Question Period Note: BATTERY PLANT INVESTMENTS

How is the Government of Canada attracting investments as it transforms the automotive sector?

• Canada aims to become a global leader in the development of an end-to-end battery ecosystem.
• By supporting domestic battery development capacity, the Government of Canada is pleased to attract further investments throughout the electric vehicle (EV) and battery supply chain, and securing future EV assembly mandates.
• To date, the government’s efforts have attracted projects worth more than $46 billion in private investment, including most recently Honda.
• These projects will generate significant benefits by supporting tens of thousands of jobs and contributing to GDP growth.

In many countries, major automakers are pivoting to manufacturing electric vehicles (EVs) at historic speeds. Canada has everything it needs to be a global leader in EV battery manufacturing: access to markets; talent; land; green energy; critical minerals, such as nickel, cobalt, graphite, and lithium; and, a focus on innovate, reuse, and recycle. That is why the Government of Canada is investing in the EV battery value chain by attracting strategic anchor investments in battery material processing and cell manufacturing.
Since March 2023, Canada has announced three EV battery manufacturing plants: Volkswagen’s EV battery subsidiary, PowerCo., in St. Thomas, Ontario; Stellantis-LG Energy Solution joint venture, NextStar, in Windsor, Ontario; and, Northvolt in Saint-Basile-le-Grand and McMasterville, Quebec. On April 25, 2024, Honda also announced that it will be investing $15 billion to create a comprehensive electric vehicle supply chain, located in Alliston, Ontario. These private investments will total more than C$46 billion in the Canadian economy only for the building of the facilities.
The passage of the U.S. Inflation Reduction Act (IRA) into force in 2022 and the use of its Advanced Manufacturing Tax Credit to support U.S.-based battery projects posed a challenge to Canada’s ability to compete for North American battery investments. In order for Canada to remain a competitive investment destination, Canada announced that it would provide production support via Special Contribution Agreements with PowerCo., NextStar and Northvolt. The current estimated cost for production support is between C$4.6 billion and C$15 billion for each plant, for a total of C$32.8 billion. Support will depend on how much the plant produces and sells, and will be adjusted if any changes occur to U.S. IRA’s Advanced Manufacturing Production Credit.

• As the North American automotive sector pivots to electric vehicle- (EV) based platforms, battery manufacturing investments will be a critical component of the new automotive supply chain.

• To facilitate the Canadian automotive industry’s transition towards electrification, the government is investing in the industry, ensuring adequate vehicle supply, and supporting the installation of more charging and refuelling infrastructure.
• Canada has announced its commitment to provide production support to three EV battery facilities (PowerCo, NextStar and Northvolt) to mirror the incentives under the U.S. Inflation Reduction Act (IRA) Advanced Manufacturing Production Credit (US$35 per kWh for battery cells and US$10 per kWh for battery modules produced and sold).
• Support provided through Special Contribution Agreements will range between C$4.6 billion and C$15 billion for each plant, for a total of C$32.8 billion, with one third of the cost supported by Ontario and Quebec.
• The total amount of support will depend on the level of production at the plant located in Canada. Support under the Special Contribution Agreements will be adjusted if any changes occur to the Advanced Manufacturing Production Credit in the United States.
• The government has also committed to provide support for capital expenditures through the Strategic Innovation Fund of up to C$500 million for NextStar, C$700 million for PowerCo., and C$1.34 billion for Northvolt.