a battery cell assembly line and a recycling facility, according to people who know the negotiations. 

"Northvolt is currently doing a site study in North America, analyzing multiple possible locations in the US and Canada. This process is ongoing, and no final investment decision has been made," wrote Northvolt spokesperson Anders Thor.

The Canadian and Québec governments are reportedly willing to fork billions in aid to the company, following a similar agreement with Volkswagen AG (VW) and another tentative deal with Stellantis NV.

From 2007 to 2019, the feds spent $76.7 billion on business subsidies, according to the Fraser Institute. Among the provinces during the same period, total provincial subsidies were highest in Québec ($79.6 billion) and Ontario ($73.4 billion).

Northvolt aims to build the "world's greenest battery" and chose Québec for its low-cost and clean hydroelectric power.

With a formal announcement expected later this month, negotiations enter the 11th hour between industry and government. However, the promise of other plants comes at a considerable cost to the public purse.

On March 13, Industry Minister François-Philippe Champagne announced a 1,500-acre VW "gigafactory" in St. Thomas, Ontario, for 2027. 

On April 20, Cabinet approved an estimated $13.9 billion subsidy to VW as part of their "funding commitment" with the company. However, a recent PBO report uncovered that that tab now exceeds $16.3 billion, or $5.4 million per job.

"This includes an estimated $12.8 billion in production support," said the report Fiscal Analysis Of Canada's Support For Volkswagen's Electric Vehicle Battery Manufacturing Plant. 

Aaron Wudrick, director of Macdonald-Laurier Institute's domestic policy program, added that Champagne's numbers were 'plucked out of thin air.'

"The thing that makes this Volkswagen plant unique is it's exponentially more money than has ever been spent before, so they've essentially taken an idea that's expensive and has failed repeatedly and supersized it," he said.

The total figure for Canada's largest plant is now quadruple all annual federal aid to corporations of $5.5 billion, reported Blacklock's Reporter.

Parliamentary Budget Officer (PBO) Yves Giroux warned that the plant is over the annual Environment and Climate Change Canada budget.

"The issue I have with the deal is the lack of full transparency," he said.

According to an expert, Stellantis NV could receive more subsidies for a new EV battery plant in Canada than VW extracted.

In May, the Financial Post reported that Stellantis and South Korean partner LG Energy Solution Ltd. would build a factory in Windsor last year but has since halted construction while they negotiate more financial aid from the federal government. 

Both companies want more than $19 billion over the next decade, according to political scientist Bentley Allan — in line with promises outlined in the U.S. Inflation Reduction Act

"That's just what the math says," he claimed. 

Both companies wrote to Prime Minister Justin Trudeau in April, requesting an update on their "special contribution agreement" finalized in February. "The continued delay in executing this agreement is bringing significant risk to the project," they said.

Allan attributes the delay to Trudeau's ongoing tit-for-tat with Ontario's government over how much the latter would contribute to the Windsor project, which is expected to cost $5 billion.

Though both governments remain confident they will reach a deal, Stellantis and LG have warned they may move operations elsewhere.

Wudrick explained there's little evidence of a successful outcome for 'strong-arm governments' who create a cycle of dependency. 

"Eventually, plants like Oshawa either close or shrink [once the money runs out]," he said.

A prospective deal with Northvolt highlights Canada's ambitious plan to have EVs constitute one-fifth of all passenger vehicles sold by 2026. 

On December 21, Parliament proposed a target of 6 million more zero-emission passenger vehicles by the decade's end. Annual vehicle sales before COVID amounted to under 2 million units, with the total stock in Canada at about 23 million.

At the end of 2022, EVs constituted 8.4% of new cars registered in the country. By 2030, Parliament hopes 60% of all vehicular sales will be EVs and, by 2035, every passenger vehicle.

However, the number of Canadians considering an electric car has decreased from 47% to 34%.

Only 22% of people in the Prairies are interested in purchasing an EV. Conversely, nearly half (46%) of British Columbians have considered getting an EV.

According to J.D. Power, 63% expressed concerns with range, while 59% were concerned with price. Another 55% voiced their issues with limited charging stations.

No federal agency to date has confirmed the total costs of the EV mandate, reported Blacklock's Reporter.

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