VW explores construction of battery plant in Ontario

Dusseldorf When it comes to potential locations for battery cell factories at Volkswagen, the group is usually tight-lipped. The search involves funding in the millions, different regions compete with each other and outbid each other. Determining too early is counterproductive.

Now the search of Germany’s largest car manufacturer in one region can at least be narrowed down more clearly. In North America, for example, Volkswagen is apparently considering Ontario as the future home for one of its battery cell plants. This is shown by entries in the Canadian province’s lobby register.

The Ontario Integrity Officer’s website currently lists five entries for the Volkswagen Group from early January 2023 – including a renowned real estate consultancy and two law firms that appear to be representing the group in the matter.

According to the documents, it is about the “investigation of a possible production site” in the Canadian province. Ontario has offered to “support the project through investments and other incentive contributions,” it says. The province wants to be “competitive with other locations under consideration”.

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Under the number PP4740, even CEO Oliver Blume appears in person in the register. Accordingly, the VW boss sought exchange with a total of seven Canadian ministries. Prime Minister Justin Trudeau’s office is also listed in the register entry under “Lobbying Targets”.

Ontario Lobby Register

Five recent goals for Volkswagen.

Volkswagen declined to comment on the register entries. A spokesman only confirms that the group is “currently evaluating suitable locations for a first gigafactory in North America” and examining them based on 100 factors, including, for example, the availability and price of green electricity in a region. So far, however, “no decisions have been made,” the spokesman said.

Volkswagen has been trying to get close to the Canadian government for a long time

In fact, the documents are not yet evidence that Volkswagen will build its first gigafactory in North America in Ontario. However, the group has been looking for proximity to Canada for battery issues for some time. In August 2022, the then CEO Herbert Diess signed a memorandum of understanding with the Trudeau government on battery value creation and raw material security.

In December, Volkswagen then concluded a supplementary agreement with Canada’s Economics Minister, François-Philippe Champagne. At that time, both sides agreed, among other things, to identify possible locations for a cell factory. CEO Blume has since described Canada as a “logical option” for battery cell production.

The USA’s northern neighbor is one of the few countries in the western world that has important battery raw materials such as lithium, nickel or cobalt. In addition, the country is pursuing a consistent sustainability strategy and intends to switch completely to renewable energy in the coming years. Canada is already the third largest producer of hydroelectric power after Brazil and China.

>> Read about this: Billion plan: VW wants to participate in raw material mines in Canada

“Because of its raw material deposits, the expertise in cathode and anode production and last but not least because of its experience in recycling, Canada is definitely one of the shortlisted favorites when choosing a location,” summarizes Christian König, car expert in Atlanta and himself a former manager at VW daughter Porsche.

Canada’s Industry Minister Champagne, VW board members Schmall and Blume (from left) in December 2022

Solidarity for e-mobility.

(Photo: Volkswagen AG)

There is also political pressure from the US government’s “Inflation Reduction Act” under President Joe Biden. The $430 billion investment package signed in August is intended to make US industry climate and future-proof.

However, buyers of electric cars can only enjoy generous tax rebates if the car manufacturers themselves meet strict requirements. The raw materials for batteries must come from a country with which the USA has a free trade agreement. That would be the case in Canada. Also, much of the car and battery has to be manufactured in North America.

VW: ramp up business in North America to become more independent from China

America is also becoming increasingly important for Volkswagen because the group wants to reduce its dependency on China. According to the will of the new US boss Pablo Di Si, VW’s market share should be ten percent by 2030. Large electric SUVs in particular should boost sales. But there is still a long way to go: In September 2022, VW’s market share in America was just 3.5 percent.

>> Read about this: “We urgently need new models” – the US boss of VW wants to make himself more independent of Wolfsburg

Volkswagen’s largest plant in North America is in Chattanooga, in the US state of Tennessee. In the city, which directly borders the state of Georgia, VW produces, among other things, its US version of the ID.4 electric model. There is therefore always speculation about a battery cell plant in the region.

As the Handelsblatt learned from corporate circles, Volkswagen decided last week to produce another electric car in North America. It is therefore a compact SUV, smaller than the ID.4. This is to be produced at the US main plant in Chattanooga or in Puebla, Mexico, from the middle of the decade. A spokesman confirmed corresponding plans on request, but did not want to comment on the details.

Large amounts of raw materials have to be moved for a battery. Short transport routes should therefore have high economic priority for Volkswagen. VW has already announced that it will invest in raw material mines in the country.

If we don’t succeed in reducing the (…) quickly and reliably, investments in energy-intensive production or in new battery cell factories in Germany and the EU will no longer be feasible. VW brand boss Thomas Schäfer

In December, the group’s own battery company PowerCo also concluded an agreement with the Belgian materials technology and recycling group Umicore, which is intended to secure VW cathode material for its future battery cell production. To this end, Umicore plans to set up a battery materials factory in Canada – in Kingston, Ontario.

Cathode materials are among the most important substances in a battery. They determine how efficient, reliable and durable a battery is – and how quickly it can be charged. Umicore and VW also cooperate in Europe.

In this country, VW is building a gigafactory in Salzgitter, and another in Valencia, Spain, and in Eastern Europe are considered set. By 2030, VW wants to build a total of six battery cell plants in Europe. However, corporate circles have recently been hearing that this number is wobbling – mainly because of the sharp rise in energy prices.

In a LinkedIn post, brand boss Thomas Schäfer recently even warned: “If we don’t succeed in lowering energy prices in Germany and Europe quickly and reliably, investments in energy-intensive production or in new battery cell factories in Germany and the EU are practically no longer feasible. “Other regions could benefit from that. North America for example.

Cooperation: Felix Holtermann

More: On the way to the green revolution – the “Battery Belt” is Biden’s boldest future project

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