Volkswagen Secures $13 Billion Contract to Build Electric Vehicle Battery Plant in Canada
Source：reuters
From：Taiwan Trade Center, Toronto
Update Time：2023/06/06
German automaker Volkswagen has won an exclusive contract with Canada to build an electric-vehicle battery plant in southwestern Ontario. The contract, worth up to $13 billion over the next decade, includes an upfront capital investment of $700 million and production subsidies for every battery the company produces and sells. The plant, which will be operated by Volkswagen’s battery company PowerCo, will be the automaker's first manufacturing presence in Canada. It marks a significant step in Canada's push to maintain its position in the clean-tech industrial revolution, as well as to continue being a major car-producing nation.
Canada's edge over the United States in the site selection was the abundance of raw materials, including minerals and metals needed for batteries, as well as an abundance of clean power. The United States had an edge in proximity to vehicle manufacturing, as Canada has no Volkswagen plant. Industry Minister François-Philippe Champagne made a formal pitch to Volkswagen in Germany last fall, and in March, the company announced it had chosen the city of St. Thomas, Ont., to build its first overseas gigafactory. PowerCo chairman Thomas Schmall said that the company looked at 200 different parameters in making its site selection.
The Canadian government's investments, including in the Volkswagen plant, are critical to maintaining Canada's position in the clean-tech industrial revolution. Finance Minister Chrystia Freeland said that the investment in the Volkswagen plant is vital to keeping Canada as a major car-producing nation. Canada's investment will be repaid in five years through job creation and spill-over effects from the new plant. Only the $700 million is an upfront cost, and nothing else gets spent until the plant is built and making batteries.
The subsidies for the production of electric-vehicle batteries will not be in the form of tax credits but are designed to match what Volkswagen could have received had it chosen a site in the United States to build its new plant. The U.S. Inflation Reduction Act, which passed last year, set a new high bar for government investments in clean-tech companies, including electric-vehicle makers and the battery supply chain needed to power them. The subsidies will only remain in place as long as that law is in effect. If the U.S. subsidies on offer decline or are eliminated, Canada’s contract with Volkswagen will be amended to reflect that.
The PowerCo plant will cost $7 billion to construct, and it is the third gigafactory the company is building, following the first in Salzgitter, Germany, and a second in Valencia, Spain. PowerCo was just announced last year as a Volkswagen offshoot to make a unified type of battery that can be used in electric vehicles across Volkswagen’s brands. The batteries made in St. Thomas will be shipped to Volkswagen’s plant in Chattanooga, Tenn., which began making Volkswagen’s ID.4 crossover electric SUV last year. Some of them may eventually also go to a new plant being built in Colombia, S.C., where Volkswagen’s subsidiary Scout Motors plans to start making electric trucks and SUVs in 2026.
Opposition parties in Canada were quick to demand an explanation of what Canada was paying for the Volkswagen plant when it was first confirmed in March. However, parties were silent on the matter during the question period Thursday and did not ask a single question about the deal. NDP auto critic Brian Masse issued a written statement via email, demanding that the government show how the deal will benefit workers, as well as the company. Masse said that Canada needs to be a leader in producing electric vehicles with good-paying union jobs as a requirement for any contracts to fight the climate crisis and secure Canada’s economic future.
Volkswagen's exclusive contract with Canada to build an electric-vehicle battery plant is a significant development for Canada's position in the clean-tech industrial revolution and its auto sector.
Source: https://www.reuters.com/business/autos-transportation/volkswagen-canada-battery-plant-targets-90-gwh-capacity-its-biggest-yet-2023-04-21/