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The entrance to the Stellantis factory in Hordain, France, July 7, 2021.PASCAL ROSSIGNOL/Reuters

While its standoff with the Canadian government continues, automaker Stellantis NV STLA-N has opened another front in Britain, where the company is warning that it may have to close plants unless the government renegotiates a Brexit trade arrangement.

In a submission to a British parliamentary committee, the company also said that electric vehicle battery production in Europe could be lured away to Canada, the United States or Asia because of government subsidies available in those places. Stellantis specifically cited the U.S. Inflation Reduction Act, which offers many billions of dollars in financial incentives to producers of clean-energy technologies, including electric vehicle batteries. The company said the American legislation and similar programs elsewhere are causing “emerging distortions to the transatlantic level playing field.”

“We see investments in the EU and U.K. either stalled or refocused elsewhere,” it said in its submission.

Ottawa at stalemate over Stellantis battery factory, calls on Ontario to pay its ‘fair share’

Stellantis and LG Energy Solution are at loggerheads with Ottawa over the two companies’ plans to build a $5-billion electric vehicle battery plant in Windsor, Ont. The project initially received $1-billion in federal and provincial support, but that was before the implementation of the IRA – and before Ottawa, in an attempt to match the U.S. subsidies, committed as much as $13-billion to a second battery plant, which is being built in Ontario by Volkswagen VWAGY.

Earlier this week, Stellantis and LG announced that they were halting construction on the Windsor plant. On Wednesday, the companies continued to call on Ottawa to “keep its commitments.” Although the companies have not specified publicly what those commitments were, a letter they sent to Prime Minister Justin Trudeau last month, later obtained by The Globe and Mail, said the federal government had promised them that it would match the U.S. subsidies.

For the past several days, Ottawa has pushed for Ontario to pay its “fair share” of the cost of keeping the Stellantis-LG project in Windsor, without going into specifics on what that amount would be.

Ontario Premier Doug Ford said Wednesday he is disappointed with the way Mr. Trudeau’s government has handled the issue, adding that he doesn’t know what a “fair share” would entail. Mr. Ford said the two levels of government are currently in talks, and are looking for a resolution.

“It’s disappointing it’s come to this right now. But we believe in working with the federal government. We can’t afford to lose Stellantis,” Mr. Ford said.

Federal Finance Minister Chrystia Freeland added further pressure on the province to fund the Stellantis plant, telling reporters on Wednesday that the billions in federal funding flowing to Ontario is raising regional fairness concerns from other premiers. She said she remains optimistic a deal will be reached, but that the Ford government and Stellantis must do more.

“What we are saying though, and we are very clear on this, is the province has to contribute its fair share,” she said. “That is entirely reasonable. And that is what I am hearing. That’s what I heard from MPs at [the] finance committee, MPs from other provinces. That is what I am hearing from premiers of other provinces. And that is entirely reasonable.”

Mr. Trudeau and Innovation Minister François-Philippe Champagne were in South Korea on Wednesday, where Mr. Champagne said he would attempt to meet with LG leadership. The company is based in Seoul.

In Britain, Stellantis has taken aim at a trade deal the government signed with the European Union in 2020 as part of the country’s departure from the EU.

That pact, known as the Trade and Co-operation Agreement, includes rules of origin requirements, which specify that 40 per cent of parts in electric vehicles must be sourced in Britain or the EU to qualify for tariff-free treatment. That figure is set to rise to 45 per cent in 2024, and to 55 per cent in 2027. If automakers fail to meet the threshold, their vehicles will face a 10-per-cent tariff when they are shipped between Britain and the EU.

Stellantis – whose brands include Vauxhall, Peugeot, Citroën and Fiat – has two plants in Britain and employs roughly 5,000 workers. The company is redeveloping its plant at Ellesmere Port, south of Liverpool, into its British hub for electric cars and vans.

In its submission to the British House of Commons business and trade committee, which is examining Britain’s supply of electric vehicle batteries, Stellantis said that when it announced the redevelopment project in 2021 it expected to meet the rules-of-origin requirements.

But the company said that because of “various external headwinds,” including the soaring price of raw materials, it can no longer meet the threshold. As a result, vehicles shipped from Ellesmere Port to the EU will be hit with the 10-per-cent tariff, making them uncompetitive with imports from Japan and South Korea, the company argued.

“If the cost of [electric vehicle] manufacturing in the U.K. becomes uncompetitive and unsustainable, operations will close,” the company said. “The closing of U.K. manufacturing will see significant job losses, the loss of a skilled work force and a negative impact to the U.K. economy.”

The company has called on the British government to renegotiate the EU trade deal and keep the current rules of origin in place until 2027.

On Wednesday, Nus Ghani, a junior minister in the British Department for Business and Trade, told the country’s House of Commons that Kemi Badenoch, the Business and Trade Secretary, had raised the rules of origin issue with EU officials and “had productive conversations.”

“We are aware of the concerns from the U.K. car makers about the challenges, and of course we continue to make strong representation,” Ms. Ghani said.

The Society of Motor Manufacturers and Traders, which represents the British auto industry, has raised similar concerns about the trade agreement.

“The rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases which discourage consumers from buying the very vehicles needed to achieve climate change goals,” said the SMMT’s chief executive, Mike Hawes.

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