VW picks Canada for North American battery cell plant

Volkswagen Group plans to build its first North American battery cell manufacturing plant in Canada as the automaker establishes a regional supply chain to build electric vehicles.

VW and its in-house battery subsidiary PowerCo on Monday announced the investment in the southwestern Ontario city of St. Thomas midway between Toronto and Windsor.

Financial details were not immediately available.

VW said the plant is scheduled to begin producing battery cells in 2027.

Thomas Schmall, VWs technology chief as well as head of the PowerCo board, said the investment will drive the automaker’s battery strategy forward “at full speed.” 

“Our gigafactory in Canada sends a strong message: PowerCo is on track to become a global battery player,” he said in a release.

VW's announcement on Monday did not specify the size of the investment or the capacity of the new plant, but Schmall said in August the company was targeting 20 gigawatt hours of capacity at its first North American site.

The value of the investment and further details about production capacity are expected to be announced at an event in St. Thomas in the coming months.

Despite stiff competition, Canada has for months appeared to be the frontrunner for Volkswagen’s inaugural battery cell site in North America.

In August, the company signed a memorandum of understanding with the Canadian government to cooperate on building a supply chain for battery-electric vehicles. And in December, the automaker singled out Canada as “one logical option” for the plant, though it cautioned other countries were also being considered.

VW has long said it is working towards setting up regional supply chains in Europe, North America and China for EV production in light of high transport and logistic costs, supply chain risks and geopolitical tensions.

It announced last week its Scout brand would build a $2 billion manufacturing plant near Columbia, South Carolina, for trucks and SUVs, with production to start in 2026.

The U.S. Inflation Reduction Act gave the company an incentive to prioritize decisions on North American investments, VW said last week, adding plans for battery plants in Europe were still in place but that it would wait to see whether the IRA spurred Europe to offer better incentives.

Canada, which is home to a large mining sector for minerals including lithium, nickel, and cobalt, is trying to woo companies involved in all levels of the EV supply chain via a multi-billion dollar green technology fund to safeguard the future of its manufacturing heartland in Ontario as the world seeks to cut carbon emissions.

Chemicals giant BASF a year ago also secured land in Canada for a planned battery materials facility to better serve electric vehicle markets in the U.S. and Mexico.

The site for the new plant in St. Thomas is book ended by two railway lines, and has strong highway and utility links, according to the St. Thomas Economic Development, which has spent about two years assembling the greenfield development site.

The 1,500-acre plot of land sits at the northeastern edge of the city, and until March 2 was partially part of the neighboring municipality of Central Elgin. Provincial legislation redrew the borders around the city earlier this month, putting the entire site within St. Thomas.

Vic Fedeli, the province’s minister of economic development, job creation and trade, told Automotive News Canada in early March that putting the megasite under one local government was the final component needed to “lure” the next big investor to the province.

Reuters contributed to this report