Stellantis, LG battery joint venture defends billions in tax breaks

Feb 05, 2024

NextStar Energy's CEO is downplaying concern that $15 billion in incentives from the federal and Ontario governments for a new electric-vehicle (EV) battery plant is too steep a price for taxpayers.

Danies Lee's reassurance comes as experts question the economic value of using multi-billion subsidies to lure foreign car companies to Canadian soil.

NextStar is a joint venture between U.S. automaker Stellantis (STLA) and South Korea's LG Energy Solutions. With an expected production capacity of more than 49 gigawatt-hours, the company estimates its new plant under construction in Windsor, Ont. will be able to produce enough batteries to power 500,000 EVs annually.

On Monday, NextStar announced it has started recruiting 130 new employees to launch the $5 billion plant due to open next year. For Lee, the job openings are an important milestone after a recent showdown over government funding threatened the project. NextStar aims to hire as many as 2,500 workers as the Windsor facility ramps up to full production.

"This is a huge opportunity," Lee told Yahoo Finance Canada in an interview on Monday.

However, as Ontario’s government looks to establish the province as a hub for electric-vehicle manufacturing, experts have raised concerns about the effectiveness of handing tax credits to foreign companies. Volkswagen is also building a massive EV battery factory in Ontario, backed by up to $13.2 billion in manufacturing tax credits from Ottawa, and $500 million in direct investment from the province.

“Frankly, I don’t know where the doubts or concerns are coming from,” Lee said

Greig Mordue, an associate professor of automotive engineering at McMaster University, is critical of Canadian governments attempting to mimic the nearly US$370 billion in clean energy funding under the U.S. Inflation Reduction Act. He’s also raised concerns about Canada losing out on valuable research and development work flowing back to head offices in the United States, Germany, and South Korea.

“The benefit will go to the people in Canada,” Lee insists. “This initial offering of jobs for the NextStar Energy launch team is just one example.”

NextStar says 100 of the 130 new hires will be a core team of highly skilled production engineers and technicians who will begin training at large-scale lithium-ion battery plants in Poland, China and South Korea in October. The remainder will be staff to “launch and grow” the business.

Beyond the jobs at the new plant, Lee predicts the Windsor region will benefit from a number of spin-off jobs at NextStar's suppliers.

"There are three or four direct suppliers to NextStar Energy who have committed to invest in the region," he said. "Suppliers in our supply chains are going to come and invest not only in the Windsor area, but also in Ontario, and Canada."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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