Volkswagen Group Canada CEO Pierre Boutin couldn’t say much about the auto giant’s hunt for a North American electric vehicle battery plant when he spoke to the Star in January. He confirmed Canada was on the list, but the negotiations were well above his pay grade.
In fact, at the time, Volkswagen was scrutinizing the details of what would become the winning bid for Volkswagen’s first EV battery plant outside of Europe — its $7-billion, St. Thomas, Ont., facility announced in May. It’ll be run by PowerCo SE, a company started by Volkswagen to run its entire battery business. Both Queen’s Park and Ottawa have promised $14 billion in government aid for the new factory, an eye-watering sum that some critics say won’t deliver on its promises.
They may have good reason to be skeptical. The subsidies are significant. EVs, while one of the fastest-growing segments of vehicles worldwide, simply aren’t legacy investments yet. A Ford or GM assembly plant in the 1960s represented a plethora of good jobs for generations to come. The same has yet to be seen for electric vehicles, although investments are pouring in thick and fast. Just this week, automotive giant Stellantis and Ottawa salvaged a fraught EV battery plant deal in Windsor with up to $16 billion in subsidies.
Yet Volkswagen is confident the company’s St. Thomas EV battery factory won’t be a fad.
“It’s a really exciting time for us to consider Canada — to see these major investments from the company coming back,” Boutin says.
Boutin spoke to the Star about the deal from the sidelines of Toronto’s recent Collision tech conference:
Why Canada?
Why Canada? Many factors. First of all, the North American context is extremely important to the development of our company moving forward. We’re very strong in China. We’re very strong in Europe, and we need to have a third leg — which is basically North America. Canada has one of the cleanest mining industries in the world. They work hand in hand with communities. In many of these cases, we’re talking about Indigenous communities.
The human rights factor is extremely important for us because we’re not just about building EVs — we’re also looking at all of the social, economic and environmental sustainability factors. If we are to provide electric vehicles to reduce carbon emissions, the last thing we want to do is to create more through our manufacturing process. And the third element is that there is a lot of automotive knowledge in southern Ontario at every level — energy, power, systems.
A lot of automotive towns in Ontario have been burned by auto companies in the past with layoffs and downsizing. Has there been any skepticism from St. Thomas about your plant?
I will give them praise — they are extremely dynamic. They want their community to thrive in the future. They’ve been great partners to work with. They really care about making St. Thomas, and southern Ontario, a different place in the future. But when I talk about sustainability — on the social side — the transformation of our company to electric vehicles meant a lot of people were really scared of losing their jobs.
We guaranteed employment until 2030. So we’re working with the labour unions to make sure that we can retain people, we can offer them new jobs in new factories — or the same factory. We’ve gone through extensive retraining. It’s still an assembly line, in many cases. But it’s different. There are a lot of safety standards that we don’t have to have in a combustion-engine facility. If you invest in people, you will get a lot more additional sustainability for your company.
When you look at St. Thomas and what we’re about to do — it’s not for two years. It’s not for five years. We’re talking about generations upon generations. So we’re committed to the long term. We’ve got to do what’s right for the long term.
What’s the hiring plan for the factory? Do you have a game plan in the works?
There is always a game plan. When we were making investments in Chattanooga for the launch of the ID.4 EV model, we had to recruit literally thousands of people — in COVID times — when the unemployment rate was less than five per cent. For all Western countries, it is a challenge to find talent, to find people who want to contribute to the economy, who are interested in these types of jobs.
And we know it is a challenge. But like anything else, we’re putting a plan in place, and we’re going to grow employment at our factory. Because it is important to us, it is important to the community. And we’re not afraid of the challenge.
There has been a lot of criticism regarding the amount of money Volkswagen received for this deal. I’ve seen claims that it’s a classic case of corporate welfare. What do you think of this assessment?
First of all, we’ve got to refer to this as an investment. And from what I understand, the government also looked at it as an investment — for the future of the economy. We had over 200 criteria for making this decision. Yes, the financial factors were important, but they weren’t the only ones. We’ve had many jurisdictions in North America contacting us. We’ve had many conversations and evaluations — because we could have put this investment in many other places.
Like where?
I will not bring that up, for obvious reasons. But many of these jurisdictions were also competing for such an investment. At the end of the day, just like we are asking ourselves whether something is a good investment for generations to come, the government does as well. These types of factories don’t go in and out within two years. We are investing this kind of money because it will be absorbed over generations to come.
Everywhere we’ve been, we have a positive impact on the manufacturing of many things. Let’s not forget one thing — we’re all committed to reducing the CO2 impact of personal mobility, and battery electric vehicle is the technology, today. We want to make sure we contribute to the development of more battery electric vehicles in Canada for Canadian consumers.
The aim of PowerCo is research and development, raw material transformation, manufacturing and recycling. We want to, through Power Co, service the needs of all our brands globally, but Power Co is also looking at selling some of these batteries to other manufacturers. So it’s not an exclusive element for Volkswagen. We want to be a major leader in the transformation of sustainable mobility to reduce our dependence on carbon emissions, and we feel that these investments will probably contribute to achieving this — not only for North America, but certainly for Canada.
There are a lot of interesting developments in batteries right now — the use of sodium-ion batteries is one. Finishing this new factory is going to take years. What happens if other technologies are taking off by the time it is done?
It’s very adaptable. Right now, even with the first-generation batteries, we’re making some substantial advancements. I’ll give you an example. I’m going to be on stage in the next few minutes with the president of Xanadu, a Canadian company in quantum computing. They’re helping us find better, faster ways to develop batteries. Another major factor for us considering Canada was the development in the Kitchener-Waterloo area.
In our discussions to invest in Canada, a key factor was the technology, research and development centres, and the strength of post-secondary institutions — because we want to partner with all of these people. If we were not coming to Canada, we would not be open to these opportunities, because we wouldn’t be involved with these communities. This is how we can get to net-zero, sustainable mobility. Nobody is going to make it happen on their own. We can bring a lot, but we can also learn a lot from the different players.
Volkswagen’s deal with Canada pegs the subsidies it receives to those given to U.S. companies under the Inflation Reduction Act. If those subsidies drop, so do Volkswagen’s. What happens to the factory if they drop?
I’m not in the know on all of the intricacies of the contracts. I don’t want to comment on this other than to say that anytime we make decisions, there is always risk, and there are always opportunities. We make these decisions to the best of our knowledge and understanding.
What is this factory going to mean to the average Canadian Volkswagen buyer? Are they going to see cheaper EV prices because there are batteries being made right here?
If there is more manufacturing of batteries and other elements in Canada, that will definitely help make them more affordable. Today, depending on the size of a zero-emission vehicle, the cost of the battery is anywhere between 30 and 45 per cent of the total. And we are a global company. Many parts are coming from Europe, in euros, and the United States, in U.S. dollars. Looking at our currency against these currencies, over years, it is sometimes very challenging — and that has a pressure on the price.
The fact that we’re going to be investing a lot more in Canada itself lowers the risk. We also strive to reduce the cost on an ongoing basis through the technical advancements we’ve just developed over the past few days, because we want to market to the masses. That means we need to make electric vehicles more accessible. In Europe, we have a project called the ID.2 for Volkswagen that is aiming exactly at this — finding a way to bring in an entry-level vehicle at a much lower price.
That is our aspiration. Because if we want to have 100 per cent net-zero vehicles in Canada by 2035, this has to happen.
This interview has been edited for length and clarity.
Brennan Doherty is a former staff reporter for Star Calgary and the Star’s 24-hour radio room in Toronto. He is now a freelance contributor.
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