Volkswagen’s battery arm PowerCo will build its first plant outside of Europe in St Thomas, Ontario, Canada 

After signing a memorandum of understanding on battery value creation and raw material security with the Canadian government in August 2022, European car manufacturer Volkswagen (VW) has moved to advance its growth strategy in the region. VW expects cell manufacturing at the gigafactory to commence in 2027, but did not provide any estimates for cost. The move will mark the company’s entrance into a key market for e-mobility and battery cell production as it looks to close the gap in North America with EV manufacturer Tesla. 

Despite its location, the plant is likely to qualify for special credits under the US ‘made in North America’ domestic manufacturing rules which includes Canada and Mexico. The Inflation Reduction Act (IRA), and its revamped EV tax credits, require EVs sold in the US to be assembled locally with key battery components sourced in North America. 

VW’s plans to construct a battery plant in North America could qualify it for nearly US$11Bn in IRA incentives but will also intensify concerns in Europe over reduced investment in European battery capacity. However, Thomas Schmall, head of VW’s components unit, looked to allay fears stating the move “does not mean that we will cancel capacity or investment in Europe”. Volkswagen has already planned six European Gigafactories with 40GWh of capacity each.