It’s no secret that Volkswagen wants to build a lot more EVs in the near future. To do that, it needs more batteries, and its tapping Canada as the site of its brand-new battery factory.
As covered by Reuters, the company’s new battery cell plant in St. Thomas, Ontario will draw raw materials from Canada’s well-established mining sector. The country is a rich source of lithium, cobalt, and nickel, all crucial materials in the manufacture of EV batteries. The new factory, run by VW’s battery company PowerCo, is expected to begin battery production in 2027. The announcement comes shortly after the company announced plans for US-based factories for the upcoming Scout brand.
The development makes good on a Memorandum of Understanding the company signed with the Canadian government six months earlier. It comes as the country pushes to attract major companies to invest in the nation with a C$15 billion green technology fund.
François-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry. Volkswagen
VW isn’t the only company establishing new manufacturing capabilities up north, either. A joint venture by Stellantis and LG Energy Solutions will also set up a battery plant in Canada in coming years. The impetus comes down to recent US legislation which provides tax credits to companies that produce batteries and battery components in North America. The Inflation Reduction Act requires EVs to contain certain minimum proportions of minerals extracted, processed, or recylced in the US or countries with free-trade agreements to qualify for the maximum available credit.
It’s not just tax credits pushing VW to up its commitment to North America, either. The company has previously spoken of how transport costs, supply chain tangles and geopolitical issues have pushed it to establish more regionalized operations for the future.
At this stage, VW has not outlined the exact size of the new plant, though the company’s press release used the term “gigafactory” as popularized by Tesla. Notably, VW board member Thomas Schmall indicated last year that the company was targeting an output of 20 gigawatt-hours of capacity for its first North American battery plant.
Volkswagen’s new factory plans indicate that the incentives put in place by the Biden administration appear to be working as intended. Expect similar moves from other automakers eager to secure access to tax credits to remain competitive in the marketplace.