Wolfsburg, March 14 (BNA): Volkswagen has chosen Canada to build its first battery cell plant outside Europe, giving its vehicles access to Canadian and US support as it localizes the electric vehicle production chain in the region.
Volkswagen AG confirmed in December that it was looking for sites for a Canadian factory, six months after signing a memorandum of understanding with the country to secure access to key battery raw materials, Reuters reported.
Canada, home to a large mining sector for metals including lithium, nickel and cobalt, is trying to attract companies involved at all levels of the electric vehicle supply chain with its multi-billion dollar green technology fund as the world strives to cut carbon emissions.
Volkswagen joins a joint venture between Stellantis NV and LG Energy Solutions in building out the EV battery supply chain in Canada, as European automakers seek to take advantage of a US climate law that requires 50% of EV battery components to be made in North America in order for vehicles to qualify for credits. Tax up to $7,500.
Canada’s federal innovation minister, François-Philippe Champagne, called the Volkswagen battery plant a “home run for Canada” and said it was “the largest single investment in the automotive sector in Canadian history,” without elaborating.
The plant will be located in St. Thomas, about 195 kilometers (120 miles) northeast of Detroit, which is across the Detroit River opposite Windsor, Ontario. The two cities are connected by the Ambassador Bridge.
“I think all of the major manufacturers understand that if you need to green the supply chain, Canada is the place to do it,” Champagne said.
Chemicals giant BASF also secured land in Canada a year ago for a battery materials facility planned to better serve the electric vehicle markets in the United States and Mexico.
It also reflects efforts by European companies to expand their presence in the United States, eager to take advantage of President Joe Biden’s generous Inflation Reduction Act (IRA) last year.
Vehicles with batteries from the planned Volkswagen site will also be eligible for Irish Republican Army (IRA) subsidies, which are for vehicles with a battery made with the least percentage of critical metals mined or processed in the United States or in a country with a trade agreement. American Free, or North American Recycled.
Volkswagen’s announcement did not specify the size of the investment or the capacity of the new plant, but board member Thomas Schmoll said in August that the company was targeting 20 gigawatt-hours of capacity at its first North American site.
Volkswagen has long said it is working to create regional supply chains in Europe, North America and China to produce electric vehicles in light of rising transportation and logistics costs, supply chain risks and geopolitical tensions.
The company said last week that the IRA had given Volkswagen an incentive to prioritize decisions on North American investments, adding that plans for battery plants in Europe remained but that it would wait to see if there would be better incentives.