Volkswagen Group’s $7 billion investment in Canadian battery cell production means it’s no longer business-as-usual for the German automaker’s brands in Canada.
Sales growth is both an aspiration and an expectation as the company builds its first significant manufacturing footprint in the country, said Pierre Boutin, CEO of Volkswagen Group Canada.
“We don’t make these investments to have the status quo,” he told Automotive News Canada. “We need to pick up volume and we believe also with the electric-vehicle lineup we have that we have an edge on many of our competitors, so we can grow faster than most.”
The German automaker, which was lambasted for its environmental record less than a decade ago following the so-called dieselgate emissions cheating scandal, is now driving quickly into zero-emission vehicle and battery cell production.
For the Canadian team, Boutin said, the arrival of Volkswagen battery subsidiary PowerCo will heap on added pressure, but “we’re up for the challenge.”
“We’re going to prove what can be done here in Canada so that further investment can be looked at in the future, so that we continue to grow.”
VW Canada was not directly involved in the group’s decision to site its inaugural North American battery cell plant in St. Thomas, but it did ensure early on that Canada was considered, Boutin said.
Similarly, as PowerCo prepares to break ground on the 370-acre site midway between Toronto and Windsor next year, its Canadian sales and marketing arm will play a minimal role. PowerCo will operate in the country as its own entity, according to VW Canada spokesman Thomas Tetzlaff.
But the German automaker’s series of EV investments in North America, which also include retooling at its Chattanooga, Tenn., assembly plant over the past several years and the recently announced Scout Motors plant in Blythewood, S.C., are designed in part to energize the company’s sales in Canada and the United States, Boutin said.
'WE WANT TO GROW'
Volkswagen is the market leader in Europe and a leading brand in China, so “the biggest opportunity for our company is North America,” he said. “We’re investing because we want to grow.”
Volkswagen Group was the second-largest automaker by volume globally last year, but it placed seventh in Canada among full-line car companies, according to the Automotive News Research & Data Center in Detroit. Across its stable of brands, led by Volkswagen and Audi, the company sold 85,859 vehicles in 2022, accounting for 5.7 per cent of the overall Canadian market. In pre-pandemic 2019, the group held a 5.8 per cent market share in Canada, selling 112,537 vehicles.
The new Canadian manufacturing presence is certain to up the company’s profile across the country, and should lead to higher sales, according to local Volkswagen dealer Michael Dalglish.
“I think it signals a new era for Volkswagen in Canada and North America, and luckily, here, I’m on the doorstep,” said Dalglish, the dealer principal of Dalmar Motors and Audi London.
Dalmar Motors, now in its second generation, opened in London, Ont. in 1953, a few months after the first Volkswagen vehicles arrived in Canada.
After several years of relocation work, Dalglish opened the doors at a new 43,000-square-foot (4,000 square-metre) dealership at the southwest end of the city just a few weeks ago. The new store is less than 20 kilometres from the planned St. Thomas cell plant, a short drive across a handful of farm-lined country roads.
Dalglish said he expanded at the new location “with growth in mind,” despite a warning from VW Canada that the relocated dealership was larger than needed for the sales volume it currently has. Between the company’s upcoming EV lineup and the benefit of local battery production, Dalglish has little doubt the extra service bays and floorspace he invested in will be filled out in short order.
VW 'MONEY WHERE THEIR PROMISES WERE'
“There have been, over the years, promises of great volumes and going to the next level. The difference this time is Volkswagen’s put the money where their promises were.”
To what degree the Canadian battery plant will translate to higher sales is difficult to estimate, Dalglish said, but he is excited about its potential to drive brand awareness, and the added attention paid to the Canadian market by top company brass in Wolfsburg, Germany.
If other automakers with local manufacturing footprints are any indication of sales potential, Volkswagen could find itself adding to its volume. Of the six top-selling automakers in Canada, all but one assemble vehicles in the country.
While Volkswagen will be building batteries not vehicles, the new cell plant should lower costs for the most expensive component in Volkswagen’s future EVs, Boutin said.
About 40 per cent of the cost of an EV is the battery, and because batteries will now be produced in Canada, they can be sold to Canadian consumers without added currency fluctuations, which have typically favoured the American dollar and Euro, he added.
“This provides us with an additional competitive edge.”
