ST. THOMAS, ON. – Volkswagen’s massive new electric-vehicle battery plant, being built in southwestern Ontario, could eventually grow to be the automaker’s biggest gigafactory in the world, the CEO of the company’s battery arm said Friday.
The company announced last month it had selected St. Thomas for the site of the first gigafactory in North America.
On Friday, further details, including some of the financing, were made public at a splashy announcement in the town’s railway museum that attracted the prime minister, the premier and almost every federal, provincial and municipal politician with even a tenuous connection to the region.
“Congratulations from our side for outperforming the competition and bringing this gigafactory to St. Thomas,” Volkswagen battery chief Frank Blome told them. “That wasn’t easy.”
It also wasn’t cheap.
Canada has committed $700 million in up front capital costs towards the $7-billion price tag to build the factory. Ontario added $500 million.
Once the factory is producing batteries – the goal is initially to make enough every year to power one million electric vehicles – Canada is offering production subsidies to equal the production tax credits Volkswagen would have received if it had set up shop in the United States.
Those subsidies, which are estimated to be in the range of $8 billion to $13 billion over a decade, will disappear or be reduced if the U.S. supports within the Inflation Reduction Act are eliminated or phased down.
Blome said money on the table wasn’t the only factor in deciding to set up shop in St. Thomas, but it was “the first entry.”
“You have to be competitive,” he said. “If your product is not competitive in product or in cost, you have no future.”
He said 200 factors were considered.
Every cent is worth it, Prime Minister Justin Trudeau said.
“Let’s be really clear about what’s happening today. Other parts of the world, including our neighbours to the south, were willing to put up an awful lot of money to get this project there,” he said.
“Everyone wanted this, so yes, we put up a lot of money. Money that’s going to come back in economic investments very quickly.”
The federal government said that with the economic benefits from the plant, the government investments will be recouped in just five years.
The plant will create up to 3,000 direct jobs and 30,000 indirect jobs in the region. It will be operated by PowerCo, the battery subsidiary Volkswagen created last year. The St. Thomas plant is the third planned by the company, but Blome said given the fast growth in demand for electric vehicles in the United States, it could eventually become the company’s biggest.
Ontario Economc Development Minister Vic Fedeli said it’s a huge win for St. Thomas and the province as a whole.
“We’ve landed the largest auto investment in the province’s history,” he said.
“It’s not only a big win for the people of St. Thomas, but it’s huge for Ontario.”
The plant will be built on a 1,500-acre “megasite,” with construction set to begin in 2024 and production expected to begin by 2027.
The sprawling plant will anchor an industrial park where several other manufacturers will be needed to supply critical components for the batteries, Fedeli said.
Ottawa and Ontario began wooing the German automaker a year ago when the Volkswagen board came to Toronto, Fedeli said.
Federal Industry Minister Francois-Philippe Champagne and Fedeli formally pitched the company in Germany last fall, which became a turning point in the deal.
“We really felt that when we flew back from that meeting with Volkswagen, we were very confident then that Ontario was the right place for them, but we had to put the right package together,” Fedeli said.
The United States had an edge on proximity to vehicle manufacturing because Canada has no Volkswagen plant. But Canada had the edge on raw materials – namely the minerals and metals needed for the batteries – as well as an abundance of clean power.
Fedeli said the pitch included two “line items that were missing” from every other country’s pitch to Volkswagen: universal health care and the loonie.
“We showed the value of the Canadian dollar and the value of universal health care and what that means in savings,” Fedeli said.
This will be the second electric-vehicle battery factory in Ontario. Last year, automaker Stellantis and South Korean battery-maker LG Energy solution announced they were building a facility in Windsor, Ont., with a $5-billion price tag.
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