Stellantis, which makes Chrysler, Dodge, Jeep, Fiat, and other car brands, is building a new plant for electric-vehicle batteries in Windsor, Ontario. Or at least it was. The CBC reports that Stellantis has stopped construction because the Canadian government has not come through with sufficient financial support.
This is a peculiar outcome if you believe that EVs are what the market wants. If carmakers are pursuing EV production in accordance with market demand, it shouldn’t matter whether the Canadian federal government gives $500 million to subsidize it, as was the deal with Stellantis in Windsor.
Think of something for which there certainly is market demand: restaurants. An entrepreneur looking to build a new restaurant will consider a variety of factors in deciding whether to build: what other restaurants are nearby, the price of land, the available labor pool, the propensity of people living nearby to eat out, etc. He is highly unlikely to consider whether the government will subsidize him, though, because his purpose in opening the restaurant is to sell food.
If the purpose of this battery plant was to make batteries, whether to build it should be a decision Stellantis can make based on its extensive knowledge of the market for cars. But that very clearly is not the purpose, or at least not the only purpose.
Stellantis is chasing down subsidies and is willing to stop ongoing construction to get them. The CBC reports:
Stellantis and NextStar Energy Inc. announced the plant last year and construction has been ongoing for months. The plant is due to open next year. Ottawa’s contribution was to be about $500 million.
But the Inflation Reduction Act, introduced by the U.S. government a few short months after the Windsor plant was announced, promises billions over the next 19 years to incentivize companies to build EV plants on their soil. That competitive edge played a role for the higher investment in Ottawa’s Volkswagen deal.
On Friday, Stellantis said it would move to “contingency plans” should Ottawa not fulfil its negotiation commitments.
The automaker reiterated that Monday.
“As of today, the Canadian government has not delivered on what was agreed to, therefore Stellantis and LG Energy Solution will begin implementing their contingency plans. Effective immediately, all construction related to the battery module production on the Windsor site has stopped.”
Volkswagen is getting $13 billion in subsidies over the next ten years to build in St. Thomas, Ontario, about a two-hour drive from Windsor. And all those U.S. subsidies on offer from the so-called Inflation Reduction Act are looking tasty as well.
The subsidies are opposed by the Canadian Taxpayers Federation. “If you hand out billions of dollars in taxpayer cash to one auto company, of course the others will follow,” said CTF Ontario director Jay Goldberg. “Taxpayers can’t afford to throw money at every company under the sun and Ottawa needs to say no before it wastes billions more.”
An op-ed in the Globe and Mail makes a different critique aside from the fiscal problems:
So far, the investment in Volkswagen’s EV battery plant was more than three times the entire amount dedicated to Canada’s admittedly broad Critical Minerals Strategy, which focuses on sourcing the raw materials for making those batteries. These are critical minerals that Canada has in abundance, but has been slow to build mines to extract and plants to process.
This country has zeroed in on the end product and ultimate goal, but it has neglected the necessary ingredients and the path to get there. It’s a sign of a focus that is further downstream than Canada’s advertised advantages (its mining capabilities), and of a lack of resources dedicated to the deeper challenges holding our country back.
Perhaps the green planners don’t quite have it all together as well as they’d like you to think.