Volkswagen Expands to Canada with First Battery Cell Plant Outside Europe

Volkswagen has announced that it has selected Canada to construct its initial battery cell factory outside of Europe.

Information

In an effort to localize its electric vehicle production chain and leverage Canadian and U.S. subsidies, Volkswagen (VOWG_p.DE) has selected Canada to construct its initial battery cell factory beyond European borders.

The decision comes six months after Volkswagen AG signed a memorandum of understanding with Canada to obtain access to crucial raw materials for batteries.

Canada's Green Fund for EV Supply Chain Companies

Canada, which boasts a substantial mining industry for minerals like lithium, nickel, and cobalt, is aiming to attract firms operating at every stage of the EV supply chain through a multi-billion-dollar green technology fund to reduce carbon emissions worldwide.

Volkswagen Collaborates for Canadian EV Battery Supply Chain

In the wake of a U.S. climate law mandating that 50% of EV battery components be manufactured in North America for cars to be eligible for tax credits of up to $7,500, Volkswagen is collaborating with Stellantis NV (STLAM.MI) and LG Energy Solutions to establish an EV battery supply chain in Canada, following in the footsteps of European automakers seeking to benefit from this incentive.

Champagne hails VW battery plant as major win for Canada

Francois-Philippe Champagne, Canada's federal innovation minister, has hailed Volkswagen's battery plant as a "major win" for Canada, claiming that it is "the biggest single investment in Canada's automotive sector ever," although specifics were not disclosed.

The factory will be situated in St. Thomas, a city located approximately 195 km (120 miles) northeast of Detroit, which is connected to Windsor, Ontario, via the Ambassador Bridge, which spans the Detroit River.

"I think all the big manufacturers understand that if you need to green the supply chain, Canada is the place to do that," said Champagne.

Details remain unknown for VW's battery plant in St. Thomas

While Volkswagen did not disclose the exact scale of its investment or the production capacity of the new plant, board member Thomas Schmall revealed in August that the corporation aimed to achieve a capacity of 20 gigawatt hours at its initial North American site.

European Firms Eager to Tap into US Presence

The decision by Volkswagen to build its first non-European battery cell plant in Canada reflects the efforts of European companies to broaden their presence in the United States. This move is driven in part by the generous Inflation Reduction Act (IRA) launched by President Joe Biden last year, which European firms are eager to tap into.

Volkswagen to Benefit from IRA Subsidies with Canadian Battery Site

Vehicles fitted with batteries from Volkswagen's planned battery cell plant in Canada will be eligible for IRA subsidies. These subsidies are provided to cars that have a battery composed of a minimum percentage of essential minerals that are extracted or processed in the United States or in a country that has a free-trade agreement with the United States, or recycled within North America.