Volkswagen AG has chosen Canada to build its first battery plant outside Europe in a bid to fast-track an expansion in the key US market.
(Bloomberg) — Volkswagen AG has chosen Canada to build its first battery plant outside Europe in a bid to fast-track an expansion in the key US market.
The site, in St. Thomas, Ontario, is slated to start production in 2027, Europe’s biggest carmaker said Monday. The decision to locate the facility in Canada, amid rich incentives offered in the US as part of the Inflation Reduction Act, will help VW get access to key raw materials and clean energy, according to the company.
“We now have the unique opportunity to grow profitably in North America and play a key role in driving the transition to electric mobility,” VW Chief Financial Officer Arno Antlitz said in a statement. “Volkswagen has the right strategy, products and scale to take a strong position in the North American market.”
VW is seeking to turn the page from being an also-ran in the US with an enlarged footprint and a slew of new models and lessen its dependence on China, where it sell just under 40% of its vehicles. Earlier this month, VW-backed Scout Motors Inc. said it’ll build a new $2 billion plant making Scout-branded SUV in South Carolina.
VW is part of a wave of European companies looking to cash in on President Joe Biden’s climate law, which stipulates that 50% of the battery components of an EV must be made in North America to qualify for EV tax credits of as much as $7,500. The carmaker in August signed an accord with Canada to cooperate on the supply chain for batteries with a focus on material such as lithium, nickel and cobalt.
Earlier this month, Antlitz said the US policy, comprising some $369 billion in incentives, were a tailwind to the company’s plans. The St. Thomas plant marks VW’s third wholly-owned battery plant, in addition to sites in Germany and Spain.
The move follows warnings battery-cell plants would become unfeasible in Germany and Europe if the region didn’t bring energy prices under control. VW also has a range of partners, including Sweden’s Northvolt AB.
Prime Minister Justin Trudeau’s government is under intense pressure to match the enormous US subsidies. Climate think-tank Clean Prosperity recently estimated the US production tax credits on a battery plant create a gap of C$1.89 billion ($1.4 billion) each year, compared to current Canadian grants. Trudeau’s government has promised to level the playing field with the US but a detailed plan is not expected until later this month when the federal budget is published.
Government officials wouldn’t disclose how much money Canada is putting on the table for the VW plant. But Industry Minister Francois-Philippe Champagne called it “a home run” for the northern nation.
“It is the largest single investment in the history of the automotive industry in Canada,” he said, adding there is “an understanding that Canada is the place to be for the critical minerals supply chain.”
VW’s multi-billion battery factory is the latest project confirmation in the EV battery supply chain in Canada. Stellantis NV and LG Energy Solutions announced a joint venture in March 2022 to establish a $4 billion battery plant in Windsor, Ontario.
General Motors Corporation and Posco Chemical Co. Ltd. are setting up a cathode factory in Becancour, Quebec. Ford Motor Co. is also in talks with Korean firms to build a battery component plant in the region, Bloomberg has reported.
–With assistance from Mathieu Dion.
(Updates with quote from Canadian industry minister.)
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