Germany-based Volkswagen will build its first overseas battery cell plant in St Thomas, Ontario, Canada. It will establish the new facility through its battery subsidiary PowerCo. The plant will begin to produce sustainable unified cells from 2027. It will likely be a $1bn-plus investment, creating thousands of jobs.

The announcement comes shortly after Volkswagen announced a new plant for its Scout brand in the US. Oliver Blume, CEO Volkswagen Group, outlined the company’s North American expansion plan, stating: “With the decisions for cell production in Canada and a Scout site in South Carolina, we are fast-forwarding the execution of our North American strategy.”

Additionally, the group’s software and technology company, Cariad, established a technology hub in the US at the beginning of 2023. A team of more than 200 software engineers and developers based in the greater Seattle area and Silicon Valley are working on Volkswagen’s Automotive Cloud.

The company also plans to more than double its charging network across the US and Canada by 2026.

Volkswagen is a leading automotive company, owned by Porsche, with almost $300bn of annual revenue in 2022. It sees large growth potential in the North American electric vehicle (EV) market.

The news is a significant win for Ontario’s vibrant automotive cluster. Since 2020, Canada and Ontario have attracted more than $12bn in investments by global automotive companies and battery suppliers.

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The rise of EV FDI

Volkswagen’s new plant is the latest example of an ever-increasing trend in battery plant foreign direct investment (FDI). In 2022, there were triple the number of project announcements compared with 2019. Some of the largest FDI projects are related to EV batteries. In 2022, Contemporary Amperex Technology, a China-based technology company that manufactures lithium-ion batteries, announced plans to build a $7.5bn (51.57bn yuan), 100GWh battery plant in Debrecen, Hungary. In the same year, LG Energy Solution and Honda Motor announced plans to open a $4.4bn EV battery plant in Ohio, US.