"BERLIN -- Volkswagen AG chose a site in the Canadian province of Ontario for its first battery plant outside Europe, taking advantage of the country's rich raw materials -- and possibly cashing in on U.S.-legislated incentives aimed at encouraging green-tech investments in North America.
The location of Volkswagen's next battery plant has been a recent flashpoint in the competition between the U.S. and Europe to boost investment aimed at transitioning to a low-emission economy. Last year, the Biden administration passed environmental, healthcare and tax legislation -- called the Inflation Reduction Act -- that included hundreds of billions of dollars in subsidies and incentives aimed at boosting the country's clean energy industry and encouraging certain investments in North America.
Volkswagen has previously outlined broad plans to build battery factories in both Europe and North America, and is already building plants in Germany and Spain. Ahead of Monday's announcement, Thomas Schmall, VW board member in charge of technology and components, had warned European officials that the company would likely push ahead with its planned investments in North America before breaking ground on its next plant in Europe. He blamed what he called the slow pace of European bureaucracy and lack of financial aid to help jump-start new green technologies.
The Wolfsburg, Germany-based company has been negotiating for months over building a battery plant in Eastern Europe, but hasn't made a final decision. The company says it is waiting for the European Commission to firm up its own subsidy program to level the playing field with the U.S. in the wake of President Biden's IRA.
It isn't clear how much -- if any -- assistance Volkswagen is getting from the IRA, or Ottawa, for its new plant in Canada. "Made In America" conditions attached to the IRA subsidies in many cases apply to investment in Canada and Mexico.
Europe's biggest car maker by sales is in the midst of a buildup of battery capacity to power its growing fleet of electric vehicles. It has pledged to make electric cars at least 80% of all new cars sold by the company by 2030.
The company said it chose a site in St. Thomas, Ontario, for the new battery plant and said it would begin production in 2027. The site in Canada provides access to raw materials needed for battery production, Volkswagen said, as well as renewable energy to power the plant and reduce the overall carbon footprint of the company's batteries and electric vehicles. Volkswagen has said it is still committed to building new battery plants in Europe to cover battery-capacity needs for EV production on the continent.
The European Union last week said it is relaxing the bloc's tight restrictions on government subsidies to make it easier for member states to compete and prevent investment from migrating to the U.S. The changes should allow governments to match the level of aid that is on offer in the U.S. or another non-EU country if the projects meet certain criteria, although officials said matching aid is meant to be used only in exceptional circumstances.
Other changes include increasing the value of certain subsidies that EU governments can offer without first seeking approval from the commission and allowing for more money to flow to clean-tech companies that operate in less wealthy regions of Europe. Industry executives said they were encouraged but needed to wait to see details before judging whether they would be enough to compete with the U.S. subsidies.
The bloc is also expected to introduce new legislation this week aimed at speeding up permitting and improving access to the raw materials needed for clean-tech manufacturing. Those measures are meant to tackle broader concerns about competitiveness in Europe that many industry and government officials raised after the IRA's introduction.
Some executives said that all might be too little, too late.
"I think it's quite possible that the EU has already been hit hard by events around IRA," said Michael Insulan, commercial vice president of Toronto-based Electra Battery Metals Corp." [1]
Let's run, hare, the sky is falling...
1. VW Picks Canada for Its First Battery Plant Outside Europe --- Ontario site is near raw materials and could draw U.S. green- energy incentives
Boston, William. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 14 Mar 2023: B.4.
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