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Volkswagen’s first battery factory in North America for electric vehicles will be built in Canada, and Prime Minister Justin Trudeau and other Canadian politicians have said that the country has effectively entered into a bidding war with the United States.
“We put up a lot of money,” Mr. Trudeau said at a news conference in St. Thomas, Ontario, where six assembly lines covering 370 hectares will be built. “Everybody wants this.”
Volkswagen announced last month that it would build its first battery plant outside of Europe in Canada, but offered few details. On Friday, Canada and the province of Ontario said they would give a joint company 1 billion Canadian dollars — about $750 million in U.S. currency — to build the plant, which will cost 7 billion Canadian dollars overall.
A separate agreement will provide 8 billion to 10 billion Canadian dollars in subsidies over the next decade to match the benefits that Volkswagen will receive under the Inflation Reduction Act if it has put a factory in the United States. The amount is tied to battery production.
Mr. Trudeau, speaking at the railway museum in front of a steam locomotive and two electric Volkswagen models, said that while it is impossible for Canada to generally match US industrial subsidies, the deal with Volkswagen has come out of Canada’s policy decision for. strategically challenge the neighbor.
Volkswagen is considering about a dozen other locations in North America for the plant, which it says will eventually employ 3,000 people and make enough batteries every year for one million vehicles.
“Congratulations from our side for outperforming the competition and bringing this gigafactory to St. Thomas,” said Frank Blome, chief executive of PowerCo, Volkswagen’s auxiliary battery. “It’s not easy.”
The Volkswagen plant will be Ontario’s second major battery operation. Last year, automaker Stellantis and South Korean company LG Energy Solution announced a plant in Windsor, where Stellantis has a large assembly plant built by Chrysler. The plant, which will employ 2,500 people and begin production next year, also received a government subsidy worth 5 billion Canadian dollars.
Volkswagen will become the sixth automaker with a major operation in Ontario, Canada’s most populous province, and the first to operate there since Honda and Toyota arrived in the 1980s. St. Thomas was once home to a heavy truck factory owned by Germany’s Daimler as well as a Ford Motor plant that, in recent years, assembled cars primarily used as police cruisers and taxis. Both closed in 2011 and were not replaced by other industries.
After the announcement early last month, Pierre Poilievre, leader of the opposition Conservative Party of Canada, criticized the government for subsidizing Volkswagen.
“This money belongs to Canadians,” he wrote on Twitter. “Not to foreign companies. Not to Justin Trudeau.
But Andreas Schotter, a professor of international business at Western University in London, Ontario, and a former financial executive with Volkswagen North America, said subsidies are a reality for countries that want to keep their auto industries afloat.
“It’s good, but with a high risk,” he said, noting that policy changes, especially in the United States, could slow the transition to electric vehicles or other technologies, such as hydrogen fuel cells, could eliminate batteries over time.
While St. Thomas, which is midway between Detroit and Toronto, in the middle of the Canadian automotive corridor, it is a considerable distance from the North American factories of Volkswagen in Tennessee and Mexico. However, it’s just down the road from the factory where General Motors recently started building electric delivery vans and the Toyota factory that makes hybrid crossovers.
Over time, Dr. Schotter said, the new factory could end up supplying batteries to other companies.
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