Volkswagen chooses Ontario for first battery plant outside Europe

Volkswagen, Europe’s largest automaker, announced Monday its plans to set up an electric vehicle (EV) battery manufacturing plant in St. Thomas, Ont.

The facility will be established by Volkswagen’s battery maker subsidiary PowerCo, the Wolfsburg, Germany-headquartered company said in a news release.

The plant will be PowerCo’s first cell factory in North America and its third worldwide behind facilities in Germany and Spain.

Production is planned to start at the new factory in 2027, though Volkswagen didn’t specify when construction of the plant would begin or its estimated cost.

François-Philippe Champagne, Minister of Innovation, Science and Industry, and Vic Fedeli, Ontario’s Minister of Economic Development, Job Creation and Trade hailed the Volkswagen announcement in a joint statement.

“Today’s news is a major vote of confidence in Canada and Ontario, and in our shared work to position the country and the province as a global leader on the electric vehicle supply chain,” they said.

“This historic investment is a testament to Canada’s strong and growing battery ecosystem and Ontario’s competitive business environment. With a highly skilled workforce, clean energy, an abundance of critical minerals, access to markets, and a flourishing automotive and battery sector, we are an attractive investment destination with everything companies need to grow. In addition, Canada and Ontario offer stability and predictability to their business partners.

“We will continue to build on this success by growing our EV ecosystem and supporting clean technology to create well-paying jobs and spur economic growth and prosperity for future generations,” they added.

PowerCo CEO Frank Blome said the subsidiary is ready to introduce “key strategic assets” such as the unified cell and the standardized cell factory to Canada and the wider North American market.

“We are dedicated to build up regional and therefore robust, transparent and sustainable supply chains,” he said. The two governments didn’t specify what funding they expect to contribute to the St. Thomas project but other similar deals have come with government funding.

The news comes more than six months after the federal government and Volkswagen signed a memorandum of understanding with the Volkswagen Group multinational on collaboration to help cement Canada’s position as a destination for EV manufacturing and investment.

Monday’s news also marks the fourth foreign company in less than a year to announce plans to invest in battery plants or battery-related projects in Ontario.

In September, South Korea’s LG Energy Solution (LGES) said it inked a production agreement for the supply of about US$63 million worth of cobalt sulphate for lithium-ion batteries from 2023 to 2025 from Electra Battery Materials’ (TSXV: ELBM; NASDAQ: ELBM) plant in Cobalt, northern Ontario.

Last July, Belgium-based technology firm Umicore said it plans to invest $1.5 billion to build a manufacturing plant near Kingston for the production of cathode active battery materials and their precursor ingredients. Construction is expected to start this year.

And almost one year ago, on Mar. 23, 2022 LGES and multinational Stellantis N.V., headquartered in Amsterdam, announced plans to invest more than $5 billion in a battery plant in Windsor, which is anticipated to be operational by 2025.