Volkswagen Group is entering into the Canadian battery supplies sector because it re-evaluates its relationship with Canada and works to localize its North American provide chain amid the shift to electrical automobiles.

The German automaker signed a deal Aug. 23 to collaborate with the Canadian authorities on alternatives all through the EV worth chain, in addition to introduced plans to arrange a brand new workplace in Canada for its in-house battery unit PowerCo.

Volkswagen know-how chief Thomas Schmall mentioned the 2 steps will speed up firm efforts to get instantly concerned within the Canadian battery supplies sector, establishing the nation as a key companion for the automaker’s transition away from gasoline and diesel automobiles.

“It will likely be a robust pillar holding [up] our EV enterprise [and] cell manufacturing, particularly for the North American area,” he mentioned at a Toronto press convention Aug. 23.

Volkswagen stopped wanting saying any agency investments in Canada, however François-Philippe Champagne, federal minister of innovation, science and business, mentioned the automaker’s memorandum of understanding with Ottawa and the addition of workers devoted to battery provide chain growth in Canada are “opening the door for future investments.”

VW’s potential plans for Canada span the early hyperlinks within the EV battery provide chain, particularly mining, processing, cathode energetic materials manufacturing and battery cell manufacturing, Schmall mentioned. Whereas that’s the extent of the corporate’s present explorations, neither Canadian elements manufacturing nor automobile meeting have been dominated out, he added.

Any materials processing or manufacturing footprint in Canada can be a brand new growth for the world’s second-largest automaker by quantity. Volkswagen presently has North American meeting and elements crops in america and Mexico, however no footprint in Canada past gross sales and distribution.

STARTING SMALL

But the automaker’s new chapter in Canada will begin small.

Schmall mentioned PowerCo’s Canadian workplace will open with three workers and scale up because the automaker’s Canadian involvement grows. The PowerCo staff will focus completely on “the enterprise of cell manufacturing and important mineral provide chain,” Schmall mentioned. Volkswagen Canada mentioned PowerCo remains to be finalizing the small print on a location for its Canadian workplace.

Volkswagen formally established PowerCo in July because it began building on the unit’s first battery cell plant in Salzgitter, Germany. A half dozen different battery crops are anticipated to comply with earlier than the tip of the last decade, together with one in North America with capability to provide 20 GWh of cells yearly. Canada is within the working, Schmall mentioned, however the firm remains to be evaluating potential areas.

Selections will come sooner reasonably than later, nevertheless.

VW plans to announce a web site for its North American battery plant earlier than the tip of the 12 months, Schmall mentioned. It additionally expects to decide on a companion that can present it with cathode energetic materials, and launch “concrete particulars” on mining tasks from which it plans to supply materials earlier than the beginning of 2023. The automaker is evaluating all choices to safe streams of battery supplies, together with making direct investments in Canadian miners, Schmall added.

The current passing of the Inflation Discount Act (IRA) in america might additionally affect EV provide chain investments in Canada, although Volkswagen management mentioned it was not the impetus behind the accord with Ottawa.

Pablo Di Si, the incoming CEO of Volkswagen Group of America who will take over for Scott Keogh Sept. 1, mentioned the brand new laws will “solely strengthen our technique to localize extra.”

The IRA provides extra stringent guidelines for automakers trying to absolutely qualify for federal U.S. tax incentives, together with a requirement to supply an escalating quantity of battery materials from a rustic with which america has a free commerce settlement over the subsequent 5 years.

Di Si mentioned Volkswagen had already drawn up its technique to supply battery materials and localize manufacturing in North America, however the firm would work towards assembly the up to date necessities for the tax incentive.

“Now what we have to do is get the precise companions, localize extra, and the intent will likely be not solely to have nice merchandise for customers, but in addition … make the availability chain extra resilient and hopefully the default will likely be to get the $7,500 credit score sooner or later.”