In May this year, the Canadian government started talks with various EV manufacturers about the possibility of setting up production facilities up north. In short, the Canadian government wants to play a significant role in building a greener future and has set aside $3 billion over the next eight years to help accelerate exploration for rare earth minerals, extracting them from the earth, and refining them for use in electric vehicles.

At the time, the Canadian government did not reveal who it was talking to, as many manufacturers would have been approached, but Tesla has now disclosed that it will begin lobbying efforts to set up shop in Ontario.

According to Reuters, Tesla plans on erecting an advanced manufacturing facility in the region.

Tesla has been increasing production at a rapid rate. Over the last few years, it has built facilities in Texas, Germany, and China. Thanks to the German factory, Tesla could finally beat Mercedes-Benz at its own game and claim the title of most sales in the premium midsize SUV segment.

The Tesla Model Y is now so successful that Elon Musk has claimed that it will eventually become the world's best-selling car.

But the US government has thrown a spanner in the works with the new Inflation Reduction Act. While the Model Y qualifies for the new extended tax credit, Tesla remains at a disadvantage because it imports batteries from China.

One of the main aims of the act is to force manufacturers to rely less on Chinese-sourced parts, which has massive implications for EV makers. China is by far the leading producer of lithium-ion batteries used in BEVs.

According to Musk, Tesla might announce a new factory later this year, and it will eventually have 10-12 factories.

Setting up shop in Canada makes sense as it potentially grants Tesla access to the billions set aside to speed up battery manufacturing. The bill mentions significant upsides for manufacturers who source materials within the USA or from countries with a free-trade agreement with the States.

The USA currently has free-trade agreements with 20 countries, and Canada is on that list.