Volkswagen’s first North American battery plant for electric vehicles will be built in Canada, and Prime Minister Justin Trudeau and other Canadian politicians made it clear Friday that the country was, in effect, in a bidding war with the United States.
“We have invested a lot of money,” Mr. Trudeau said at a news conference in St. Thomas, Ontario, where six 370-acre assembly lines will be built. “Everyone wanted this.”
Volkswagen announced last month that it would set up its first battery plant outside Europe in Canada, but gave few details. On Friday, Canada and the province of Ontario said they would jointly give the company $1 billion — about $750 million in U.S. currency — to build the plant, which will cost a total of $7 billion.
A separate agreement will provide $8 billion to $10 billion in subsidies over the next decade, equivalent to the benefits Volkswagen would have received under the Inflation Reduction Act if it had located the plant in the United States. That amount is linked to battery production.
Speaking at a railway museum for a steam locomotive and two electric Volkswagen models, Mr Trudeau said that while it was impossible for Canada to largely match US industrial subsidies, the deal with Volkswagen stemmed from a policy decision by Canada to challenge its neighbor strategically.
Volkswagen was considering about a dozen other locations in North America for the plant, which it said would eventually employ 3,000 people and make enough batteries to power a million vehicles annually.
“Congratulations from our side for outperforming the competition and bringing this gigafactory to St. Thomas,” said Frank Blome, the CEO of PowerCo, Volkswagen’s battery subsidiary. “That was not easy.”
The Volkswagen plant will be Ontario’s second major battery operation. Last year, automaker Stellantis and South Korean company LG Energy Solution announced a plant in Windsor, where Stellantis has a large assembly plant built by Chrysler. That plant, which will employ 2,500 people and begin production next year, also received significant government grants at a cost of $5 billion Canadian.
Volkswagen will become the sixth automaker to have major facilities in Ontario, Canada’s most populous province, and the first to establish facilities there since the arrival of Honda and Toyota in the 1980s. St. Thomas was once home to a heavy truck factory owned by Germany’s Daimler, as well as a Ford Motor factory that in its later years assembled cars primarily used as police cars and taxis. Both were closed in 2011 and not replaced by other industries.
Following the initial announcement last month, Pierre Poilièvre, the leader of Canada’s Conservative Opposition Party, criticized the government for subsidizing Volkswagen.
“This money belongs to Canadians”, he wrote on Twitter. “Not to a foreign company. Not for Justin Trudeau.”
But Andreas Schotter, an associate professor of international business at Western University in London, Ontario, and a former chief financial officer at Volkswagen North America, said subsidies are the reality for countries that want to preserve their auto industries.
“It’s a good thing, but with a high risk,” he said, noting that policy shifts, particularly in the United States, could slow the transition to electric vehicles or cause other technologies, such as hydrogen fuel cells, to overwhelm batteries. of time could loosen.
While St. Thomas, halfway between Detroit and Toronto, is at the center of Canada’s automotive corridor, it is a considerable distance from Volkswagen’s North American plants in Tennessee and Mexico. However, it is just down the street from a factory where General Motors has recently started building electric vans and a Toyota factory that makes hybrid crossovers.
Over time, Dr. Schotter, the new factory can supply batteries to other companies.
