Salzgitter Europe’s largest carmaker Volkswagen is building its next battery cell plant in North America, more precisely in Canada. The group and VW’s battery subsidiary PowerCo announced this on Monday afternoon.
Accordingly, the plant is to be built in the Canadian province of Ontario in St. Thomas. Start of production is planned for 2027. Volkswagen initially gave no details on the costs and production capacity.
After the meeting, VW announced the construction of a new plant in the US state of South Carolina for the Scout pick-up brand. However, the decision on a battery cell plant in North America was still pending.
After the decision became known, VW boss Oliver Blume said: “With the plants in Canada and the USA, we are accelerating the implementation of our North America strategy”. Chief Technology Officer Thomas Schmall added that PowerCo is “on the way to becoming a global player in the battery business” with the first battery cell factory outside of Europe.
Canada has important raw materials
Canada is one of the few western countries that have important battery raw materials such as lithium, nickel or cobalt. In August and December, VW therefore concluded several agreements to secure important battery raw materials in the country. Since then, CEO Oliver Blume has called Canada “a logical option” when it comes to the battery issue.
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Because the country has a free trade agreement with the USA, investments are also eligible for funding through the IRA climate program. In addition, VW customers in America receive tax breaks when buying a car that is equipped with batteries from the factory. At a presentation in Salzgitter shortly before the news broke, CTO Schmall described the IRA as a “great tailwind” for VW.
The construction of the factory itself is likely to be subsidized by the Canadian province. In January, several Volkswagen entries appeared in Ontario’s lobby register – the Handelsblatt reported. According to the documents, the province had offered “to support the project through investments and other incentive contributions.” CEO Blume appears personally in the register under number PP4740. In the meantime, further VW entries have been added to the database.
The Chattanooga facility is over 1,000 kilometers away.
(Photo: AP)
A clear disadvantage of the Canadian location is the distance to VW’s production facilities in the region. The Chattanooga plant, where VW builds the ID.4, and the Scout plant in South Carolina, where up to 200,000 electric vehicles are to be built in 2026, are more than 1000 kilometers from St. Thomas. However, access to raw materials in Canada is significantly closer.
CTO Schmall emphasized that around 200 factors are taken into account when looking for a new location. “A decision for or against a location is always a mix of these factors.”
Difficult market for Volkswagen
North America has so far been a difficult market for Volkswagen. The sales figures have hardly changed for years. By 2030, VW intends to increase its market share in the region to ten percent, relying primarily on electric models. The carmaker is currently at almost four percent. For its electric strategy, VW expects a battery requirement of between 60 and 100 gigawatt hours (GWh) in North America by 2030.
It is still unclear what consequences the decision will have for VW’s battery plans in Eastern Europe. At a meeting of the “European Battery Alliance” a few days ago, VW is said to have informed government representatives that corresponding plans were being paused for the time being. A person from the group of participants reported this to the Handelsblatt.
Board member Thomas Schmall emphasized in Salzgitter that battery issues will be covered in Europe until 2028. A decision on the location in Eastern Europe is therefore not urgently on the agenda. VW is committed to its goal of providing production capacities of 240 GWh in Europe by 2030. The fact that one is now building in North America does not mean that one is canceling planned capacities elsewhere.
However, Europe’s largest automaker is likely to make its further timing dependent on the response Brussels finds to the US IRA subsidy package.
The European Commission is presenting its Net Zero Industry Act these days. This should significantly ease the subsidy policy in Europe and state a minimum amount for future investments.
According to a draft by the Commission, the EU wants to be able to produce 40 percent of its annual requirement for emission-free technologies by 2030. Wolfsburg should be looking forward to the exact design with excitement.
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