Canada, Volkswagen to invest more than C$20 billion in EV battery gigafactory

By Steve Scherer and Victoria Waldersee

OTTAWA (Reuters) -Canada and Volkswagen (ETR:) on Friday together committed more than C$20 billion ($14.8 billion) for a battery gigafactory in St. Thomas, Ontario, the biggest single investment ever in the country’s electric-vehicle supply chain.

Europe’s largest carmaker is investing up to C$7 billion to build the plant, Volkswagen said in a statement.

Canada’s federal government will provide up to C$13.2 billion in manufacturing tax credits through 2032, matching the $35 per kWh in production subsidies offered by the U.S. Inflation Reduction Act (IRA), the government said in a separate statement said. It will also provide a C$700 million grant.

Ontario’s provincial government also will provide C$500 million in direct investment to the German carmaker, as well as hundreds of millions of dollars to upgrade local infrastructure.

“It’ll be worth over C$200 billion to the Canadian economy over the coming decades,” Prime Minister Justin Trudeau told reporters in St. Thomas, adding that it would be an “anchor for Canada’s electric vehicle supply chain”.

“It will provide millions upon millions of batteries to power Canada’s auto industry … and the economic impact of this project will be equal to the value of government investment in less than five years,” Trudeau said.

The decision to build the plant in Ontario, Canada’s most populous province and a key industrial engine of the country, was announced last month. The battery plant is expected to be Volkswagen’s largest and create up to 3,000 jobs. Groundbreaking is planned for 2024 and production is projected to begin by 2027, the carmaker said.

“This secures the future of St. Thomas,” the city’s mayor, Joe Preston, told Reuters earlier this week. “It gives us the opportunity to be a great place to live, with good, high paying jobs for a long time looking into the future.”

Luring the Volkswagen plant to Canada has been a priority for Industry Minister Francois-Philippe Champagne, who wants to woo companies involved in all levels of the EV supply chain to safeguard the future of the manufacturing heartland in Ontario as the world seeks to cut carbon emissions.

The plant, which will be located about 195 km (120 miles) northeast of Detroit, will become the largest factory in Canada when completed, Trudeau said, and will provide most of the battery capacity that Volkswagen needs in North America.

The factory “will have six production blocks with the potential of up to 90 gigawatt hours… enough for a million electric vehicles a year,” said Frank Blome, CEO of Volkswagen’s battery unit, PowerCo SE. “The dimensions are enormous … The cell factory will span an area of 210 football fields.”

Volkswagen joins a Stellantis NV and LG Energy Solutions joint venture in building a battery gigafactory in Canada, as European carmakers seek to benefit from a U.S. climate law that requires 50% of EV battery components be made in North America for vehicles to qualify for generous U.S consumer tax credits.

($1 = 1.3533 Canadian dollars)