Volkswagen picks minerals-rich Canada for setting up first battery plant outside Europe

Volkswagen has chosen Canada as the location for its first battery cell plant outside of Europe.The move will enable VW cars to access Canadian and US subsidies as the carmaker seeks to localise its electric vehicle production chain in the region.

The plant will be based in the city of St. Thomas, which is around 195 km northeast of Detroit and is set to become the largest single investment in Canada's auto sector.

What is the underlying idea behind this plan?

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It is common knowledge that climate change is a major concern of this decade and the ones following.

Nations throughout the world recognise the fact that there is a need for combined action specially targeted at reducing carbon emissions to take care of climate concerns.

It is due to this idea that the Canadian government is investing in multi-billion-dollar green technology funds to attract companies involved in all levels of the EV supply chain.

Canada is rich in key raw materials for batteries, including lithium, nickel, and cobalt, and home to a large mining sector.

The country is looking to woo EV companies as the world seeks to cut carbon emissions.

European carmakers are seeking to benefit from the US climate law that requires 50 per cent of EV battery components to be made in North America for vehicles to qualify for tax credits of up to $7,500.

VW’s announcement did not specify the investment size or plant capacity, but the carmaker is targeting 20 gigawatt-hours of capacity at its first North American site.

VW has 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.

The IRA subsidy has given Volkswagen an incentive to prioritise decisions on North American investments.

The automaker stated that while it still has plans for battery plants in Europe, it will hold off to see if there are better incentives.

By taking advantage of the benevolent Inflation Reduction Act, which US President Joseph Biden generously introduced last year, European businesses are attempting to increase their US presence, as evidenced by the news of the new VW facility.

Given the high costs of transportation and logistics, supply chain concerns, and geopolitical unrest, Volkswagen has stated that it is seeking to establish regional supply chains for EV production in Europe, North America, and China.

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