The battery manufacturer PowerCo of the European carmaker Volkswagen has announced plans to build its first “gigafactory” for manufacturing battery cells outside of Europe in St. Thomas, southwest Ontario.

The start of actual manufacturing is set for 2027. By constructing the facility in Canada, VW will have access to both Canadian and American government funding.

VW hasn’t provided many specifics about its ambitions for Europe, though, as long as there are still worries about Washington’s green subsidies.

With CEO Oliver Blume stating that “our North American strategy is a critical focus,” North America remains a vital region for Volkswagen.

Why Canada?

Minerals like lithium, nickel, and cobalt, which are crucial in the creation of dry battery cells, are abundantly mined in Canada. The province of Ontario has designated a 1,500-acre “mega site” in southwestern Ontario and altered municipal boundaries to accommodate the property in one municipality.

Canada is attempting to entice businesses engaged in the supply chain for electric vehicles by offering a multibillion-dollar green technology fund to safeguard the future of its manufacturing base in Ontario.

The Inflation Reduction Act (IRA) subsidies will be available for battery-powered vehicles from the planned VW plant. In order to promote the shift to a green economy, US President Joe Biden proposed the IRA, which alarmed European officials as a competitive threat to the continent’s green sectors.

The subsidies are given to cars whose batteries were recycled in North America or created with minimal essential minerals that were mined or processed in the US, in a nation with a US free trade agreement, or both.

The Canadian government and Volkswagen agreed to work together last year to find potential locations for such a factory there.

The corporation has also promised to explore opportunities for Canada to contribute to its supply chains for batteries, including raw materials and assembly.

At least 10 significant promises for electric vehicle-related investments totaling more than US$12 billion (Canadian $16 billion) have been made in Canada, where the government is attempting to encourage investors in the sector.

VW has its own battery factories as part of its effort to lessen reliance on China.

The company’s goal is to reach the highest level of customer satisfaction. By 2030, it intends to launch 25 new electric vehicles in the US.