Auto manufacturer Stellantis halted construction in Canada of a battery plant for electric vehicles, saying Monday that the federal government has not delivered promised incentives.
Stellantis and South Korea-based LG Energy Solution had announced with much fanfare a deal in March 2022 to build the plant in Windsor, Ontario.
The Can$5 billion (US$4 billion) joint venture to supply EV batteries for a significant portion of the North American market was billed by Ottawa as the largest ever investment in the country's auto sector.
"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," the company said in an email to AFP.
"Effective immediately, all construction related to the battery module production on the Windsor site has stopped," it said.
As of Monday a major part of the construction had been completed.
The government said negotiations with Stellantis and LGES were ongoing.
"We are very supportive of this investment, and I am absolutely confident that we're going to get a deal," Deputy Prime Minister Chrystia Freeland told reporters in Ottawa.
"But I also want to point out that the resources of the federal government are not infinite, and we are counting on Ontario (provincial government) to do its fair share and we're counting on Stellantis to be reasonable," she said.
Last year, the two companies said they expected the plant would "serve as a catalyst for the establishment of a strong battery supply chain in the region."
Windsor -- across the border from Detroit in the U.S. state of Michigan -- is the hub for Canada's auto sector.
The new Stellantis-LGES facility had been scheduled to begin operation in 2024 and employ 2,500 workers.
Stellantis, which was formed in 2021 when Fiat-Chrysler and Peugeot merged, is aiming to shift towards battery-electric vehicles as tightening pollution regulations mean internal combustion engines will need to be phased out.
Ottawa committed Can$500 million to help defray construction costs for the new plant.
According to a senior government source not authorized to speak publicly on the matter, the auto maker is now seeking additional funding that is competitive with offers by U.S. President Joe Biden's administration under the ambitious Inflation Reduction Act (IRA).
Canada has been making a big push into batteries for electric vehicles, touting tax incentives, bountiful critical minerals and clean energy to attract auto makers.
It announced last month up to Can$13.2 billion (US$9.8 billion) in subsidies over 10 years for Volkswagen's first overseas battery plant, to be built in St. Thomas, Ontario.
Construction of the Volkswagen plant is set to start next year, while battery production will begin in 2027. It will employ 3,000 workers.
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