Volkswagen is setting its sights on Canada for a new electric vehicle (EV) battery factory after a recently signed agreement effectively added the country to a shortlist of potential locations for the company’s expansion to North America.
Why it matters: Interest in Canada as an EV battery production destination is on the rise, thanks to its access to the critical minerals and cheap energy the industry relies on.
- Canada is the only country in the Western hemisphere that has all the critical minerals needed to make the lithium-ion batteries used in EVs and is expected to become the third most important player in the battery supply chain by 2025.
What’s next: Volkswagen will explore potential sites to asses characteristics, infrastructure, energy availability, and “competitive financial conditions,” per Bloomberg.
- Ontario and Quebec have relatively clean and affordable electricity grids, making both provinces viable locations for the site (and sparking some inter-provincial competition).
Zoom out: The relationship between China and Western governments has companies up and down the EV supply chain eyeing Canada as an alternative source of critical minerals and other inputs for their products.
- The 14,000-person town of Becancour, Quebec has drawn interest from over a dozen EV businesses and automakers, including Ford, thanks to its proximity to mining sites and cheap electricity.
- And earlier this year LG and Stellantis committed $5 billion to build a battery manufacturing hub in Windsor, the largest investment in the space to date in Canada.
Yes, but: Canada still has a ways to go to become an EV supply chain champ (we are still a net importer of many critical minerals despite them being readily available at home), and investments made today will take years to bear fruit.