The twin Memorandums of Understanding signed today in Toronto cement the status of Volkswagen’s newly created battery company PowerCo as a force to watch on the market, while Mercedes indicates unprecedented interest in its Canadian activities

Canada’s battery minerals sector has secured promising agreements from two German automakers. Volkswagen and Mercedes, under Memorandums of Understanding, are now engaged in further talks to receive priority access to Canadian critical battery minerals.

There is also the potential for future factories to turn these minerals into batteries for electric vehicles, although no locations were specified.

Behind the 17-storey glass panes of an office building in downtown Toronto, at the midpoint of a three-day visit to Quebec, Ontario, and Newfoundland and Labrador, Volkswagen and Mercedes executives were joined by top government officials from both Canada and Germany to make the announcements.

“I’m extremely excited about all the expertise Canada can bring to bear on the clean energy transition,” said Prime Minister Justin Trudeau at the announcement.

Calling Canada a resource-rich country with “boundless potential,” German Chancellor Olaf Scholz was effusive about his government’s partnership announcements on this trip, which, in addition to the Volkswagen and Mercedes MOUs, includes a significant hydrogen component.

“Fourth-dimensional chess”

Industry reaction to the announcement has been swift.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, called the agreements “a fourth-dimensional chess move” by the federal government, adding that it was “the most significant thing that’s happened so far” for the mining sector, in an interview with Electric Autonomy Canada.

“Our cooperation and partnership goes way beyond raw materials. We want to develop auto new technology here on the battery side. The next level of battery — new energy density batteries — but other EV components as well.”

Markus Schaefer, Chief Technology Officer, Mercedes

With a direct line to priority access for Canadian minerals, Volkswagen and Mercedes are well positioned to meet their corporate targets.

In addition to today’s signing, Mercedes said via press release that it also intends to sign an MOU with Vancouver-based Rock Tech Lithium in future to secure a supply of 10,000 tonnes of lithium hydroxide, annually.

Rock Tech’s spodumene mine (the raw material for lithium hydroxide) is at Georgia Lake, Ont. At one point it had plans to build a refinery in Thunder Bay, in a joint venture with Avalon Advanced Materials, but last December Rock Tech reversed course, announcing it had financing in place to build a refinery in Germany, where most of its market activity is located.

Volkswagen has not made any specific partnership announcements with Canadian companies, but advises that all of its battery activities will occur under its newly established PowerCo entity.

Critical minerals bring Ottawa to the fore

One difference about today’s announcement that stands out from previous EV battery supply chain announcements is that today’s news was delivered only by federal government representatives because it only pertains to critical minerals.

“This is the first agreement that we’ve seen [in Canada] between states and foreign-owned companies on preferable access to raw materials,” says Volpe. “I think that today is a signal to all the other OEMs to call the prime minister.”

The various parties were keen to emphasize that they hope the partnership will grow.

“I think that our German friends have realized, though, the real of possibilities that we can offer to be the green supplier of choice,” says minister of Innovation, Science and Economic Development, François-Philippe Champagne, in response to a question from Electric Autonomy.

“I think what this visit has done is to open up a world of possibilities.”

Markus Schaefer, chief technology officer, responsible for research and development and procurement at Mercedes, offered even more specifics: “Our cooperation and partnership goes way beyond raw materials. We want to develop auto new technology here on the battery side. The next level of battery — new energy density batteries — but other EV components as well.”

Natural Resources Canada minister, Jonathan Wilkinson indicated that value-added supply chain is the prize that the government has its eye on when entering into deals with OEMs.

“This isn’t just about digging up minerals, it’s about actually having the processing located here in Canada,” says Wilkinson in an interview with Electric Autonomy. “We’re interested in the potential for them to think about investing — even backward integrating into investing in mining — but we’re certainly interested in seeing them actually build manufacturing capability here in Canada.”

Significant prospects for more

On the Volkswagen side, a similar value-added strategy appears to be in place, with the automaker saying via a press release, “Both parties see significant prospects for Volkswagen and PowerCo to ramp up cathode material production together with partners and to offer Canadian suppliers an opportunity to act as raw material suppliers, refiners and processors.”

And regarding BMW, the German automaker not represented on today’s stage, Minister Champagne teases that the Canada-Germany friendship is always looking for new members.

“I cannot give all the good news at once. We have advanced discussions with all the German manufacturers. I think other German manufacturers are contemplating what Canada can be in terms of the green supplier.”