Volkswagen Group will spend $7 billion on a new battery cell manufacturing plant in St. Thomas, Ont., notching a new high-water mark for Canadian automotive investment.
The formal announcement April 21 came a month after the German automaker, along with its in-house battery subsidiary PowerCo, named the city midway between Toronto and Windsor as the location for its first North American cell plant.
Government and company officials were on-hand for the event in St. Thomas, not far from a 1,500-acre (600-hectare) development site at the northeast end of the city, a quarter of which will soon be occupied by Volkswagen’s largest North American manufacturing plant.
PowerCo CEO Frank Blome, said federal, provincial and local governments outperformed the competition to bring the cell plant to St. Thomas.
POTENTIAL TO BE BIGGEST IN THE WORLD
“It will be our first gigafactory in North America, and it has great potential to become our biggest one in the world.”
The cell complex will be situated on 370-acres (149-hectares), with the plant itself expected to cover 80 per cent of that area, according to PowerCo COO Sebastian Wolf. At 12.9 million square-feet (1.2 million square-metres), it will be the largest manufacturing plant of any kind in the country.
Once fully built out, the plant will have six production blocks capable of building 90 GWh of battery cells annually. This equates to about one million electric vehicle batteries per year, Blome said.
The plant will supply cells to Volkswagen’s North American EV assembly facilities. An existing site in Chattanooga, Tenn., and the recently announced Scout Motors plant in Blythewood, S.C., are likely candidates, though Volkswagen has not officially pointed to either site.
The St. Thomas plant is expected to create 3,000 direct jobs and up to 30,000 indirect jobs throughout the supply chain, according to both the federal and provincial governments.
The facility, Prime Minister Justin Trudeau said, is a “generational investment” for the city, province and country as a whole.
WORTH $200 BILLION TO ECONOMY
“It isn't called a gigafactory for nothing. It can create thousands upon thousands of great jobs. It'll be worth over $200 billion to the Canadian economy over the coming decades.”
The new EV cell plant is the second such facility planned for Ontario. Stellantis and LG Energy Solution have partnered to build a $5-billion battery plant, currently under construction in Windsor and scheduled to open in 2024.
Volkswagen, the world’s second-largest automaker by volume, also gains the distinction of becoming the sixth major car company to put down significant manufacturing roots in Ontario. The investment has been touted as the most significant for the country’s auto industry since Toyota and Honda built plants in the province in the 1980s.
In addition to Volkswagen’s 370-acre cell plant, a supplier park made up a several billion-dollar facilities is expected to occupy the remaining 1,130-acres (457-hectares) of development land in St. Thomas, according to the Ontario government.
The St. Thomas megasite beat out dozens of other prospective locations across North America to land the new plant, but the win did not come cheap.
The federal government contributed $700 million toward the capital costs of the plant, while also negotiating a separate contract to match production incentives offered under the U.S. Inflation Reduction Act.
Ontario will contribute a further $500 million toward start-up costs at the plant, but did not put up cash to help Ottawa counter the battery subsidies offered the United States.
SUBSIDIES DEPEND ON OUTPUT
“Our job is to compete state-to-state, and the feds’ job is to compete nation-to-nation,” said Vic Fedeli, the province’s minister of economic development, job creation and trade.
The federal subsidies are expected to be worth between $8 and $13.2 billion over 10 years, depending on plant output.
The large amount of public funding to secure the site was necessary to put Canada’s auto sector on a level playing field with incentives offered in United States, said federal Minister of Innovation, Science and Economic Development François-Philippe Champagne a day before the St. Thomas event.
The cell plant will bring thousands of direct and spin-off jobs to Ontario, Champagne said, making it far more valuable than the funds used to bring it to St. Thomas. Ottawa expects economic activity generated by the plant will recoup the investment in its first five years in operation.
'THIS THING IS GOING TO GROW'
Between the Volkswagen facility and its adjacent feeder plants, Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said St. Thomas is poised to grow into an automotive powerhouse.
“This thing is going to grow up to be the biggest automotive industrial site since General Motors at its height in the ‘70s and ‘80s in Oshawa.”
The public investment may look high today, he added, but it will be paid back in the form of infrastructure, schools and hospitals long into the future.
“Somewhere along the line, in British Columbia or in Newfoundland, someone is going to get a federal investment that is going to come in part from the tax revenue generated by an investment like this.
The new facility is expected to produce its first battery cell in 2027. Volkswagen said fully building out the site will take until 2030. Construction is scheduled to begin in 2024.
