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Home Motoring Volkswagen chooses Canada for a battery plant, enticed by US green incentives.

Volkswagen chooses Canada for a battery plant, enticed by US green incentives.

by Dennis Mathu
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Volkswagen will build its first North American battery plant in Canada, as US President Joe Biden’s multibillion-dollar green incentive package under the Inflation Reduction Act accelerates its plans to establish itself in the continent’s electric vehicle sector.

Building a factory in Canada will fall under US rules because the “made in North America” credits cover electric vehicles produced in Canada, the US, and Mexico. Volkswagen expects to receive up to €10 billion in US incentives.

The automaker had informed EU officials that it was putting a planned battery plant in eastern Europe on hold while it waited for the EU to respond to Washington’s $369 billion subsidy package in the Inflation Reduction Act (IRA).

Thomas Schmall, head of VW’s components unit, said during a visit to the carmaker’s factory in Salzgitter, Germany that the “IRA is a big tailwind for us, as it decreases the cost of cells and makes possible a faster ramp-up of EV cars in the US”.

The Canadian plant will be located in St. Thomas, Ontario, and will be operated by VW Group’s PowerCo battery company. Production is expected to begin in 2027.

Batteries manufactured in Canada will supply VW’s $2 billion electric vehicle plant in South Carolina, which was announced two weeks ago.

The Canadian plant will be VW’s third battery plant, following two under construction in Salzgitter, Germany, and Valencia, Spain.

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