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WOLFSBURG (Reuters) -Volkswagen chose Canada to build its first battery cell plant outside Europe, granting its cars access to both Canadian and U.S. subsidies as it works to localise its electric vehicle production chain in the region.
Volkswagen AG (OTC:VWAGY) confirmed in December it was looking for sites for a plant in Canada after it signed a memorandum of understanding with the country six months prior to secure access to key raw materials for batteries.
Canada, which is home to a large mining sector for minerals including lithium, nickel, and cobalt, is trying to woo companies involved in all levels of the EV supply chain via a multi-billion dollar green technology fund to safeguard the future of its manufacturing heartland in Ontario as the world seeks to cut carbon emissions.
Chemicals giant BASF a year ago also secured land in Canada for a planned battery materials facility to better serve electric vehicle markets in the U.S. and Mexico.
It also reflects efforts by European firms to expand their presence in the United States, eager to tap the generous Inflation Reduction Act (IRA) launched last year by U.S. President Joe Biden’s administration.
Cars with batteries from the planned Volkswagen (ETR:VOWG_p) site, too, will qualify for IRA subsidies, allocated to vehicles with a battery made with a minimum proportion of critical minerals extracted or processed in the United States or a country with a U.S. free-trade agreement, or recycled in North America.
The U.S. Treasury Department is due to release details on this guidance in March.
VW’s announcement on Monday did not specify the size of the investment or the capacity of the new plant, but board member Thomas Schmall said in August the company was targeting 20 gigawatt hours of capacity at its first North American site.
Volkswagen has long said it is working towards setting up regional supply chains in Europe, North America and China for EV production in light of high transport and logistic costs, supply chain risks and geopolitical tensions.
It announced last week its Scout brand would build a $2 billion manufacturing plant near Columbia, South Carolina, for trucks and SUVs, with production to start in 2026.
The Inflation Reduction Act gave the company an incentive to prioritise decisions on North American investments, it said last week, adding plans for battery plants in Europe were still in place but that it would wait to see whether the IRA spurred Europe to offer better incentives.
