Volkswagen has picked Canada to house its first battery cell manufacturing factory outside of Europe. As the company strives to localize its electric vehicle production chain in the region, the move will allow Volkswagen automobiles to obtain Canadian and US incentives.
The plant will be located in St. Thomas, some 195 kilometers northeast of Detroit, and is expected to be Canada’s greatest single investment in the auto sector.
What is the basic concept of this strategy?
Climate change is widely acknowledged to be a major worry for this and future decades. To protect the environment, governments around the world understand the need for coordinated efforts geared primarily at cutting carbon emissions.
Canada is investing in multibillion-dollar green technology funds in order to attract enterprises participating in all stages of the EV supply chain.
Canada has a strong mining sector and is rich in important raw materials for batteries such as lithium, nickel, and cobalt.
As the world attempts to reduce carbon emissions, the country is attempting to entice EV companies.
European automakers are attempting to capitalize on a US climate regulation that requires 50% of EV battery components to be manufactured in North America in order for vehicles to qualify for tax credits of up to $7,500.
VW’s announcement did not disclose the scale of the investment or plant capacity, but the automaker is aiming for 20 gigatonne-hours of capacity at its first North American location.
In view of high transport and logistic costs, supply chain concerns, and geopolitical tensions, Volkswagen has stated that it is seeking to establish regional supply chains for EV production in Europe, North America, and China.
IRA subsidy gives Volkswagen an incentive to give consideration to projects in North America
While the manufacturer still intends to build battery operations in Europe, it will wait to see if better incentives become available. VW has the incentive to prioritize decisions on North American investments thanks to the IRA subsidy.
European corporations are aiming to extend their US presence by taking advantage of the beneficent Inflation Reduction Act, which US President generously sponsored last year, as indicated by the news of the new VW site.
VW has claimed that it is looking to develop regional supply chains for EV production in Europe, North America, and China due to high shipping and logistics costs, supply chain problems, and geopolitical upheaval.