Trump threatens Canadian funding for battery factories | The battery industry

The election of Donald Trump in the United States could cause Northvolt in Quebec to lose billions of dollars, as well as the battery factory projects of Volkswagen and Stellantis-LG (NextStar) in Ontario. The Canadian government must indeed withdraw its production subsidies if the United States does the same. And this is precisely the intention of the American president-elect.

This is the mirror principle. The government reflects what is done on the other side of the border. If Washington increases its public aid to the battery industry as part of theInflation Reduction Act (IRA), Ottawa increases them. If Washington reduces them, Ottawa reduces them. If Washington cuts them, Ottawa cuts them.

However, Donald Trump has pledged to dismantle the IRA if he is elected. And in the IRA, there isAdvanced Manufacturing Production Credit which inspired the Canadian government to subsidize the three battery factory projects on its territory.

Innovation, Science and Economic Development Canada confirms that its funding agreements were conditional on maintaining the ERI.

If the American government were to modify or cancel theAdvanced Manufacturing Production CreditCanada would follow suit in a consistent manner.

Promises of subsidies for factory construction are not at risk of disappearing. Those that are under threat are subsidies for battery production.

Ottawa has put on the table the equivalent of 35 US dollars per kilowatt hour (kWh) for battery cells produced and sold, and 10 US dollars per kWh for battery modules produced and sold.

For Northvolt, the Swedish company, already in financial difficulties, this represents a risk of seeing $3.1 billion evaporate.

Like the rest of the industry, we closely monitor public policies in the United Stateswrites Northvolt North America spokesperson Emmanuelle Rouillard-Moreau by email.

Tens of billions of dollars at risk in Ontario

It was in Ontario that the federal government bet the biggest, in line with the American IRA.

According to the Parliamentary Budget Officer, $13.2 billion in production subsidies were announced for the Volkswagen battery plant project in St. Thomas and $15 billion for the NextStar project in Windsor.

Ottawa will cover two-thirds of the subsidies, Ontario the third.

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The profitability of projects would no longer be the same

This will certainly affect the expected profitability of these investments.predicts Yan Cimon, professor of strategy at the Faculty of Administrative Sciences at Laval University.

The automotive industry specialist even believes that the possible withdrawal of production subsidies could be done to the detriment of the scale or completion of certain projects. But it’s still too early to conclude it, he adds.

The expert recalls that production subsidies weighed heavily in the decision of these companies to set up in Canada. Otherwise, they would probably have chosen the United States.

This changes the grid under which we examined this type of strategic investment.

Yan Cimon, however, does not fear a move from projects whose construction has already started.

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Northvolt also confirms that the choice of Canada remains interesting for it.

With its access to the North American market, its green hydroelectricity and its skilled workforce, Quebec remains the ideal location for Northvolt and we remain fully committed to advancing our project heresaid his spokesperson.

Yan Cimon believes that the next Trump administration will also have incentives that it will want to put forward to stimulate investments in the United States, which will create an environment that will put pressure on Canada to try to do the same or, in any case, to have the tools, too, to try to attract investments.

Not easy for Trump to stop the IRA

In any case, it will not be an easy task for Donald Trump to carry out his threat. Not only would withdrawing the IRA move the United States further from its greenhouse gas emissions reduction targets, it could also hurt the economy.

The IRA has already pumped $361 billion into new investments, including in Republican states.

According to a recent analysis by the nonpartisan think tank Energy Innovation Policy & Technologythe IRA could create more than a million net new jobs in 2030 and increase the GDP up to $200 billion in 2030.