Volkswagen and the Canadian government announced on Friday a joint investment of over C$20 billion ($14.8 billion) in a battery gigafactory in St. Thomas, Ontario. This marks the biggest-ever investment in Canada’s electric-vehicle supply chain. Europe’s largest automaker, Volkswagen, is committing up to C$7 billion to build the plant.
Canada’s federal government will provide up to C$13.2 billion in manufacturing tax credits through 2032, matching the production subsidies offered by the U.S Inflation Reduction Act (IRA) of $35 per kWh. The Canadian government will also provide a C$700 million grant. Ontario’s provincial government will provide C$500 million in direct investment to the German carmaker and hundreds of millions of dollars to upgrade local infrastructure.
“This investment will be worth over C$200 billion to the Canadian economy over the coming decades,” Prime Minister Justin Trudeau said. He also added that it would be an “anchor for Canada’s electric vehicle supply chain.”
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.
“This secures the future of St. Thomas,” said the city’s mayor, Joe Preston. “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 attract companies involved in all levels of the EV supply chain to safeguard the manufacturing heartland in Ontario.
Volkswagen’s battery unit, PowerCo SE, CEO Frank Blome, stated that the factory “will have six production blocks with the potential of up to 90 gigawatt hours… enough for a million electric vehicles a year.” He also added that “The dimensions are enormous … The cell factory will span an area of 210 football fields.”
Volkswagen’s decision to build a battery plant in Canada is part of its strategy to benefit from a U.S. climate law that requires 50% of EV battery components to be made in North America for vehicles to qualify for generous U.S consumer tax credits. The company joins a Stellantis and LG Energy Solutions joint venture in building a battery gigafactory in Canada.
“This is a great day for the auto sector in Canada and the fight against climate change,” said Trudeau. “This investment will help ensure that Canada remains a global leader in the transition to a clean economy while creating good-paying jobs for Canadians.”
