Volkswagen plans North American battery plant, paving way for more EV tax credits

Volkswagen Group CEO Oliver Blume recently shared that the company is actively searching for a home for its first battery cell factory in North America. Furthermore, Blume has named Canada specifically as “one logical option.” By joining Volkswagen’s current EV production footprint in Tennessee, the Group may soon meet the battery manufacturing requirements outlined in the Inflation Reduction Act for vehicles like the ID.4 to continue to qualify for US federal tax credits, while opening the door for more EVs under its umbrella to qualify.

On the whole, Volkswagen Group is putting a lot of funding and effort into becoming an all-electric company across most of its marques, including Audi and Porsche. As an automotive brand, Volkswagen especially has help lead the charge (no pun intended) for legacy automakers shifting their business strategies to support the growing wave of zero-emission vehicles.

In the US in particular, VW has revamped some of its production to support EV manufacturing in Chattanooga, Tennessee where it is now rolling out ID.4s. Furthermore, Volkswagen Group has shared intentions for a second faciilty on US soil that could also include a battery cell plant.

Under current tax credits, the Volkswagen ID.4 qualifies for up to $7,500 in federal tax credits, but those numbers will be cut next month when new terms kick in as part of the Inflation Reduction Act signed by President Biden in August. Since the ID.4 is assembled in the US, it could still qualify for some level of tax credit, but either the battery components and/or critical materials must come from the US or a free trade partner as well, a requirement Volkswagen is quite aware of.

A mere week after the President signed the IRA, Volkswagen announced a supply agreement with the Canadian government to obtain raw materials for battery manufacturing in the US. Now, it appears Volkswagen group is taking battery manufacturing a step further by erecting its own facility – its first on the continent.

Volkswagen to bolster battery production in North America

Volkswagen Group CEO Oliver Blume reaffirmed the company’s intention to bring battery manufacturing the North America, particularly to support EV production in the US. Although the company is still searching, our neighbors to the north sound like a viable candidate:

Canada is one logical option for the construction of a gigafactory in the region of North America.

Blume went on to cite high standards in sustainability and ideal economic conditions as factors that could soon make Canada home to Volkswagen’s first battery gigafactory outside of Europe. Conversely, the Group’s battery subsidiary PowerCo also announced an extended deal with Umicore out of Belgium to ship cathode materials to Canada. Volkswagen said this agreement is part of a long-term strategic partnership to support its full intentions of future battery cell production in North America.

While many European automakers have scoffed at the revised tax credit terms in the Inflation Reduction Act as unfair, the legislations intention to bring more EV manufacturing to North America already appears to be working. By adding battery production to the continent, more Volkswagen Group’s automotive brands may soon qualify for tax credits.

Recently reborn off-road nameplate Scout could be one of those marques, especially since it is reportedly in talks with contract manufacturer Foxconn to help build its EVs. Foxconn currently operates out of the famed Lordstown facility in Ohio. Add VW Group’s planned battery plant, and you may have several more models available to US customers that qualify for credits (pending MSRP of course).

We’d expect the next update in Volkswagen Group’s search process to include the location of the pending battery plant, and Canada appears to now be the frontrunner.