Volkswagen’s interest in Canada shows auto sector dynamics shifting & More Trending News

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Volkswagen AG‘s chief executive Oliver Blume has made it clear — twice — that Canada is becoming a more attractive place for players in the electric vehicle industry to do business, and that his company wants in on the action.

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On Thursday, at the company’s management convention in Wolfsburg, Germany, Blume signalled VW would search for potential appropriate places in Canada to construct a battery cell manufacturing plant.

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“Canada is one logical option for the construction of a gigafactory in the region of North America,” he stated. “The country offers high sustainability standards and ideal economic conditions and the government of Canada has already proven to be a strong and reliable partner.”

But with no funding connected, the implications of the announcement for the nation’s nascent EV economic system are up in the air. The announcement on Thursday got here as an addendum to a memorandum of understanding (MOU) VW and Canada signed in August, in which the 2 events agreed to co-operate on constructing a “sustainable” battery electrical car provide chain.

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Skeptics say the announcement shouldn’t be seen as vital, however optimists say that VW, which competes repeatedly with Toyota Motor Corp. to take the crown as largest automaker in the world, and is as dedicated to the electrical car transition as every other automaker, may simply have stated nothing in any respect.

“As a publicly traded company, they would not have signed that MOU, I assure you, if it wasn’t a real effort,” stated Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, an auto elements trade lobbying group. “You do not tell the market you’re looking at sites in Canada if it’s bull, I mean there’s no upside to it.”

Still, Volpe acknowledged that there’s a political component to the state of affairs that can’t be ignored: VW signed the unique MOU in August whereas German Chancellor Olaf Scholz visited Canada, in search of a supply of liquefied pure gasoline that would assist it finish its reliance on Russia. Although it didn’t stroll away with a brand new LNG provide, it signed a take care of Canada to collectively discover the manufacturing of inexperienced hydrogen gasoline for export to Germany. And simply weeks earlier, Foreign Affairs Minister Mélanie Joly agreed to return generators that have been repaired in Canada to be used in a key Russian pure gasoline pipeline that provides Germany.

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The turbine’s return drew robust objections from Ukraine, and required an exemption from Russian sanctions. However, the state of affairs confirmed that Germany is seeking to Canada as a possible power companion.

Volpe stated the developments are all indicators of how geopolitics, the power transition and the transfer to construct a battery-electric-vehicle provide chain have reshuffled the dynamics of auto sector commerce and funding in methods not seen for years, if not many years.

Canada is transferring to capitalize on the shift and is positioning itself as a supply of uncooked supplies, with a extra environment friendly mining allow course of than the U.S. It additionally has a century-long historical past of constructing cars, which implies it has a workforce that may construct EVs.

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The nation’s power in tech can be a promoting level. Ontario, in explicit, has one of many largest tech ecosystems in North America, which specialists say is turning into a extra necessary issue as automakers more and more embed computer systems and software program in autos, hoping that finally vehicles will auto-pilot themselves.

To date, Canada has spent billions of {dollars} to entice automakers, with rising outcomes. Europe’s Stellantis N.V. has agreed to construct a battery manufacturing unit in Windsor, Ont., whereas Umicore plans to provide battery supplies in Kingston, Ont. BASF SE is planning to provide battery supplies in Bécancour, Que, as are General Motors Co., in partnership with South Korea’s POSCO Chemical.

The influx of investments to Canada marks a reversal from years previous when automakers usually pulled funding from the nation, usually citing the necessity to transfer to lower-cost jurisdictions.

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Some in the auto trade, together with Volpe, cite the throne speech in December 2019, not lengthy after Canada dedicated to achieve net-zero emissions by 2050, as a turning level for Canada’s auto trade.

But others say the turning level occurred just a little later, in 2020, when Canada, Mexico and the U.S. signed the United States-Mexico-Canada Agreement, the substitute for the North America Free Trade Agreement. The new commerce deal raised the edge for the quantity of North-American made elements and uncooked supplies required in a car to keep away from tariffs to 75 per cent from 62.5 per cent. Subsequently, later that yr, Toyota introduced it will construct luxurious and sports activities autos in Ontario — the primary time it did so outdoors Japan.

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Any momentum for Canada’s auto sector has solely grown since then, as Industry Minister François-Philippe Champagne and his counterparts in Quebec and Ontario, together with Ontario’s Economic Development Minister Vic Fedeli, flew around the globe courting automakers and pledging billions of {dollars} to assist them construct manufacturing amenities in the nation.

The sector received one more shot in the arm earlier this yr when the U.S. handed the Inflation Reduction Act, which incorporates client incentives for electrical autos produced in North American crops utilizing North American uncooked supplies.

So will VW truly construct a battery manufacturing unit in Canada or is it, as some skeptics would say, political posturing?

“From what I understand it’s one site amongst potentially other options as well,” stated David Adams, president of Global Automakers of Canada, a lobbying group that counts VW as a member. “But it’s all positive at the end of the day.”

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Adams stated VW, a public firm, would make a detailed calculation of prices and alternatives earlier than making its resolution.

Volpe stated there’s cause to consider the corporate’s intentions are honest. VW already buys lots of of thousands and thousands of {dollars} of auto elements from Canadian firms, and the truth that it’s scouting places in Canada means it’s critical, Volpe stated. And even when nothing comes of the announcement, he stated different automakers could also be enticed to contemplate constructing right here.

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By his estimates, automakers have to construct a number of extra battery factories in North America to service the market right here, however the window of time to take motion is narrowing.

VW’s announcement on Thursday featured pictures of Champagne signing the MOU with Blume. But Volpe argued that now could be the time — whereas automakers are determining the place to construct their North American provide chain — for politicians to vigorously courtroom extra firms, and ply them with incentives.

Champagne’s efforts are already paying off for Canada in the brand new investments in its auto sector, Volpe argued.

“He’s on a hitting streak,” he stated of Champagne.

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