Automotive analysts say moves by Canadian and U.S. governments behind Stellantis decision

Automotive analysts say the decision by Stellantis to look for alternative solutions for itsfuture electric vehicle battery plant are a result of moves made by the Canadian and U.S. governments.

"They're simply looking to try to get the best government support that they can and this is one way to do it," said independent analyst Tom Venetis.

Ottawa's contribution to Stellantis' Windsor, Ont., plant was announced to be $500 million last March.

David Booth, senior writer at Driving.ca, saysthe number is now "chicken feed" compared to the $13 billion Volkswagen is getting in subsidies from the federal government to build itsnew plant in St. Thomas, Ont.

Venetis and Booth saythe main difference ofthe funding is the Inflation Reduction Act (IRA), which was passed by the Biden administration a few months after the Windsor plant was announced. The legislation states if automakers build new EV battery factories only in the U.S., they receivea subsidy of $45 per kilowatt hour per battery,each year until 2032.

Booth says Volkswagen would have gotten the same amount of money in subsidies through the IRA as they did with Ottawa. He also said Stellantis should have been more patient when negotiating their deal with the Canadian government.

"They must have been kicking themselves in the foot," Booth said of Stellantis, when the IRA was implemented.

"If they'd waited two or three months, they could [have] either built the plant in the U.S. and gotten that money or blackmailed the Canadian government into giving them the same money."

Complicating matters in the U.S. is next year's presidential election.

Venetis says prominent Republican candidates hoping to be the party's nominee all came out against the IRA.

"However, many of those same Republicans are also very interested in securing more jobs for Americans and they have also been very vocal about bringing more manufacturing back onto American soil, which over the past few decades has been offshored," said Venetis.

Booth says while some parts of the IRA may get rescinded if the Republicans take control of the U.S. Congress, the parts concerning EV battery production are likely not in danger.

"Most of the plants that have benefited from these subsidies are in their constituencies," Boothsaid.

"It'd be really tough for them to rescind [the legislation], especially since for some reason the Republicans, at least under [Donald] Trump, have turned to protectionist policies, even more so than the Democrats."

Stellantis implementing 'contingency plans'

Stellantis announced on Friday eveningit would "immediately begin implementing their contingency plans", according to a statement from LouAnn Gosselin, the company's head of communications for Canada.

Gosselin did not elaborate on theplans.

Lana Payne, national president of Unifor, says she is concerned about Stellantis' move.

"This is as serious as it gets right now," she said on Saturday. "We have tens of thousands of working people, communities, depending on the commitments that have been made by all these parties."

Unifor Local 444 President Dave Cassidy did not respond to requests for an interview.

On the other hand, Flavio Volpe, president of the Canadian Automotive Parts Manufacturers Association, says he's not concerned.

"There was going to be a renegotiation," he said. "We're just seeing it happen in public right now. It doesn't make sense for any of the parties to step away from this deal and, ultimately, we're not that far apart."

Venetis and Booth were hesitant to support Volpe's view that Stellantis is employing a negotiating tactic to cut a better deal with the Canadian government, but another analyst did agree with him.

"What automaker or what business person or what team of executives isn't going to try and maximize the return from the federal government if nothing is really set in stone yet?" said Greg Layson, digital and mobile editor at Automotive News Canada.

Layson sayswith their investment in the Volkswagen plant, the Canadian government has now set a precedent and everyone will want more money from them, not just automakers.

"We saw it during the PSAC strike," he said. "I read tweets and headlines that said, 'Cough up the money, Trudeau! You did for Volkswagen!'"

Layson says if Stellantis does decide to build the battery plant elsewhere, it could cause a local domino effect.

"I believe Magna is going to produce housing units for those batteries, so that's another factory that may go up in smoke," he said.

"You have product slated for the Windsor Assembly Plant that is supposed to use the batteries from this new battery plant. So if that new battery plant isn't in Windsor, does the new product that was supposed to run off those batteries come to Windsor?"

Layson saysalthoughpotential EVs may not come to Windsor if the plant is not built, he does believe the Windsor Assembly Plant's future is safe and will continue to operate as usual.

Venetis says there is also the potential for Ontario and Canada to suffer from any future investment in the auto sector should the Stellantis deal fall through.

"It sends a message out that maybe we're not as committed to the automotive sector or certainly to that part of the sector, which is the electrification side of it, as others are," said Venetis.

"In [the] future, when we may talk about how we wish to attract this kind of business to Ontario, it may be much harder because [people] will say, 'You had a chance to do that with Stellantis and you didn't come through. They took their business elsewhere.'"

Venetis says manufacturers could think twice about deciding to invest and set up shop in Ontario.