Volkswagen said on Monday it will build its first North American battery cell plant in Canada, granting its cars access to US subsidies which require that electric vehicles’ batteries are made with North American materials.

Under the US Inflation Reduction Act (IRA) guidance, cars only qualify for thousands of dollars in subsidies if a proportion of critical minerals in their battery were extracted or processed in the United States or a country with a US free-trade agreement, or recycled in North America.

Volkswagen confirmed in December it was looking for sites for a plant in Canada after it signed a memorandum of understanding with the country six months prior to secure access to key raw materials for batteries.

“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,” chief executive Oliver Blume said in a statement on Monday.

The carmaker said last week its Scout brand would build a $2 billion manufacturing plant near Columbia, South Carolina for trucks and SUVs, with production to start in 2026.

The carmaker has long said it is working towards setting up regional supply chains in Europe, North America and China for EV production in light of high transport and logistic costs, supply chain risks and geopolitical tensions.

The IRA gave the company an incentive to prioritise decisions on North American investments, it said last week, adding plans for battery plants in Europe were still in place but that it would wait to see whether the IRA spurred Europe to offer better incentives.

(By Victoria Waldersee and Jan Schwartz, Editing by Friederike Heine and Angus MacSwan)

SOURCE: https://www.mining.com/web/volkswagen-to-build-first-north-american-battery-cell-plant-in-canada/