Canada has reached an agreement with automaker Stellantis NV to increase government financial support for an electric-vehicle battery plant, ending a standoff that began in May when the carmaker halted construction on the project. 

The plant, built in partnership with South Korea’s LG Energy Solution Ltd., will be located in Windsor, Ontario, across the border from Detroit. It’s expected to cost more than $5 billion (US$3.8 billion) to build. 

Unifor, a union that represents autoworkers in Canada, confirmed the deal in a statement.

The project was first announced in March 2022, but the passage of the incentive-rich US Inflation Reduction Act last summer threw a wrench into the process. Canada publicly promised to create a level playing field with the US subsidies, but talks with Stellantis on how to do that dragged on for many months.

A key obstacle was removed recently when Ontario Premier Doug Ford pledged his government would cover a third of the cost of the subsidies. 

Financial terms of the deal haven’t been disclosed, but the total package is expected to be near, or even exceed, a similar agreement for a Volkswagen AG battery plant that may cost the government more than $13 billion over a decade. 

Under the Inflation Reduction Act, the Stellantis plant would qualify for as much as $19 billion in subsidies, according to one expert’s calculation. However, numerous factors — such as the fact the project was announced before the US subsidies existed — should allow Canada to bring that cost down.

At the original announcement, the federal and provincial governments committed about $1 billion to Stellantis to offset capital costs.

If completed, the 45 gigawatt-hour factory would create 2,500 jobs and supply Stellantis’s assembly plants in North America.