LG battery plant put on hold as Ontario, Ottawa bicker

LG Energy Solution and Stellantis halted the construction of a $3.7-billion joint electric vehicle (EV) battery plant in Ontario, Canada, with local authorities failing to provide promised incentives.

Stakeholders of LG Energy Solution and Stellantis' new battery joint venture in Ontario, Canada pose for a photo. [LG ENERGY SOLUTION]

LG Energy Solution and Stellantis halted the construction of a $3.7-billion joint electric vehicle (EV) battery plant in Ontario, Canada, with local authorities failing to provide promised incentives.

With Canadian Prime Minister Justin Trudeau on his three-day visit to Korea, which started Tuesday, speculation suggests that the prime minister will try to find a breakthrough in a possible meeting with executives from LG Energy Solution.

The Canadian federal and provincial governments are in a stalemate over financial responsibilities for the pledged support, as the former is urging the Ontario provincial government to “pay its fair share” while the latter calls for bigger commitments from the federal government.

LG Energy Solution, the local battery maker, announced its plan to build a lithium-ion battery factory with a production capacity of 45 gigawatt-hours in Windsor, a southwestern city of Ontario, with Stellantis in March last year. The project was estimated to create 2,500 jobs in the region.

The commercial operation was set to begin in the first half of 2024.

However, the construction was put on hold recently, as the Canadian government did not provide the undisclosed total of incentives that was promised beforehand, according to Stellantis and LG Energy Solution.

“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," Stellantis said in a statement Monday.

"Effective immediately, all construction related to battery module production on the Windsor site has stopped.”

LG Energy Solution and Stellantis have been demanding Canada increase incentives after the U.S. Inflation Reduction Act was enacted in August, according to media reports.

In April, the Canadian government provided tax credits worth $9.6 billion and grants worth $518.5 million to Volkswagen, a German carmaker, to bring its battery plant into the country. LG Energy Solution and Stellantis have reportedly demanded a similar level of support from the government, which the government agreed to offer.

“We said we would level the playing field with the United States, that we would offer them a fair deal quite similar to what we have offered to Volkswagen,” said Canadian Industry Minister Francois-Philippe Champagne during a press conference in Seoul on Tuesday, according to Reuters.

Champagne stressed that the Ontario provincial government should “pay its fair share.”

Canadian Prime Minister Trudeau met with President Yoon Suk Yeol on Wednesday. The minister is expected to attend meetings with executives of LG Energy Solution as well, yet no details on the date or the attendees of the possible meeting were provided.

In the meantime, Trudeau met with SK Chairman Chey Tae-won and Posco Chairman Choi Jeong-woo in separate meetings on Wednesday. The main agenda in the meeting with Chey centered around clean energy and batteries, with the executives of battery maker SK on, construction and energy unit SK ecoplant and chemicals company SKC present.

With Posco Group Chairman Choi Jeong-woo, the prime minister discussed the ongoing construction project of a battery material plant by Posco Future M in the country, as well as the steelmaking business, according to Posco Holdings.

BY SHIN HA-NEE, PARK EUN-JEE [shin.hanee@joongang.co.kr]