Stellantis and LG announce $5 billion EV battery plant in Ontario

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European automaker Stellantis N.V. and South Korean battery manufacturer LG Energy Solution, with financial support from various levels of Canadian government, on Wednesday morning announced a joint venture that plans to invest $5 billion to build an electric vehicle battery cell manufacturing plant in Windsor, Ont.

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That would make it among the largest, if not the largest, investment in the Canadian auto sector in the country’s history.

The battery plant would eventually create more than 2,500 jobs within a key segment of the auto supply chain: the battery is expected to supplant the internal combustion engine as the single most valuable component in a vehicle over the next two decades.

The Stellantis and LG joint venture would also be the first battery cell manufacturing facility in the country. The plant aims to have an annual production capacity in excess of 45 gigawatt hours, and construction is scheduled to start this year with first production in early 2024.

“The reason this is significant is it is the first major battery announcement for Ontario,” said Dave Adams, chief executive of the Global Automakers of Canada, a lobby group that represents Honda Motor Company Ltd. and BMW AG, among others. “The recognition by most now is if you’re going to be producing EVs (electric vehicles), you want to have the battery manufacturing facilities close to the assembly just because of the weight of the batteries.”

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Adams predicted the battery plant would encourage future investment in southern Ontario’s auto sector. The high cost of transporting heavy batteries means auto parts suppliers and other companies in the supply chain want to be close to battery manufacturing facilities, he said.

On Tuesday, the federal government announced a press conference scheduled for Wednesday morning in Windsor “about the future of the automotive sector, Canadian jobs and the zero-emission economy of tomorrow.”

If you’re going to be producing EVs, you want to have the battery manufacturing facilities close to the assembly just because of the weight of the batteries

Dave Adams

A who’s who of dignitaries have lined up to speak at the press conference, including Federal Industry Minister François-Philippe Champagne, Ontario’s Premier Doug Ford and its Minister of Economic Development Vic Fedeli, and Mayor of Windsor Drew Dilkens, among others.

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In the past, the federal government has come together with provincial government to fund as much as 30 to 50 per cent of electric vehicle-related facilities. The Stellantis-LG plant is expected to receive significant funding and incentives from federal, provincial and local governments.

Reuters previously reported LG Energy Solution planned to invest US$1.5 billion in the plant and would own 51 per cent of the joint venture; Stellantis would own 49 per cent.

Previously in 2020, Stellantis committed to investing between $1.35 billion and $1.5 billion in a facility in the Windsor area, though a battery plant wasn’t specified.

“We’re confident that because of the ‘Open for Business’ climate we’ve created in Ontario, we will be successful in landing an EV battery facility, as well as more EV vehicle investments in the coming days and weeks,” a spokeswoman for Fedeli said in an emailed statement.

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Paired with announcements last week that General Motors Co. and BASF SE plan to build battery cathode manufacturing plants in Quebec, it appears the contours of a Canadian electric vehicle manufacturing industry is forming.

In recent months, four out of the five automakers operating in Canada — including Ford Motor Company, General Motors, Toyota Motor Corp., and Honda, had disclosed plans to transition to electric vehicle manufacturing that involved building major plants in the U.S.

But thus far, such investments had eluded Canada.

Auto plants in Windsor — separated only by a river from Detroit, the historical locus of U.S. auto manufacturing — have long been integrated with the U.S.

Still, there has been some investment into plants in Canada that could support an electric vehicle industry. In 2020, Ontario and the federal government each agreed to contribute $295 million, or $590 million in total support, so Ford Motor Company would commit to a $1.8-billion retrofit of an assembly plant for electric cars in Oakville, Ont..

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In 2021, GM said it would invest $1 billion in facilities in Ingersoll, Ont., to produce its BrightDrop light duty electric commercial delivery vehicles.

But the province’s industry had not yet attracted a battery manufacturing facility, and global supply chain disruptions caused by the pandemic lead to semi-conductor chip shortages that resulted in shift cancellations and reductions at many auto plants.

There have been smaller investments into the battery ecosystem in Canada, however. In Quebec, the Lion Electric Company announced a $185-million battery assembly plant, supported by $100 million in total contributions from the federal and provincial governments.

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But that facility would only import the battery cells to Canada and perform assembly in Quebec, in part because there was no significant manufacturing of cells taking place in the country.

The announcement that Stellantis — the company formed by the merger of Italy’s Fiat-Chrysler and France’s Peugot — and LG Energy Solution are building a battery plant in Canada caps months of negotiations between government officials and automakers.

During the past few months, industry insiders said Champagne had travelled to Europe and the U.S. to meet with Stellantis executives and had further meetings in Canada.

“We have to be looking to the future,” said Stephen MacKenzie, chief executive of Invest Windsor-Essex, the local economic development corporation. “The auto industry is no exception … and we’re aggressively recruiting battery manufacturers.”

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