VW Announces American Battery Production So Scout EVs Will Earn You $7,500

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Volkswagen is building a gigafactory in Canada to get some of those sweet, sweet tax incentives for its electric off-road brand.

The Volkswagen Group and its battery-building subsidiary, PowerCo, have selected St. Thomas in Ontario, Canada, as the location of its first overseas facility, which would make cells produced here eligible for the full raft of tax incentives brought in by the Inflation Reduction Act. This new facility will produce sustainable unified cells, and production will start in 2027.

According to VW, the decision to expand PowerCo cell production beyond Europe's borders proves that the German brand is extremely serious about its growth in North America.

"Our North American strategy is a key priority in our 10-point-plan that we've laid out last year," said Oliver Blume, CEO of the Volkswagen Group. "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."

This will be the third group-owned plant globally, with the other two in Salzgitter (Germany) and Valencia (Spain). VW says it will equip the brand's battery electric vehicles like the ID.4 in the region with cutting-edge cells.

Scout Motors
Volkswagen AG
Scout Motors

The deal is part of a larger plan VW and PowerCo made with Canadian prime minister Justin Trudeau's government last year. The agreement between VW and Canada expands beyond cell production and includes raw material security.

Canada's raw material security and clean energy production are major plus points for PowerCo. Roughly 60% of Canada's electricity is provided by hydroelectric sources, which makes it a much greener country than the USA. Here, 60% of electricity comes from fossil fuels.

"We now have the unique opportunity to grow profitably in North America and play a key role in driving the transition to electric mobility there," said Arno Antlitz, CFO & COO of the Volkswagen Group. "Both new, major projects are integral building blocks of our ambitious growth program for the entire region. We will be able to address an even broader range of customers. Volkswagen has the right strategy, products and scale to take a strong position in the North American market."

Volkswagen AG

The VW Group plans on introducing more than 25 new BEVs models in the run-up to 2030, two of which will be produced by the Scout plant in South Carolina. VW announced in early March that it would invest billions in South Carolina to build the planned SUV and truck. Previous rumors tied Scout to Magna Steyr and Foxconn, but Scout is going it alone, and the groundbreaking ceremony is planned for mid-2023.

With the car assembled in South Carolina and batteries and raw materials sourced from a country covered under the Inflation Reduction Act, Scout will be in an enviable position as far as tax credits are concerned-yet another reason for Scout fans to be happy.

"The Group plans to fully leverage the region's power by creating more synergies and making even better use of the innovative strength, technical expertise, production capacities, supply chains, and market knowledge of all brands in Canada, the United States, and Mexico," the press release states.

Scout Motors
Scout Motors
Scout Motors

While VW didn't mention it outright, the region's power mentioned above concerns the Inflation Reduction Act (IRA). The IRA was set up to cut the USA's reliance on Chinese-sourced batteries, but the rules and regulations also apply to countries with which the US has a free trade agreement. Both countries mentioned in the quote above have such an agreement in place.

This news regarding the VW Group's new battery plant in Canada follows shortly after Antlitz explained why VW hit the pause button on new factories in the European Union. Earlier in March, he called the IRA a "tailwind" for the brand, which allows the VW Group to grow its footprint in the USA even faster. Antlitz must have known about this imminent announcement, which can be seen as a symbolic warning shot across the European Union's bow.

Currently, the EU does not have something equivalent to the IRA, which could cost billions in investment as more companies flood to the USA to do business.


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