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Setting up in one of North America's fastest-growing lithium-ion battery development zones, Volkswagen Group has foreseen the potential and has opted to build its next gigafactory outside of Europe in the city of St. Thomas, Ontario.

The St. Thomas factory is a joint venture between VW and PowerCo SE, a new independent company created by the automaker to oversee its massive $20 billion battery initiatives. With two other gigafactories currently in development, this latest plant will be the third worldwide and PowerCo's first cell factory in North America.

According to VW, the St. Thomas plant "will equip the Group brand's BEVs (battery-electric vehicles) in the region with cutting-edge battery cells."

Signing a memorandum of understanding with Canadian Prime Minister Justin Trudeau's government last August that focuses on "battery value creation and raw material security in order to promote e-mobility in the country," Ontario was appropriately chosen as it stands to become the most well-furbished battery manufacturing regions in the West.

Instituting a mines-to-market critical minerals strategy in early 2022, Ontario has quickly attracted various manufacturers along the EV supply chain to set up shop in this valuable province.

"The Critical Minerals Strategy is our government's blueprint to connect industries, resources and workers in our province's north to the future of manufacturing in the south as we build up home-grown supply chains," said Premier Doug Ford. "Doing so has never been more important as we secure game-changing investments in our auto sector to build the electric vehicles and batteries of the future using Ontario minerals."

Garnering attention from General Motors, which announced a C$1 billion (US$800 million) investment to convert an existing auto assembly plant in Ingersoll, Ontario, into Canada's first large-scale EV manufacturing facility; LG Energy Solution, which established back-to-back deals aimed at securing the materials needed for batteries from Electra Battery Materials Corp., operator of North America's currently only battery-grade cobalt refinery, as well as lithium hydroxide from Avalon Advanced Materials Inc.'s Thunder Bay facility; and numerous other powerhouses in the automotive industry, such as Stellantis, Honda, and Toyota, Ontario is shaping up to become the hot seat of battery activity and production for North America.

North American strategy

In 2021, VW unveiled its plans to build six battery cell production plants in Europe by 2030, which currently include facilities in Germany and Sweden, a third plant under construction in Spain, and a fourth factory to be developed in Eastern Europe.

The plants will eventually have a production capacity of 240 gigawatt-hours a year, enough to power upwards of 4 million EVs.

This year, the German automaker plans to roll out a new unified prismatic cell design of its batteries that will be installed across all its brands. The goal is to have this unified cell design powering up to 80% of its electric vehicles by 2030.

With the help of Samsung and CATL, two major battery producers, as well as California-based solid-state battery startup QuantumScape, Volkswagen is pursuing every direction it can to usher in the new age of electricity.

The Ontario project is part of VW's efforts to comply with Biden's Inflation Reduction Act which allows EVs assembled in North America to qualify for a $7,500 tax credit. Although the IRA outlines battery-sourcing requirements that discourage dealings with "foreign entities of concern," like China, it is still unknown how the U.S. Treasury Department will interpret the rule of the IRA until later this month.

International Committee on Clean Transportation

While this map focuses on light-duty EV production capacity, the main point is to show the locations of facilities that will need EV batteries and how closely tied to Ontario they are. Click image to see larger map.

Combine that with the notable supply of ethically sourced raw materials throughout greater Canada and clean electricity to power its plant along the coasts of the Great Lakes, Ontario not only ticks all the boxes but is connected to some of the United States' most significant automobile manufacturing states.

In addition to its plant in St. Thomas, VW also announced its plan to build electric trucks and SUVs under its new Scout brand, with a specific focus on American car buyers.

Aiming for a vehicle assembly plant to be built in South Carolina, the VW Group CEO Oliver Blume said the Ontario gigafactory will be crucial to that effort.

"Our North American strategy is a key priority in our 10-point-plan that we've laid out last year," Blume said. "With the decisions for cell production in Canada and a Scout site in South Carolina, we're fast-forwarding the execution of our North American strategy."