The German automaker announced today it has chosen St. Thomas for the site of a new battery cell manufacturing plant, after months of negotiations with the province and federal government

Volkswagen is going to build electric vehicle batteries in Ontario. The German automaker, the province and the federal government made the announcement in a joint statement today.

The Volkswagen factory is to be located in St. Thomas, south of London. It will be the German automaker’s “first overseas battery cell plant.” It is being touted as a major coup for both the province and the country.

“This is a home run for Canada,” says Innovation, Science and Industry minister François-Philippe Champagne. “This is the largest single investment in the history of the auto sector in Canada. Ever. It’s multi-billion.”

There is no word yet about the factory’s exact cost, its capacity or how many jobs will be created. However, both the Ontario and federal governments have made no secret of their ongoing efforts to woo Volkswagen to locate a battery factory here.

“You don’t land something like that for Volkswagen, on a whim. This is months in the making,” says Champagne, in response to questions from Electric Autonomy.

“I think what’s good now it’s no longer, ‘Why Canada?’ It’s how and when.”

The sales pitch for Canada hits five points, explains Champagne: talent, ecosystem, critical minerals, renewable energy and access to market.

For Ontario, specifically, say provincial officials, the most powerful lever is the supply chain that is being built.

“Ontario is a jurisdiction in the country that has every metal critical mineral that is required to build a lithium ion battery,” says Ontario’s minister of Economic Development, Job Creation and Trade, Vic Fedeli, in an interview with Electric Autonomy.

But there is a big caveat to that selling point, says Fedeli. And it was a key condition on attracting Volkswagen’s investment.

“Yes, we have minerals, but you’re processing them here.”

Vote of confidence

“Today’s news is a major vote of confidence in Canada and Ontario, and in our shared work to position the country and the province as a global leader on the electric vehicle supply chain,” reads a joint statement from Champagne and Fedeli.

The automaker was considering locations across North America. But in early January Electric Autonomy reported that Ontario was the only Canadian jurisdiction under consideration.

“Our gigafactory in Canada sends a strong message: PowerCo is on track to become a global battery player,” said Thomas Schmall, Board Member for Technology of Volkswagen AG and Chairman of the Supervisory Board of PowerCo SE, in a press statement.

“Canada and Ontario are perfect partners for scaling up our battery business and green economy jobs, as we share the same values of sustainability, responsibility and cooperation.“

For Ontario, the news is the latest in a growing series of major international investments into its electric vehicle battery supply chain. Last year, the province secured a $5-billion battery factory deal from Stellantis and LG Energy Solutions, in Windsor. They then announced Umicore‘s $1.5 billion pre- and cathode active material (CAM) factory near Kingston.

“[Volkswagen’s] historic investment is a testament to Canada’s strong and growing battery ecosystem and Ontario’s competitive business environment,” reads today’s government statement.

“With a highly skilled workforce, clean energy, an abundance of critical minerals, access to markets, and a flourishing automotive and battery sector, we are an attractive investment destination with everything companies need to grow.”

Building a relationship

Volkswagen has spent most of the past year building out its footprint in Canada and, specifically Ontario.

“I’ve been hustling for almost a year. They had a choice,” says Champagne, about Volkswagen choosing a location outside of Ontario (or Canada) for a battery factory.

Talks occurred during various trade missions between Germany and Canada, with the initial contact beginning in April 2022.

Then, in August, Volkswagen and Mercedes each signed a memorandum of understanding with the federal government, effectively laying the groundwork for the automakers to have “priority access” to Canadian battery minerals.

Volkswagen followed up the MOU with an announcement that it would be opening an arm of its subsidiary battery company, PowerCo, in Toronto.

“The most important date was October 14,” says Fedeli.

“It was a trade mission meeting that we did with our Ontario team and VW in Germany. I think that was a real turning point. We stood on the roof of the existing battery test plant in Wolfsburg and looked at over the site. We saw this massive facility that was underway and [Volkswagen] said, ‘This is what we would do in Ontario.'”

In December, Volkswagen built on the earlier MOU when it signed a non-binding agreement with the federal government to consider Canada as a possible location for a battery factory in North America.

Investment and other incentives

Then, in January 2023, Electric Autonomy exclusively reported that Volkswagen was lobbying the Ontario government about a battery factory.

“Ontario has offered to support the project through investment and other incentive contributions to allow the project to be successful and competitive with other locations that are being considered,” reads the filing.

The battery factory deal appears to have been finalized during or around a meeting Volkswagen had with Ontario’s Premier Doug Ford in February 2023.

More details on when construction of VW’s plant will begin will come soon.