VW strikes a deal with Canada to build EV batteries in North America

Volkswagen signed a memorandum of understanding with the Canadian government to “explore opportunities” to bring some of its electric vehicle battery manufacturing to the country.

The move is seen as an effort to ensure that the automaker’s plug-in vehicles qualify for the US’s revamped EV tax credits, which place stricter requirements on where battery and vehicle manufacturing can be done.

VW says it plans to build a “dedicated Gigafactory” somewhere in North America, and today’s agreement most likely increases Canada’s chances of being selected as the location.

The automaker is tasking its battery supply management company, Power Co, with spearheading the site search as well as sourcing key ingredients for EV batteries, like nickel, cobalt, and lithium. Power Co will also play a key role in cathode production in North America, VW says.

Last year, VW unveiled plans to build six battery cell production plants in Europe by 2030, including the facility in Salzgitter, Germany, and one in Skellefteå, Sweden. A third plant will be established in Valencia, Spain, and the fourth factory will be based in Eastern Europe. The plants will eventually have a production capacity of 240 gigawatt-hours a year.

The Inflation Reduction Act, which was signed into law earlier this month by President Joe Biden, revamps the EV tax credit by adding tough new requirements about parts and supply chains. To qualify, EVs must be assembled in North America or by a US trading partner and must include battery components that are mostly sourced in North America.

VW recently began production of its flagship EV, the ID.4 crossover SUV, at its plant in Chattanooga, Tennessee. Even so, the automaker emailed customers recently to say it “cannot guarantee” that the EV will be eligible for the tax credit due to the fact that its batteries are not made in North America. Other automakers are similarly scrambling to shift supply chains to ensure they are eligible for the $7,500 customer incentive.

The ID.4 is VW’s most popular EV, having delivered 190,000 vehicles to customers globally since its release in 2021. VW CEO Herbert Diess, who is stepping down in September, said in May 2022 that the company was “basically sold out on electric vehicles in Europe and in the United States” for the year.