Windsor embraces U.S. changing course on EV incentive that excluded Canadian vehicles

Word that the U.S. is steering away from a tax incentive that excluded Canadian-built electric vehicles is driving optimism in Canada's automotive capital.

"This is great news for Canadian workers, and our industry," said Dave Cassidy, president of Unifor Local 444. The union represents workers at the Stellantis plant in Windsor, Ont., where a hybrid EV, the Chrysler Pacifica minivan, is built.

Cassidy is among many in the auto industry and the Windsor-Essex region who are welcoming news that, under proposed legislation, U.S. consumers could buy Canadian-made vehicles and still avail of rebates.

The original plan, which only included U.S.-made vehicles, was the subject of anxiety and lobbying efforts from the industry on the Canadian side of the border.

The $7,500 US credit for "clean vehicles" — which includes battery-electric, plug-in hybrid and hydrogen fuel cell — is part of $369 billion in new spending on energy- and climate-related projects included in the proposed Inflation Reduction Act announced late Wednesday.

U.S. Sen. Chuck Schumer and Sen. Joe Manchin, both Democrats, reached a deal to include the credit and a series of other tax and investment initiatives aimed at expanding the clean energy sector and spurring adoption of EVs in the bill.

But, as Cassidy pointed out, the bill is not a done deal. Schumer said the U.S. Senate is expected to vote on the proposed legislation next week, and it would next go to the Democratic-controlled House of Representatives.

'Existential threat' to Canadian sector

One of the people involved in efforts to get the U.S. government to reconsider the "Buy American" policy element is Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association.

He said the Canadian auto sector makes about two million vehicles per year ⁠— about 85 per cent of which are destined for the U.S. market.

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The move away from the policy means that billions in recent auto investments, in Canada and specifically in Windsor-Essex, can "hit the runway and start to take flight," he said.

Stellantis has big plans for EV production in Windsor and Brampton, announcing a $3.6-billion plan to retool and modernize the plants.

It's also partnering with LG Energy Solution on a $4.9-billion electric vehicle battery plant expected to be operational by 2024.

"If that U.S. tax credit came as originally proposed, I think it threatened ... the build up and the existence of those investments," Volpe said.

"I think Stellantis and LG took an educated guess, and bet on Windsor."

Change could drive innovation 

Marco Veliz Castro, a second-year Ph.D student in electrical engineering at the University of Windsor, studies electric vehicles and is doing work on power trains.

"I see a lot of future in this industry and so I wanted to specialize in this to further expand Canada's automotive industry," he said.

He said that while the former policy would have undermined Canada's efforts in EV manufacturing, the inclusion of Canadian-produced vehicles in the incentive could help drive innovation.

"We do a lot of work with industry partners and so, these incentives would further drive the EV industry, so [we] would probably likely see further strengthening of our partnerships with our existing partners, and also potentially fostering new opportunities," he said.

It's not just the scrapping of the "Buy American" part of the bill that is generating a positive reaction.

Rakesh Naidu, president and CEO of Windsor-Essex Regional Chamber of Commerce, pointed out that the policy also includes billions in incentives for U.S. companies to retool and set up EV manufacturing facilities.

That could be good news for Windsor-Essex, too.

"We are in a tightly integrated industry where products cross the border several times and Ontario and Canada [are a] very important, very vital part of that supply chain," he said. 

"So as long as [United States-Mexico-Canada Agreement] rules apply and the Canadian industry is offered a fair chance to offer its products and offer its components, we would receive any news of incentives very positively, because what it does is it really propels the industry forward."